Stripe buys Nigerian-based Paystack for $200M to expand its services into the Nigerian market

Stripes bought Paystack in an all-cash deal for $200 million. The deal will allow Stripes to expand its business in Africa and it will also allow stripes to be able to compete with other payment processing companies like Square, Paypal, etc. 

Earlier this year, Stripe announced that it had raised another $600 million in funding. Part of its reasons for the funding was to expand its API-based payment services into other countries, according to Stripe. 

Stripe is in talks with Paystack, a startup in Lagos, Nigeria that also provides API-based payment services. The fintech firm currently has about 60,000 customers including small businesses, educational institutions, large corporations, etc.

The two companies have said that the plan is to allow Paystack to remain operating independently. Although terms of the deal are yet to be disclosed, sources familiar with the matter say the deal is worth over $200 million. If the deal is successful, the Stripe/Paystack acquisition will become the biggest acquisition in Nigeria.

“Paystack was not for sale when Stripe approached us,” said co-founder Akinlade. “For us, it’s about the mission. I’m driven by the mission to accelerate payments on the continent, and I am convinced that Stripe will help us get there faster. It is a very natural move.”

Prior to the time of making the acquisition move, Paystack had been on Stripe’s radar for some time. In 2018, Stripe led a funding round for Paystack raising $8 million, with other investors such as Tencent and Visa. 

This acquisition deal will also help Stripe expand its global reach, rather than only acquire multiple small companies. In the last 18 months, Stripe has added 17 new countries to its platform list. The company has also had a progressive expansion, as it relentlessly doubles its geographic reach and grows its business. The company is now valued at $36 billion and has become a potential IPO candidate.

Stripe’s CEO Patrick Collison told TechCrunch that there are emerging markets in Africa which presents an “enormous opportunity” for Stripe.

“In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050,” said Collison.

The Stripe CEO also said that the move to acquire Paystack after investing in it was a big one. He further said people shouldn’t interpret the move in terms of Stripe’s bigger acquisition policy, as investing in startups does not mean the company is trying to “tie them up with complicated strategic investments”, according to Collison. “We try to understand the broader ecosystem, and keep our eyes pointed outwards and see where we can help.”

Stripe also has plans to acquire other regional companies to expand its reach. The company isn’t only particular about the geographic location but about how well startup founders have built their companies.

“A lot of companies have been, let’s say heavily influenced by Stripe. But with Paystack, clearly, they’ve put a lot of original thinking on how to do things better,” Collison said. “There are some details for Stripe that we consider mistakes, but we can see that Paystack gets it, it’s clear from the site and from the product sensibilities, and that has nothing to do with them being in Africa or African.”

Paystack sold for $200 million but we think that the company is worth more than that. Africa is a big market and Stripes got away with a good deal on this one.