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What’s more rewarding for an angel investor than paper returns in a startup? An acquisition that turns those paper returns into a cash payout while still maintaining shares in the company. “The return after dilution was eight times my investment,” said Selma Ribica in an interview with TechCrunch recently. “I kept some stock of the new entity, but a big majority was cash.”

Ribica currently serves as the general partner at First Circle Capital, a venture capital firm specializing in fintech SaaS, or fintech 2.0 as she terms it. She made her angel investment in Expensya, an expense management startup based in Tunis and Paris, which was acquired last June by the private equity firm Medius for a sum over $100 million, according to sources familiar with the deal.

Only a few African or Africa-focused tech companies have been acquired for more than that amount: InstaDeep to BioNTech, Sendwave to WorldRemit, DPO Group to Network International and Paystack to Stripe. Like InstaDeep, the acquisition of Expensya underscores the potential of Africa-founded products to serve global markets and subsequently get bought by larger companies.

For years, venture capital globally experienced a bullish trend, and Africa, albeit late to the party, caught on before things went south for the asset class in the latter half of 2022. Before the bust, local investors mainly encouraged African startups to focus on building solutions for the continent, with the promise that capital would follow. Building global products was often an afterthought, particularly as local solutions, especially fintechs, demonstrated exit opportunities by just targeting markets within the continent.

However, there has been a notable shift in this narrative in the last 18 months. As African startups strive to develop solutions for local challenges, they now confront headwinds and macroeconomic challenges beyond their control. The economies of the continent’s most prominent tech markets — Nigeria, Kenya and Egypt — are currently grappling with currency devaluation issues, resulting in stagnant or slower revenue growth in dollar terms for startups operating in these markets, thereby diminishing their valuations in the eyes of global investors.

In response, investors are now urging startups to explore strategies to safeguard their revenues, reigniting discussions about the importance of local founders adopting a global mindset when developing their products. That mindset was integral from the beginning for founders like Karim Jouini, founder and chief executive officer of Expensya. 

“Adopting a global focus was almost from day one for many reasons. Regardless of what you are building as a company, Tunisia is a pretty small market that isn’t integrated enough with its neighbors,” said Jouini in an interview with TechCrunch. “It’s a country with an average income level and with companies that aren’t necessarily mature enough to be interested in spend management. Their companies are still setting up the first CRM or ERP. So from the beginning, we looked at building a product that is for markets where companies are mature and are at the stage where they are looking at employee productivity and spend management.”

From Tunis to Europe

Founded by Jouini and CTO Jihed Othmani in 2014, Expensya specializes in automated expense management solutions tailored for European businesses. Its software enables companies to implement autonomous spending within predefined rules and limits, optimizing time and simplifying employee expense processes. When integrated with ERP applications, Expensya helps finance teams to oversee and track business expenditures and facilitate streamlined staff reimbursement procedures.

The spend management startup, designed to support companies of all sizes in automating their professional expenses, was launched first in France, leveraging the CEO’s network and decade-plus experience working for Parrot, Musiwave and Microsoft. Expensya’s first set of clientele, which had between 1,000 and 10,000 employees, operated across multiple European countries — as a result, the startup quickly adapted its product to function in these other countries, handling local taxes and certifications along the way, which catalyzed its movement into Spain and Germany. 

And despite the seeming advantage of proximity to Europe, being a Tunisian startup posed its challenges. First, navigating the European market reasonably protected from external competition due to laws like GDPR was a significant obstacle. Compliance with GDPR necessitated setting up operations in Europe and establishing strong local teams in sales and marketing was crucial for the startup to sell to large companies; it set up teams in France, Spain and Germany to address this requirement and compete against Concur, Nautilus and N2F. 

“Sometimes, there was a bit of hesitation from these large customers when using a product built by an African startup. To them, they wanted to know if our quality was enough for them or as good as American or European products,” added Jouini. “So we invested a lot into having the best product in town. If you look at public ratings of solutions like ours on the App Store or Google Play, you will see that we are the highest rated in the market compared to our European competition because we focus on making sure that quality is never a topic because that would take us back to you’re an African startup and so standards could be lower.” 

