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Revealed: OPay’s Strategy for Dominating Nigeria’s Tech Space

OPay has dominated Nigerian tech news headlines for much of this year. From big money funding rounds to generously low service prices, the payment platform has served up a master class in how to capture a nation’s attention and gain access to its wallets, literally from scratch.

They’ve achieved all of this in a matter of months. And they say they’re just getting started.

But from its earliest days in the Nigerian market, analysts have wondered whether OPay’s strategy was sustainable. Critics said the company was burning investors’ cash on extremely subsidized products and services, and opening up new verticals with reckless abandon.

They predicted that the cash was going to dry up, and that OPay’s bosses would find themselves forgotten by the freebie-loving customers they once courted.

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The criticisms have waned somewhat. There’s a reason for this.

A lot of the questioning was hushed by the news that OPay had secured a second tranche of funds from a group of investors. The consortium of Chinese Venture Capital firms have committed to pumping $120 million into the startup, to enable it strengthen its business in Nigeria and expand into other African countries.

That was just a few months after OPay got $50million in investments from some of the same VCs.

There are still questions about OPay’s strategy, but they’re no longer just about its ability to keep up its break-neck speed expansion or its sugar-coated offerings. More questions are now being asked about its funding sources, and whether its cash flow will ever dry up.

There’s More Where This Came From

The signs are that OPay won’t be suffering dry coffers any time soon. Behind its backers are a growing class of super-rich East Asians who have the luxury of playing long term with their investment moneys.

One such ‘super-rich’ mogul’s is Zhou Yahui, who is currently Chairman and CEO of Opera, the parent company of OPay. He took over as its chairman after his company, Kunlun Tech, led a group of Chinese investors to purchase the browser from its Norwegian founders for $600 million.

They ramped up its value over the course of 18 months, finally listing it on the New York Stock Exchange (NYSE) for $1.2 billion- double its initial value.

This follows a similar pattern in which Asian capital has flowed into new tech frontiers. In recent times, some of this flow has shifted to Africa, which many global investors see as a high growth market that promises them large returns.

For analysts of international economics, it’s a sign of East Asia’s growing economic prowess. For local startups and consumers in Africa, it means more funding opportunities and (ultimately) a greater variety of products and services to choose from.

OPay’s investors don’t seem to be bothered about its strategies. It does appear that they’re still fixated on cultivating a sizeable market share of the ventures they are venturing into.

But what’s the point of capturing markets if the focus isn’t to make profit over time?

Valuation Over Profitability

Apparently, OPay is taking a different route from what traditional businesses in Nigeria are accustomed to. Its investors are more concerned about building the company’s valuation.

This was confirmed by a well-paced source within the company who spoke with Connect Nigeria on the condition of anonymity.

“The mid to long term strategy is valuation and IPO, and is more important to our investors than short term profits,” the source explained.

“That is why they are able to burn $170 million and more in the next five years.”

He also suggested that they wanted to build a “$10 billion super-app” in OPay, “just like the Unicorns and Gojek and Grab in Indonesia.”

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Here’s the clincher: the investors are looking to get huge returns on their moneys through an Initial Public Offering.

“With that kind of valuation, our chairman and his investors’ financial position will more than quadruple once they have a successful IPO and survive the onslaught of Wall Street.”

What this Means for Nigerian Tech

If the funds keep flowing in for OPay, the platform could gobble huge portions of the local tech market. Many local startups in fields like fintech and ride hailing may struggle to match its reach.   

It will also mean that the bar for entry into these markets will be higher. Intending players in these spaces will have to be backed by hefty sums- leaving room for more foreign interests and not much of a local say in how these sectors develop.

It will be interesting to see how it all pans out over the next few years. 

Featured image source: Techubway

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Ikenna Nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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