Makeba Deal Memo (September 2020)

Deal Abstract

Pre-revenue fintech company for emerging companies wants to be the PayPal/Square/Venmo/Braintree. Burned $1.1MM in 2018 and 2019, each, raising money at a $30MM valuation. Will only raise ~7 months of runway at present fundraising terms.

Shout out to reader John for forwarding me the deal!

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Why Investing/Passing

I fear that this meme may be getting good play for the majority of my deal memos.
  1. Valuation: $30MM valuation e.g. the valuation is too damn high.
  2. Pre-Revenue: …not to mention with no revenue lol
  3. No Innovation: To the credit of the business, they seem to have deployed technology. However, besides giving away value by charging lower fees, I don’t see any creation of additional value that PayPal/Venmo’s don’t already provide. To give a sense of the unit economics, even if the company provides transfer and fraud guarantee for $1MM in transfers, they’d only get to $2500 revenue. Put another way, the company has to facilitate 40MM in transfers to get $100k in revenue.

The 6 Calacanis Characteristics (91 161 18)

1. A startup that is based in SVNo: New York, NY
2. Has at least 2 founders No: 1 (CEO holds 86.2% of the equity.)
3. Has product in the market Yes
4. 6 months of continuous user growth or 6 months of revenue.Yes: Users grew from 688 to 3239 in six months.
5. Notable investors?No
6. Post-funding, will have 18 months of runway No: Burned $1.1MM in 2018 and 2019, each, currently raising max $700k which is 7.6 months of runway.

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • Bad: not seeing fundamentally any new technology.
  2. The Timing question
    • Uncertain: Good for fintech but this company is trying to be PayPal/Square/Venmo/Braintree for emerging markets and I’m not sure they’d do it besides better than the OGs.
  3. The monopoly question
    • Good: if they could actually build it, this would be great. But the level of capital to build this is far exceeding their non-existent revenue.
  4. The people question: 
    • Eh: Not seeing anyone with fintech experience prior.
  5. The distribution question
    • Bad: Marketing to consumers is straightforward, but getting businesses onboard not easy.
  6. The durability question
    • Good: if they could build it.
  7. *What is the hopeful secret?: 
    • They can bootstrap a multi-prong fin-tech company that does peer-to-peer payments, vendor payments, and API integration when these technologies took decades to take root in the United States among several different players.

What has to go right for the startup to return money on investment:

  1. Revenue
  2. Novel technology to reduce operating costs and not give value away
  3. Free SaaS/other forms of value creation to small businesses

What the Risks Are

  1. Insanely expensive business to build
  2. Banks in developing countries decide to move their rears and build the Zelle equivalent
  3. Local players in these countries double down on building a deep solution for their nation

Muhan’s Bonus Notes

Financials (References)

  • Current Fundraised: $247k
  • Valuation: ~$30MM


I posted the following questions, then got this response:

1. Valuation: How did you come to $30MM valuation? I’m used to seeing this valuation for companies that have $250k-$350k in ARR.
2. Pre-Revenue: You’ve burned $1.1MM in 2018 and 2019 each with no revenue, can you talk about your roadmap to revenue and financial forecast?
3. Innovation: Fundamentally, how is your technology different than PayPal/Braintree/Venmo/Square? How will you sustainably process all financial requirements at scale without increasing costs? If I’m doing the math correct you’d have to facilitate 40MM in transfers to get $100k in revenue, and I’m wondering what your vision to scaling the company is.

Muhan Zhang, posted on WeFunder (

Thanks for your message and for learning more about Makeba. Below are answers to your questions:

1. We have used a Discounted Cash Flow (DCF) Valuation method based on our future cash flows of our model’s income streams.
2. 2018 and 2019 were pivotal years in the creation of the software applications and software system that powers our ecosystem. Now that we have launched in our first market, the roadmap to revenue lies in the connection of the US and EU market with the initial adopters in Cape Verde to power the remittance engine. In tandem, we will continue the expansion in other African markets, like Senegal.
3. The ecosystem approach is our innovation. As a result of catering to both merchants and customers at the same time, Makeba has no costly payment networks or slow third parties to deal with means we can offer a better and lower cost service to our customers.
Also Makeba have secure Bank partnership to expend our footprint to 43 countries.
The goal is for our customers to pay for everything in their lives with Makeba – from sending and receiving remittances to buying groceries and shopping online.


Yamandou Alexander, CEO of Makeba

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  1. Anon
    September 11, 2020 at 1:53 am

    This review was written without any discussion with the Company.

    The review does not demonstrate an understanding of the company and their objectives in an untapped market comprising of 1.2 billion people, many of whom operate in an informal sector.

    Makeba is actually innovative in the markets it serves. The platform simplifies people’s lives.

    It’s 2020, charging lower fees or offering services for free is not “giving away value.”

    Comparison to Paypal/Venmo and any other US company is mostly irrelevant.

    Unit economics is inaccurate and lacks understanding of the revenue streams.

    The monopoly effect in a short period of time is a more likely outcome as compared to the US. American companies have no interest in providing services to Africa. Case and point are the US companies that charge 10% for individuals to send money to family in emerging countries/Africa.

    Innovation in the US is slow, particularly innovation that reduces costs, is always slow and needs a brave disruptor. Innovation in emerging markets happens much quicker with little barriers since the “standard” American technology is new there. Also, keep in mind emerging markets leap technology. For example, very few people had/have land lines in Africa, but all have mobile phones. Same will be the case for banking. Africa has a significant unbanked population that mostly have smart phones.

    Doing business in Africa is different. One of the keys to success is the alliances with government, which the Company has done an excellent job of thanks to the experienced CEO. The demand for the technology and need to serve the diaspora alone creates a potential high reward scenario. The valuation is reflective of all the banking agreements, licenses, and development of technology to date.

    The seed investor they have is extremely notable in Africa and key for the adoption of the platform in several countries.
    CEO has built businesses in Africa and had successful exists.

    I am an investor in the Company.

    • muhan
      muhan • Post Author •
      September 11, 2020 at 8:37 am

      Duly noted! I actually posted three of my major concerns to the CEO and he responded thoughtfully. I’ll post them in the deal memo updates.

      Either way, I hold my case that I am not an expert in African continental payments. Especially if one of the keys to success is alliances with the government, that’s too large of an unknown for me to gauge effectively. I hope you make a great return on your investment, and hope you’ll keep us posted.

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