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Chipper Cash’s $2B valuation was reduced by FTX to $1.25B

According to records supplied by the Financial Times on Alameda’s venture capital portfolio, the valuation of African fintech Chipper Cash dropped from $2 billion to $1.25 billion just before FTX’s bankruptcy.

Although the African cross-border payments company did not confirm the news when questioned, the documents corroborate the specifics provided by our sources. Chipper Cash announced layoffs of 12.5% of their personnel the day before this news broke (about 50 employees).

SVB Capital, the investment arm of Silicon Valley Bank, a U.S. high-tech commercial bank, led Chipper Cash’s $100 million Series C round last May. Six months later, Chipper Cash raised an additional $150 million, bringing the total amount of funding it had secured to $250 million. The investment was spearheaded by Sam Bankman-defunct Fried’s cryptocurrency exchange site FTX, and it pushed Chipper Cash’s valuation to $2 billion, making it one of Africa’s five unicorns in 2017.

The documents showing Alameda’s and FTX’s bets reveal that FTX financed more than a quarter of Chipper Cash’s extension round, at $40 million. Chipper Cash, whose celebrity endorsers include Afrobeats musician Burna Boy and French ex-professional football player Patrice Evra, raised over $250 million in 2021 but returned to the market this year to seek additional money, possibly as a buffer to weather the present socioeconomic environment. The company may have had to settle with a down round, though, like many other companies this year. Chipper Cash, a startup with a four-year history, recently received $35 million in SAFE from FTX at a $1.25 billion valuation, according to publicly available documents. Chipper Cash’s valuation has dropped by 62.5% from where it was a few months ago, and this decline will become permanent in a pricing round that will occur in the future.

There has been a new round of layoffs and budget cuts because of the slowdown in the extended bull run that saw public tech stocks and private investments flourish for over a decade. This is in sharp contrast to the enticing climate for startup fundraising that prevailed in 2017. As the pendulum swings back from a founder’s market to an investor’s market, many startups are battling to prove and retain the skyrocketing values they acquired.

Startup values have taken a dramatic hit this year, especially in the financial technology sector. Industry titans like Stripe and Klarna have seen their valuations drop by as much as 85% and 61%, respectively. As we mentioned in yesterday’s coverage of the layoffs at Chipper Cash for which TechCrunch was responsible, a number of prominent African businesses have recently reduced their internal valuations in a manner similar to those of their worldwide contemporaries. It has been reported that, similar to Chipper Cash, secondary sales of startup shares have dropped by 20% to 60%, resulting in a reduced 409A valuation (an independent evaluation of a firm’s fair market worth, typically used to price employee stock options).

African companies, especially those on the smaller scale, have been hit hard by the recent value downturn. For instance, individuals acquainted with the situation say that the valuation of Egyptian social commerce network Brimore was cut by as much as 50%. A down round in October saw investors at Nigerian genomics firm 54gene ask for a 4x liquidation preference after the company’s valuation dropped from $170 million to $50 million.

The bankruptcy of Chipper Cash’s primary investor, FTX, makes it unclear whether or not the company’s existing valuation will be preserved in the next pricing round. According to FT, Sam Bankman-Fried wanted to use the four-year-old fintech as collateral for more than 450 investments in an effort to raise money for the FTX group, which consists of 10 holding companies including Alameda Research, FTX Ventures, FTX Trading, Maclaurin Investments, and Clifton Bay Investments (the arm used to invest in Chipper Cash.)

OVEX, a South African digital asset exchange and OTC trading desk, received $5 million from FTX at a valuation of $122 million; AZA Finance, a Kenyan payment automation and settlement company, received a $25 million promissory note/loan; the African mobile money platform Wave received $10 million in equity; the South African crypto exchange platform VALR received $4 million in equity; and the Nigerian crypto exchange startup Bitnob received $500,000 from FTX at a valuation of $20.

There have been rumours that due to FTX’s collapse, some of the portfolio firms managed by Alameda may not have received the entire amount of capital promised in the financials. Two persons aware with Chipper Cash’s contacts with the defunct FTX exchange say the firm was not exposed to the failure of the exchange, thus it is easy to understand how it may have cut off workers to conserve runway.

In 2018, Chipper Cash was established to fill a need for a cost-free, peer-to-peer, international monetary transfer platform in Africa. The company claims that more than 5 million people in Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa, and Kenya use its platform. This year, the FTX-backed startup expanded into the United States and the United Kingdom to facilitate peer-to-peer money movement from those countries to select regions in Africa. The African money transfer app announced last month that it will purchase the Zambian fintech firm Zoona in an effort to grow into the country in Southern Africa.

According to financials, the P2P marketplace’s gross income increased by a factor of 21 from $8 million in Q1 2021 to around $169 million in Q1 2022, while the marketplace’s total product value increased by a factor of 8 from $213 million to $1.65 billion in the same time period.