Ananyi Urged Startups to Hedge Against Currency Risks

Chief Executive Officer of Tizeti, Kendall Ananyi also urged startups to hedge against currency risks by expanding into multiple countries. By diversifying their geographic presence, startups can mitigate the impact of currency volatility from any single market.

He pointed out that this strategy helps stabilize financial results when consolidated. For example, if the Nigerian Naira is depreciating, revenues from other regions like Francophone Africa or the MENA region, where currencies might be performing better, can balance out the overall financial health of the company.

He added that the multi-country approach not only spreads risk but also opens up new markets and revenue streams, enhancing the startup’s resilience and growth potential.

In a recent post on his blog, Ananyi, shared his insights from an eight-year journey of investing in over 40 startups. Ananyi emphasized the significance of not punishing failures and the crucial role that robust ecosystems and support systems play in the success of startups, especially within the challenging landscape of African entrepreneurship.

Highlighting the importance of strong support systems and robust ecosystems as vital for startup success, he noted that early-stage companies often lack the resources and expertise to navigate complex challenges. By building comprehensive support structures, startups can overcome hurdles and reach their full potential.

Tizeti has benefited significantly from the technology ecosystem and continues to advocate for synergies across tech startups. Ananyi recalled the pivotal moment when YCombinator came to Nigeria in 2016.

Hosted by the Lagos Business School and the Nigerian Tech community, Tizeti provided the internet for the event focused on “Building a Startup,” featuring speakers like Michael Seibel, CEO of Y Combinator, Younis Qasar, COO of Y Combinator, and Shola Akinlade, founder and CEO of Paystack. Following this event, Tizeti joined YCombinator (YC W17) and earned the moniker “ISP for Africa.” Ananyi has since actively invested in startups, building a portfolio of over 40 companies.

Eight years ago, Ananyi made his first angel investment in Paystack and has averaged an exit each year since Paystack’s acquisition by Stripe in 2020. He describes the experience as symbiotic, stating, “It is been a great symbiotic experience overall as my own startup Tizeti thrives from the startups. My customers utilize the internet service we provide to access some of these startups’ services/products. The startups and their team also need the internet to build and support tech products/services from their office or homes.”

Ananyi has invested in companies with a cumulative valuation of close to $4 billion, either directly or via a fund. While some of his investments are performing well, others face challenges but are expected to rebound.

His diverse portfolio spans sectors such as energy, education, financial services, healthcare, food delivery, internet, and space, including companies like BuyPower, Helium Health, Kuda, Brass, Edukoya, Curacel, Topship. Despite a broad portfolio, Ananyi has successfully exited four companies: Paystack, Flutterwave, Reliance Health, and Oxio.

Ananyi has been an advocate for collaboration and support for startups. Beyond his investments in African-owned tech-enabled companies, he supports the ecosystem through events like Africa at TECH WEEK by a16z, TechCircle, and Tizeti-hosted NextGen, a conference for Africa’s leading technology enthusiasts, IT innovators, startup executives, corporate business leaders, and digital thought leaders.

Tizeti’s NextGen provides an enabling ecosystem for African startups and their founders to amplify their offerings, featuring speakers from companies such as Interswitch, Brass, Trove, Providus Bank, Teesas, Termii, and PaddyCover. Additionally, Ananyi invests in startups and supports tech leaders, including funding tuition fees for graduating students at the University of Benin’s Electrical and Electronics department.

In his post, Ananyi also identified several hurdles successful startups must overcome, such as co-founder conflicts and crisis management. He urges founders and entrepreneurs to move on from crises by taking stock, re-strategizing, and continuing to build, emphasizing that mature investors base their decisions on growth and market potential rather than press coverage.

He underscored the importance of due diligence and governance, advising startups receiving significant investment to adhere to proper governance policies and hold regular board meetings with experienced board members.

According to Ananyi, exits should be celebrated, but losses should also be understood.

The power law in venture investing helps offset losses, as a few successful investments yield returns larger than all other investments combined.

He encouraged founders to fail gracefully, communicate openly about failures, share lessons learned, and re-enter the arena to try again. This culture of transparency benefits the tech ecosystem and fosters more experienced founders.

While Ananyi is optimistic about exits in Africa, he noted they may be rare in Africa because the majority of the startups were founded after the Paystack exit to Stripe and are less than three years old, or have higher valuations than pre-2021 with investors expected to stay longer to see significant returns. He explained that these young startups need more time to mature and prove their business models before they can attract lucrative exit opportunities. Moreover, the inflated valuations seen during the investment frenzy of 2021 and 2022 mean that investors may need to be more patient, holding on to their stakes longer to achieve substantial returns. Despite these challenges, Ananyi remains optimistic about the potential for more exits in the near future, driven by the increasing sophistication and resilience of the African startup ecosystem.

He identified the skyrocketing exchange rate as a significant issue for African startups reporting in US dollars. Fluctuations in currency values can distort the perception of a startup’s performance, making it challenging for investors to assess real growth.

To address this, Ananyi advised startups to provide financial results in both local currency and USD. The dual reporting approach offers a clearer picture of the company’s performance, allowing investors to understand growth more realistically and make better-informed decisions.

In conclusion, Kendall Ananyi’s reflections emphasize the importance of collaboration, robust support systems, and proper governance in fostering the growth and success of African startups.