What You Should Know About Africa's First Unicorn Ahead of Its IPO

Launched in 2012, Jumia Group is set to become Africa’s first technology company to list on the New York Stock Exchange. Additionally, it is poised to become the first unicorn, company with a valuation estimated at over $1 billion. However, although the company bills itself as African - we do too, per our classification - many still contest Jumia’s ‘Africanness’.

Although Jumia’s majority shareholder is South African-based MTN Group with a 29% stake, the rest of the ownership - over 70% is held by European and American firms. The company - although maintains local subsidiaries who are each registered in their respective countries of operations - is also headquartered and incorporated in Berlin, Germany as Jumia Technologies AG.

As a private company registered as Africa Internet Holding GmbH in Germany, not much information relating to its performance has been shared with the public except for metrics surrounding Gross Merchandise Value (GMV), Number of Customers as well as the Adjusted EBITDA which are published annually as part of Rocket Internet’s Annual Financial Reports.

Yet, with the filing for IPO, the disclosure requirements mean that information that was previously private has been made public. In this research brief, we pick out the most compelling details from the F-1 filing and summarize them ahead of Jumia’s IPO. Do note that the terms Jumia and Jumia Group are used interchangeably to refer to ‘Jumia Technologies AG’.

2012 - 2014: Formation

Africa Internet Holding GmbH was incorporated on June 26, 2012, as a limited liability company (Gesellschaft mit beschränkter Haftung) under German law. However, it launched its operations as Africa Internet Group in 2012 with Jumia Nigeria - an e-commerce platform - as its flagship venture. Africa Internet Group - which later rebranded to Jumia Group - was structured like the other internet holdings that Rocket Internet launched in other emerging parts of the world - Middle East Internet Group, Asia Pacific Internet Group, and Latin America Internet Group

The Group was co-founded by two French ex-McKinsey consultants Jeremy Hodara, Sacha Poignonnec - both 38 years. These were joined by Raphael Kofi Afaedor (Ghanaian), and Tunde Kehinde (Nigerian) to launch the Jumia Nigeria venture. Rocket Internet quickly launched a series of other internet ventures ranging from food delivery to ride-hailing. These were; Hellofood, Kaymu, Jumia, Everjobs, Vendito, Lamudi, Carmudi, EasyTaxi, Lendico, and many others. Some of these have since shut down while others were rebranded.

In 2014, Tunde Kehinde and Raphael Kofi Afaedor exited the company under unclear circumstances. Tunde ended up co-founding a fintech called Lidya as well as a logistics startup called Africa Courier Express.

2016 - 2018: Scale and Focus

In 2016, the company raised a €360M Series C round at a valuation of $1.04 billion. Following the Series C, the company decided to harmonize all its subsidiaries under the same brand, giving birth to the Jumia Group. However, it continued to trade as Africa Internet Holding GmbH until January 31, 2019, when its name in Germany registry was officially changed to Jumia Technologies AG.

In 2016, at the height of its scale, Rocket Internet’s Africa Internet Group had operations across 35 African countries per its report for that year. But, the company either shut down or dissolved (mostly) classifieds ventures into Jumia Deals. The moves were in line with Rocket Internet’s approach of maintaining a “long-term focus on market leadership” by “aggressively backing winners and closing the nonperformers”.

Some of the ventures that they have shutdown include EasyTaxi (around 2016) and Jumia Car (Carmudi) whose time is not clear. It also sold off some of its Jumia House operations across Africa to PropertyPro (former ToLet.ng) in Nigeria, MeQasa in Ghana and AngoCasa in Angola In November 2017. In other markets, they dissolved Jumia Jobs (formerly Everjobs) and Jumia House (formerly Jumia House) into Jumia Deals (formerly Vendito) starting from the end of 2017 through 2018. These include operations in Uganda, Tanzania, Cameroon, Gabon, Rwanda, Zambia, and more.

The above shutdowns and disposals signaled a new direction for the company which is further revealed in the F-1 filing. Looking at the prospectus, Jumia is moving to become more e-commerce focused with all the other arms merely offering anchorage to that. They are essentially establishing (Jumia) Marketplace which is supported by (Jumia) Logistics and Jumia Pay as the payments arm. The marketplace model also implies that e-commerce giant has managed to slowly pivot away from being a 1st party e-commerce platform the way Amazon is to 3rd party marketplace the way Alibaba is.

Funding & Valuation

In 2016, Goldman Sachs led a group of other investors and acquired shares in the company, which valued Jumia at $1.2 billion. The e-commerce giant then became the first private technology company across the African continent to hit the $1 billion valuation mark, achieving the ‘first African unicorn’ moniker.

