Happy Holidays and 2022 Highlights

As we celebrate and rest this holiday period, we want to express our gratitude to all our partners, founders, and investors in our community. We are delighted to share our end-of-year newsletter with some insights and event highlights of 2022. This year has been a rollercoaster ride for the tech industry from the volatility in the markets, valuation corrections, to scandals and the recent corporate collapses. Despite that, we made significant progress investing in and scaling the 9 companies in our fund portfolio. Its times like this that innovation emerges and more than ever, we must continue to demonstrate discipline, prudence, wisdom, and humility as we learn from past mistakes and apply that in transforming the future of finance.

Despite the changing macro environment, we are entering 2023 with strong conviction in our thesis that companies building category defining financial infrastructure with blockchain / crypto rails will power the digital economy, particularly in fast-growing and underserved markets such as Africa. In 2023, we hope to see our portfolio companies help more businesses and consumers benefit from the Web3 economy in a secure, frictionless, interoperable, compliant, climate friendly and affordable way. We will support them to drive:

  1. More underbanked consumers on-ramp to the Web3 economy from different channels (airtime, mobile money, cash, fiat) to obtain better financial services on-chain and use stable currencies.

Resiliency during this period is key as we support our portfolio companies focus on capital efficiency, sustainable growth, compliance & governance, and execution. We hope to work with more diverse founders building financial infrastructure that can scale in these markets in 2023.

INDUSTRY INSIGHTS

DeFi held up despite the crypto winter

This year, we saw centralized finance platforms (CeFi) such as Celsius, Voyager and FTX fall into bankruptcy due to their mismanagement of funds and poor risk management. On the other hand, decentralized finance platforms (DeFi) such as Aave and Compound held up because they are built on smart contracts and function autonomously on open & transparent blockchains with no human control of transactions. This Havard Business Review article describes the difference between CeFi and DeFi, how DeFi can create significant value in financial services and the infrastructure tools to improve it. We expect to invest in these DeFi tools and platforms in 2023, and get more users to take advantage of the transparency DeFi offers.

Regulations may be progressing

A silver lining from this year may be that regulators all over the world will improve how they regulate crypto to prevent the collapses that happened this year. In 2023, we will expect revised policies and new legislations for exchanges, stablecoins, and other financial products in the US & Europe, Coindesk gives some detail. We are also seeing some progress in Africa: (i) Nigeria is creating regulation to recognize cryptocurrencies as capital for investment and (ii) South Africa’s Financial Sector Conduct Authority (FSCA) declared a crypto asset as a ‘financial product’ that can be offered by licensed financial service providers.

The next generation of FinTech

When it comes to valuation corrections, FinTech has taken the hardest hit. Coatue Management produced an informative white paper on the business models that will win in the next cycle of fintech innovation. Not surprising, it mentions that crypto will augment fiat in the global payments ecosystem, which is consistent with our views on “The next FinTech Unicorn runs on Crypto”. It also mentions that emerging markets such as Nigeria with huge financially underserved populations will see hundreds of billions of dollars in market cap created. Visa recognizes this and is investing $1bn into Africa over the next 5 years to capitalize on the digital / crypto payment boom in Africa.

African startups set yet another record in 2022

Despite the global downturn in VC funding, 2022 has been a record-breaking year for the Africa VC ecosystem, as noted in Africa: The Big Deal. Startups in Africa have now raised more VC funding in 2022 than in 2021, the only continent to do this.

PORTFOLIO UPDATES

Tap won the 2022 Ecobank FinTech Challenge, which rewards the company with a $50K cash prize and a partnership with Ecobank across its 33 African markets.

Verto made Accel’s 100 FinTechs in EMEA to watch, which is a list of talented founders and teams who will transform financial services.

Connected Analytics (ThankUCash)’s Co-Founder & COO, Madonna Ononobi was honored as one of the Most Influential Women in Digital Transformation in Africa.

EVENT HIGHLIGHTS IN 2022

In 2022, we participated and spoke at several events focused on FinTech, Blockchain, Emerging Managers, Finance and Venture Capital such as Celo Connect, Moonclave, Africa FinTech Summit, Africa DeFi Summit, Kuramo Capital Sub-Saharan Africa Africa Day, Culture Shifting Weekends, AWS Founders Forum and SuperReturn Africa.

We culminated the year with Barbara Iyayi’s noteworthy selection as a CUP 2022 Finance Catalyst by the Council of Urban Professionals.

We wish everyone happy holidays and happy new year!

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Unicorn Growth Capital

Unicorn Growth Capital is an early-stage Web3 VC fund that invests in the future of Finance, bridging TradFi & DeFi to foster more inclusive economies.