Dematerialization and its Disconents, Superapps and Superduperapps

From our November 2019 newsletter issue. You can subscribe here.

Thoughts & Themes

More is Less?

I recently finished reading Andrew McAfee’s “More from Less” which deals with the concept of dematerialization. This is the idea that today’s products require less materials to produce and that technology is eliminating the need for us to buy more stuff (e.g. your phone is now a music player, mailbox, GPS, flashlight, etc). The book is ultimately making the argument that economic growth is the best tool in combating climate change. On its surface the idea is kind of antithetical of what one would expect- more growth leads to more consumption, more stuff requires more inputs. But if McAfee’s premise is correct and you look at the data and facts- fewer people are living in extreme poverty today on absolute terms than there were 200 years back- this is very promising.

What does McAfee’s thesis mean for Africa with its demographic shifts, explosive urbanization and rapidly changing norms and consumptive patterns? Is there a sustainable solution and where does technology play in this? We’ve been reflecting on this as end of year approaches and considering more capital-intensive industries (what we call real assets). Firstly we believe that startups are able to disrupt real world sectors from energy to infrastructure and nowhere is this more self-apparent than in Africa. Given the basis from where many African countries are starting we are already beginning to see this happen in mobile telephony and banking. We believe in the next 24 months we will begin to see scaled-disruption to the main sectors of the economy, sectors of the real world like logistics, education, energy, food, agriculture, etc. The first wave has been “this-that” businesses that see models scaled from a developed market to a developing market (ie. Motorbikes in Nigeria) where immense technological advancements have the potential to transform virtually every non-digital sector of the economy. We believe the next wave will see some highly regulated sectors on the cutting block where connecting technology to public-regulated systems will unlock significant returns and efficiencies. For this to work entrepreneurs will need partnerships to achieve scale and differentiation. As one of our portfolio companies CEO’s Greg Murray recently posted on Twitter

Some sectors that we are excited about: i) the future of energy systems as guided by our investments in companies like Koko and Sparkmeter, ii) the future of logistics- the logistics space represents 12c of every dollar of GDP- hence why we are seeing so much interest in the likes of companies such as Lori Systems and Kobo and iii) healthcare.

Ultimately technological interdependence, much like our economic interdependence, is inevitable. And that means that we are all in the same boat and our future will depend on a reformulation of the current take-make-waste model to one that is more equitable and sustainable. We believe that investing in the critical infrastructure to provide these resources sustainably, reliably and cost-effectively is the right business to be in and if McAfee’s premise holds out we can see a decoupling in Africa between resources and consumption while still improving the economic condition.

Rise of the SuperApps:

Everyone wants to build one but what is it. A superapp is simply an app that puts several different services together. Think about it like a virtual mall allowing you to accomplish multiple tasks without ever needing to leave the app. See here for a great primer on Chinese Superapps.

Both Chinese backed Opay and PalmPay have begun their Africa superapp experiment working around common painpoints from payments, mobility, lending and communication. Many other firms are entering the fore from Max.Ng, CanGo and Safeboda who are trying to emulate the S.E. Asian success of firms like Go-Jek. Cellulant is in the process of rebranding its consumer product Mula and relaunching as Tingg which will be the first native African superapp enabling bill payments, remittances, borrowing/lending, food orders, etc.

Perhaps someone will “leapfrog”the SuperApp and build a SuperDuperApp. In the interim I encourage everyone to read this remarkable piece on Meituan- the Chinese Superapp- by Hans Tung.

Key takeaways in trying to build a SuperApp:

• What is your “trojan horse”? — 85% of Meituan’s users came to the app for restaurant search and/or food delivery. Then they stayed and bought products/services across the platform. The superapp approach can improve stickiness and net retention leading to the virtuous flywheel.
• Density matters- Considering the sheer population size of many Chinese cities Meituan has been able to increase order density to reduce their cost per order to 6 cents! This has enabled them to make food delivery a profitable endeavor- a rare feat in the industry.

Portfolio News:

• Two of our portfolio companies- Koko Networks and Medsaf were each featured in the Financial Times.
• 4G Capital received its B Corp status — one of only 2k companies globally- with customer numbers growing 62% Y-o-Y and a total of $79m in lending.

What else caught our attention:

The Algorithmic Colonization of Africa takes a position that technology is not a panacea and technology infrastructure is not apolitical. The algorithims actually hold opinions and biases that are embedded in code. Therefore technology is never neutral or objective and much as the larger debate going on in the US around companies being too big and powerful African stakeholders need to be cautious of what is being imported, used and developed.

Our friend Osarumen and DFS Lab are putting out a beautiful primer on Africa fintech. Check out the first chapter here: Sufficient Balance . I highly recommend subscribing.

As always we welcome thoughts and feedback — get in touch

// Steven on the road