When Tope Alabi returned to Nigeria in 2019 after 20 years in the United States, he knew he wanted to start a business by applying what he had learned while working at blockchain consultant Consensus. He and future co-founder John Obirije began testing a number of ideas ranging from a hip hop chat bot to a trivia game – all of which failed. But they realized throughout trial and error that they consistently ran into the same problem: trying to pay various upstarts’ business expenses with money tied up in US bank accounts.
They decided to create a money transfer system that uses blockchain to allow users to send funds by converting them into stablecoins – which are cryptocurrencies backed by reserve assets. This process makes the transaction free and faster than an existing service like Wise which charges a 6.45% fee and can take a few days to process. They launched the service, Afrex, in 2019 and the traction was instantaneous. “Things took off from there,” says Alabi Forbes. “I don’t know if it was the pandemic, but we really started to grow quickly.” The service originally focused on Nigeria and has since expanded to Uganda, Kenya and Ghana.
Afrex was launched among an explosion of fintech companies targeting underserved and often overlooked consumers in Africa. Data from CB Insights revealed that more than $1.4 billion was invested in African fintech companies in 2021, an increase of almost 7 times compared to 2020. Fintech companies raised more than half of the total of $2.2 billion in venture capital funding on the continent in 2021. One possible reason these companies are gobbling up capital is because they are experiencing high traction.
Afrex processes over $5m in monthly transfers, Wise moves an average of £4bn ($5.2bn) per month for comparison, but Afrex has grown its customer base by 500% in the last six month, with half of its active users using the platform more than once a week. The startup makes money by arbitrating currency and crypto exchange rates when a customer completes a transaction. Afrex refused to share its revenue. It raised a $1.3 million seed round last May and just closed a $10 million Series A round at a $60 million valuation. Funding was provided by Sequoia Capital China and Dragonfly Capital with participation from Goldentree, Stellar Foundation and Exceptional Capital, among others.
Haseeb Qureshi, managing partner of Dragonfly Capital, recounts Forbes that he met Alabi while mentoring at a crypto school startup run by A16z. Alabi was in his group. He says he was really impressed with Alibi and Afrex, but he didn’t participate in the round because he wasn’t sure where it was going after seeing many founders try and fail to create crypto companies targeting Africa. But after seeing the company’s traction, he thought Afrex might have cracked the code. “A big strength of the company is being able to straddle the entire corridor between the United States and Africa, where many others have tried and failed to succeed,” he says. “The reality is that if you want to succeed in emerging markets, you need a very strong ground game.”
While Afrex is currently solely focused on its core money transfer product, Alabi has ambitious goals for the platform. He hopes to use it to launch a stablecoin and has already signed a partnership with Visa to offer Afrex users credit and debit cards later this year.
Alabi hopes that Afrex will be able to give Africans a place to store their money that doesn’t fluctuate or is influenced by outside forces as much as current currencies. For example, Alabi’s uncle in Nigeria loses up to 10% of every paycheck simply because of currency fluctuations, he says. “Because we are building this network of connected financial institutions, we have built on-ramps for local Nigerian banks and on-ramps for local currency exchanges,” he says. “We’re building this web3 mesh of financial institutions that could almost become something like the next Visa.”