The company, founded by Shola Akinlade and Ezra Olubi, initially caught the eye of industry commentators as it was one the first Nigerian tech company to be accepted into the world-famous Y Combinator progam, based in Silicon Valley. Since then, having taken Paystack through Private beta, and securing $120,000 early-stage investment from Y Combinator, Akinlade [CEO] and Olubi [CTO] have quietly been building the company, working to secure this Seed investment round, whilst also building a network of partner merchants in Nigeria, over 1,500, who are now using the platform to accept online payments.
I spoke to Paystack’s CEO, Shola Akinlade, to find out how the company is working to fix Nigeria’s fragmented online payments system.
Introduce us to Paystack – how did the idea come about?
We started Paystack because we knew online payments in Africa were essentially broken and someone definitely had to do the hard work of fixing it. Ezra Olubi [Paystack Co-founder and CTO] and I graduated from Babcock University 10 years ago, and after that, I worked on Precurio, a collaboration software for businesses in emerging markets which was downloaded over 150,000 times and made available in six languages. Ezra on the other hand, started off working in payments with Eyowo, and then went on to become the CTO of Jobberman, and Delivery Science. But we were both from solidly tech backgrounds.
Sometime in 2014, I was helping a few banks with financial software and realised I had a great chance of solving the payments problem; firstly because I had built world-class software before, and now, I had a little access to the financial industry. I started speaking with people in the tech ecosystem and then put up a waiting list, which was really just a call for those who wanted to try out what we were working on. Within one month, we had over 300 people join the waiting list. From this, we felt that we had tapped into an issue that was experienced by many, so we grew the idea from there. The challenge was to solve the issue of online payments in Africa, somehow connecting the super-fragmented aspects of the sector. What we did was develop multi-channel payment options for merchants across the country, enabling them to accept payments from around the world, via credit card, debit card, and direct bank transfer on web and mobile. It’s taken two years of non-stop hard work to grow it from idea stage, to the product we have today.
You were accepted into the tech accelerator Y Combinator at an early stage. What was the process and how did it help your company?
Y Combinator is amazing. I had applied for the tech accelerator with my first company, in 2007 and, sadly, didn’t get in. I applied again last year with Paystack and got invited to Silicon Valley for a 10-minute interview. We packed our bags, took our laptops, got on a plane, shared our vision with YC applications team, showed them what we were building and, to our surprise, we got in, making us the first Nigerian company to be accepted into the program.
The YC program basically changed our company’s trajectory. They funded us with $120k and advised us to focus on building our product and talking to our customers, noting that almost everything else involved in building our ideas and company, would be a distraction. They helped us focus on the detail; the core structure of the company that was going to help us scale. YC also helped with fundraising, as at the end of Y Combinator, there’s a Demo Day where each company has to present to the top early stage investors in the world. It seems we were able to capture the attention of investors who understood the scale of the challenge, as well as our solution for fixing the problem of payments in Africa, as we were able to raise our seed round on the back of Demo Day.
You’ve just come out of beta, but you already have over 1,500 Nigerian companies using your service – how have you been able to grow so quickly?
Paystack opened up its beta in January, and in less than a year we’ve processed well over 1 Billion Naira. It’s really people telling other people about what we offer, how we can help them build their business, by using paystack. We’re already working with some of Nigeria’s top platforms, such as iROKOtv, Jobberman, Payporte, and Hotels.ng – now we want to continue to build out our list of homegrown companies. When we tell people that they can start receiving payments within 30 minutes from sign-up, I think many are, initially, a little cynical. So many merchants in Nigeria have faced so many challenges with receiving payments over the years, I think perhaps they thought it sounded a little too good to be true. But they had faith, they tried us out, our product worked for them. Our customers have been our evangelists, and that has really helped us grow quickly. Y Combinator told us to talk to our customers and we did. It seems that our customers then went on to talk about us.
You’ve just announced that you have closed on seed funding of $1.3M – how will you be investing this into the company?
We will use the investment to build out our engineering team, grow our sales and marketing operations and accelerate our product development. It’s exciting because more than ever, we feel like we now have the capacity to solve the problem of making online payments in Africa – ensuring a smooth interaction between merchants and customers.
Raising investment / seed funding for an African start-up in this economic climate cannot be easy. Can you give us an idea of the current investment landscape?
Funding is difficult and distracting for early stage businesses. We had over 60 calls and meetings and only about 15 were positive. However, I’m excited that Silicon Valley is now paying attention to African companies, with Mark Zuckerberg, Y Combinator and 500 startups all betting on African startups this year. I’m optimistic that as long as African startups keep building great businesses, funding will continue to flow in our direction.
You recently announced that Paystack has built an online payments gateway for one of the world’s largest e-commerce companies, Shopify. How did this meeting of two minds occur?
We had been getting requests from customers that wanted us to build a direct integration for Shopify and so we decided to build it. While we were building it, I think people were also telling Shopify that they needed to get Paystack in Nigeria and so the partnerships team reached out to us and really helped us get this done smoothly. This is super interesting because businesses can now setup an ecommerce store in hours using Shopify and start accepting payments that same hour with Paystack. That’s the power of collaboration.
What can Paystack offer online merchants and sellers that the likes of Paypal or other international fintech companies can’t?
Payments are really fragmented in Africa and Nigeria, because people pay in different ways here and our problems are a bit different from the rest of the world. Paystack offers support for local payment methods, like Verve Cards, USSD payments like GTBank’s *737#, and direct bank connections. More than that, I think we are just better positioned to meet the needs of the Nigerian merchant and that’s why were are able to build features like the transaction timelines to help them visualize and understand card failure rates, or payment pages to help them accept payments without a developer, and we will continue to go deeper. We understand the challenges of the African fintech market and we feel that we are best placed, as Africans, to solve said challenges.
Paystack is available in Nigeria at the moment – do you have any plans to scale the company outside of Nigeria and across Africa?
Oh yes, we are already having early conversations in Ghana and should support a few more countries in 2017. 2016 has been a brilliant year for us, and we’re happy to close it out with this funding announcement, but we’re also always thinking several steps ahead, and building out across the continent is absolutely critical to our growth strategy. The entire African payments market is, I believe, up for grabs.
There’s a lot of buzz around fintech in Africa at the moment, what does the wider market and growth potential look like for Paystack and other fintech start-ups.
The growth potential for fintech is enormous. Nigerian businesses collected about $150B last year, most of which was collected offline. However the digital economy on the continent is growing fast, and Nigeria alone currently sees 6 million new Internet users every year. Such a high proportion of payments are still conducted offline, but with more people coming online every year, the growth trajectory is staggering. It’s easy to see that there will be more digital transactions this year than last year, and this is a trend that will continue for a very long time.