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African venture capital investor reveals five sectors poised for growth

Interview with Mikael Hajjar
CO-FOUNDER, P1 VENTURES

Lives in: Dakar, Senegal

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While global venture capital funding, as measured by Pitchbook, is down 48% in the first half of 2023 compared to the previous year, Mikael Hajjar, co-founder of Africa-focused venture capital firm P1 Ventures argues that now is the time to invest. He believes in investing before the hype, or when the markets are down.

P1 Ventures has backed 29 start-ups since 2020, the year co-founders Mikael Hajjar and Hisham Halbouny established the company. They both used to run businesses and later became venture capitalists. Halbouny has experience in healthcare and consumer finance, while Hajjar has a background in clean tech and climate solutions. Recently, P1 Ventures announced the US$25 million first close of its second fund.

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The company prides itself on its contrarian investment philosophy – invest when, where and in companies that other investors won’t necessarily consider. In a recent interview with Jeanette Clark, Hajjar highlighted five sectors where the firm sees opportunities.

1. Where crypto and fintech converge

The last two years haven’t been great for crypto. Hailed by many commentators as a long “crypto winter”, the trouble that set in during 2022 with the collapse of cryptocurrencies Luna and TerraUSD, culminated in the closing of the FTX exchange in November of last year.

Despite the reigning scepticism, Hajjar is bullish about the investment his firm has made in Nairobi-based Kotani Pay. The company provides a solution for people who want to convert crypto to fiat currencies and vice versa. It operates in Kenya, Ghana and South Africa and supports eight cryptocurrencies.

Ideal for the African context, Kotani’s technology allows users to off-ramp from crypto via USSD, so no internet or smartphones are required, says Hajjar. This makes the technology accessible to a wider range of users. Kotani also offers fast remittance across borders (minutes instead of hours or days). This solves a pain point for many Africans who are working and living in other countries and need to send money back home. It also comes at a lower cost, at only 2% per US$200. The World Bank puts the average cost for a remittance to Africa at 8.5%.

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It is at this interface of crypto and Web3 fintech that Hajjar and P1 Ventures see potential. “We are firm believers that crypto infrastructure and blockchain … [offer] tremendous opportunity for the continent. Africa has been the home of some of the early fintech innovations like M-Pesa … and we believe that Web3 offers new, disruptive leapfrog opportunities for financial inclusion.”

Web3, according to McKinsey and Company, is the concept of a decentralised internet built on blockchains. Essentially, it is an extension of cryptocurrency, using blockchain in new ways.

2. Making healthcare affordable

Africa makes up approximately 18% of the world population and over 20% of the total global disease burden. But when it comes to the number of doctors, says Hajjar, the continent only has 2% of all the doctors in the world. For P1 Ventures, this imbalance equals opportunity.

A company in the P1 Ventures fold that is working to capture this opportunity, is Reliance Health. It started in 2015 as Kangpe, a telemedicine company pushing its promise of “a doctor in your pocket”. The CEO, Femi Kuti, is a medical doctor who wanted to make healthcare accessible and affordable in Nigeria.

Reliance Health has evolved into an integrated healthcare enterprise, providing micro-insurance for medical coverage, round-the-clock telemedicine support, and medical services via its chain of private clinics in Lagos, Port Harcourt, and Abuja. The firm recently extended its reach to Egypt, establishing a presence in Cairo.

On the insurance front, the company zeroes in on corporate clients, providing packages that allow employers to secure health insurance for their staff at rates starting at US$50 annually. Notable sign-ups include e-commerce giant Jumia and financial services platform OPay.

“It is a very powerful model that has been scaling nicely and is now expanding across the continent,” says Hajjar.

3. AI-driven business intelligence

P1 Ventures believes that AI is the next leapfrog opportunity for the continent. It is therefore looking for companies that are building AI-driven businesses specific to the African context.

Hajjar notes a considerable demand for data in Africa. Within this realm, conversational AI might facilitate automated data collection via intelligence crowdsourcing. Such tools, he suggests, could provide major consumer brands, such as Coca-Cola or its African distributors, with immediate insights into product availability on shelves, pricing, and logistical bottlenecks.

One of P1 Ventures’ recent investments, Lengo, based in Senegal, employs a hybrid method of field agents and AI. It links informal retailers and fast-moving consumer goods (FMCG) companies through its software-as-a-service (SaaS) platform, offering real-time data on product sales and insights into consumer behaviour. The company’s tagline underscores its mission: “Stop guessing Africa”.

Lengo was founded last year by Max Smith, Roger Xavier Macia, and Ismaila Seck. The company has already mapped over 30,000 informal retail shops in and around Dakar. Its field agents, known as Lengo Eagles, roam the streets, enlisting shopkeepers who provide information by answering chatbot questions and submitting photos of in-store stock. This data is then analysed by the Lengo team using AI models, which include voice recognition and image analysis, to produce real-time analytics on FMCG goods’ pricing and market performance.

The company already provides this analysed data to FMCG companies such as Unilever and GB Foods (a large FMCG distributor in Africa).

4. E-commerce customer retention in a tough economic climate

P1 Ventures led a round of funding in Gameball. The company is a customer intelligence and marketing CRM platform, founded in 2020 by Egyptian businessmen Ahmed Khairy, Ahmed El Assy and Omar Alfar.

“Essentially, they are enabling e-commerce marketplaces and consumer brands to retain customers through gamification of loyalty. We all know in the current environment with the liquidity crunch how important it is not to grow at all costs, but [rather] to retain customers and sustainably increase the basket or cart size of your existing customers,” says Hajjar. Gameball can be integrated into Shopify platforms as a widget and is designed to help a business grow its own community of brand ambassadors and devoted customers, offering a variety of incentives, such as points, cashback, rewards for referrals or shopping milestones, discounts, and credit.

Every feature is adaptable based on the preferences of the implementing company, resulting in a tailored shopping journey that resembles gameplay. Consumers accumulate points, progress through levels, receive awards for reviews, and more.

Already, over 2,000 companies from 70 countries have incorporated Gameball into their operations.

5. Creating online gaming communities

Growing up in Mauritania, Hajjar remembers how football provided a strong social bond. “There is this team spirit that sport fosters and we see something very similar happening [online] with football, thanks to consumer apps like Eksab!.” Eksab! is an Egyptian company, offering an online arcade for football fans to participate in fantasy football games and trivia contest. It has more than 1.5 million registered users and players can win cash and other prizes. A user buys coins to participate in any of the daily listed fantasy football or tactical games, or in trivia competitions hosted at specific times.

Beyond gaming, information dissemination is a core aspect of the platform. Users frequent Eksab! to peruse content penned by the company’s team about Egyptian players and football squads. This engagement spills over to social media platforms: on Facebook, for instance, the Eksab! page boasts over 114,000 followers, and an accompanying group has 33,000 members forming a vibrant community.

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Before co-founding P1 Ventures, Hajjar was involved in angel investing. One of the first companies he invested in was a Côte d’Ivoire-based fashion e-commerce business that eventually failed.

“The primary lesson I learnt [then], and that we have also seen in the [P1 Ventures] portfolio is the main risk you are taking, is in the team: the founding team. So that is where we spend an extensive amount of time,” he explains. Before investing P1 Ventures gets references on the team and takes time to understand how much they have already worked together, how compatible they are, and if they will be able to power through the lows.

Another pivotal consideration is a startup’s capability to circumvent the intrinsic risks associated with being confined to a specific African market or currency. Ideally, software-as-a-service and AI tech enterprises that can offer their products globally without logistical constraints are favoured.

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