Setting and maintaining a high-quality product often hinges on a startup’s talent base. While there’s a wealth of young, talented individuals, particularly in engineering and other technical fields in Tunisia and Africa, the scarcity of experienced managers and leaders, also owing to a lack of successful SaaS companies locally, posed a hurdle as Expensya scaled, Jouini acknowledged.

Generally, emigration has further reduced the availability of experienced talent in Africa, with many skilled individuals opting to pursue opportunities in Europe or the U.S. These factors contribute to the challenge of African startups competing with their global counterparts.

Part of a global success story

However, talent positioning is a double-edged sword. Despite the talent shortage, Expensya benefited from lower operational expenses than similar companies operating in Europe. Additionally, if startups in Paris struggled to attract the top 5% due to stiff competition from tech giants like Google and Microsoft in their regions, Expensya could attract the top 5% talent in Tunisia because of its visibility as one of the country’s well-funded and resourced startups. 

Jouini also emphasizes that while the Tunis-born but Paris-headquartered Expensya was perceived as just another SaaS company among many in Europe, its employees and early investors believed they contributed to something unique in Africa and maintained a bullish outlook on its potential.

“When our employees join and spend time here, they have an engagement beyond salary and the job. It’s the feeling of building something big, which is actually a real difference,” he said. “It’s a sentiment that perhaps isn’t talked about enough — the eagerness of people in Africa, or at least in the countries I’m familiar with, to contribute to a global success story.”

Last year, that shared optimism between investors and employees turned into a reality. 

After operating for over eight years and raising about $30 million, including a $20 million Series B at a post-money valuation of $83 million in 2021, Expensya got acquired — and its employees became part of an experience that remains elusive for many of their counterparts in the African tech ecosystem.

Of the company’s 190 employees at the time of the acquisition, 110 were based in Tunisia. These employees, including previous staff who had worked out of Expensya’s Tunis office, totaling 180 shareholders, collectively made $10 million from the acquisition, as disclosed by Jouini during the call. He mentioned that two-thirds of this amount was in cash. “Some people made as much as $200,000-$250,000. It’s not exactly life-changing money, but it’s certainly path-changing,” Jouini, who now serves as the chief of product and tech at Medius, remarked about the employees’ cashouts.

Medius, the Swedish conglomerate backed by prominent European private equity firms, has for years aimed to establish a global CFO automation conglomerate, making several acquisitions, including Expensya, in the U.K., U.S. and Sweden. Integrating these solutions creates a more cohesive and robust offering for Medius. Geographically, it also gives the private equity firm and its subsidiaries a more extensive reach across Europe and North America, even as Expensya, for instance, continues to operate independently. Before its acquisition, Expensya said it had doubled its recurring revenue within the two prior years and grown its customer base to 6,000 businesses and 700,000 active individual users spread across 100 countries. 

Acquisition events like Expensya and Instadeep are noteworthy as they showcase that African startups can complete a full cycle, benefiting not just business angels (some made a 20x return, for instance) and VCs but also employees. While the scale is far off that of Silicon Valley or more mature tech ecosystems, it represents a positive step forward. These stakeholders will likely invest in startups or even launch their own ventures, contributing to the growth of Africa’s tech ecosystem.  

“Expensya was built very efficiently. When you look at their return on capital, revenue-to-investment ratio and employee count, it’s a super-efficient structure that managed to scale to double-digit millions in revenues while keeping a modest valuation compared to similar models in Europe,” said Ribica, the former M-Pesa executive who has made investments in fintechs such as Qonto and Bamboo. “We should encourage more African startups to build and compete globally and create well-paying jobs at home where there is plenty of local engineering talent so they don’t leave their home countries for jobs in Europe and the U.S. This is the vision.”

For enterprise products like Expensya, growing locally can be more challenging than expanding internationally due to less market maturity and slower decision-making. Jouini advises founders to focus on selling their products and make tweaks as soon as possible. “Don’t spend too much time overengineering it,” he says. “Selling and closing customers, and learning from them, is how you make your SaaS product local or global.” Secondly, Jouini and Ribica urge founders to prioritize talent and simultaneously hire for the present and the future while sharing equity along the way and making them feel part of a journey.

“Stage one: build the product; stage two: launch the product with a couple of customers, tweak it, improve it, build a Unique Selling Proposition (USP); stage three: build, recruit, retain, that’s how you establish an enterprise sales machine, then you scale,” Ribica remarked.