The latest public valuation was estimated at around €1.4 billion ($1.6 billion) as of December 2018 when they raised a €75 million ($84.4 million) corporate minority round from Pernod Ricard Deutschland GmbH, a Germany subsidiary of the French alcoholic beverage produce Pernod Ricard S.A.

However, before that, the company’s valuation had long been estimated at over $1 billion starting from 2016 when it raised its highest funding round - a Series C - of €360M ($405M) that was led by MTN Group and Rocket Internet per CrunchBase. In total, Jumia Group has raised at least $852 million in funding across five (5) different funding rounds.

[caption id="attachment_21196" align="aligncenter" width="1280"] Jumia's number of active customers almost doubled in 2018[/caption]

The company was launched with a $45 million Seed round in 2012 from Rocket Internet, Millicom Systems and Blakeney Management. This round was followed by a €130 million ($146.3 million) Series B in 2013 led by Millicom Systems and a $150 million Pre-Series C that was raised at a $405 million Pre-Money Valuation in November 2014.

In terms of shareholding information, Jumia’s current shareholders are AEH New Africa eCommerce I GmbH (8.4%); Atlas Countries Support SA. Holding (5.8%); AXA Africa Holding SAS (5.8%); Chelsea Wharf Holdings (5.2%); Millicom International Cellular SA (9.6%); Mobile Telephone Networks Holdings Limited (29.7%); Pernod Ricard Deutschland GmbH (5.1%); and Rocket Internet SE (20.6%). It is estimated that each of the co-founders - Sacha and Jeremy - owns approximately 2% of the company. However, it is not clear through which vehicle as there are no direct individual shareholders in the company.

Locations & Employees

Jumia is distributed across three (3) continents; Europe, Africa, and Asia. The company is headquartered and incorporated in Berlin, Germany with their tech team stationed in Porto, Portugal. They also maintain a team in Dubai, United Arab Emirates and per their IPO prospectus, they have operations in 14 African countries. However, they point out Nigeria, Kenya, Egypt, Ivory Coast, and Morocco as their top five markets.

As of December 31, 2018, Jumia employed a total of 5,128 full-time equivalent (FTE) employees. The company’s employees are based in 20 offices across 18 countries. Per the prospectus, 32.8% of Jumia employees are female while 67.2% were male. At the country level, Nigeria has the highest number of employees with 1,213 followed by Egypt with 572 employees.

Leadership & Management

Under German law, a stock corporation - which Jumia Technologies AG is - has a two-tier board structure composed of the management board (Vorstand) and the supervisory board (Aufsichtsrat). The latter is the equivalent to the board of directors. At the beginning of March 2019, Jumia announced that it had added Golden State Warriors’ player Andre Iguodala to its Supervisory Board.

On December 18, 2018, the then existing shareholders - including Pernod Ricard - agreed to appoint Gilles Bogaert from Pernod Ricard and Matthew Odgers from MTN to the supervisory board. The supervisory board also includes Blaise Judja-Sato, Jonathan D. Klein, Angela Kaya Mwanza, Alioune Ndiaye, and John H. Rittenhouse. Currently, Jumia’s management board consists of Jeremy Hodara and Sacha Poignonnec who both serve as the co-Chief Executive Officers and Co-founders of the company.

Initial Public Offering

On March 12, 2019, Jumia Technologies AG announced that it was setting itself up for a listing on the New York Stock Exchange under the symbol "JMIA" hoping to raise over $250 million in the process. In the company’s prospectus, it listed Morgan Stanley, Raymond James, Citi Group, Berenberg, RBD Capital Markets, William Blair and Stifel as the Advisors on the IPO. The company never disclosed the share price at which it is considering to list on the NYSE.

One of the things the prospectus revealed was that the e-commerce giant is still a loss-making business. However, much of the company’s current $1 billion-plus valuation is predicated on how much it is generating in Gross Merchandise Value.

“The main purpose of the IPO is to bring money to the company,” said Sacha Poignonnec, Co-founder and CEO of Jumia. “We will continue to invest in existing businesses to improve services for consumers and retailers, bring more logistics partners to the platform and implement the strategies currently in place."

In an updated version of their SEC F-1 filing, Jumia is looking to offer 13.5 million American depository shares (representing 27,000,000 Ordinary Shares) for purchase at a price range of $13 to $16 per share putting the company in a position to raise up to $216 million from the IPO. However, ahead of the IPO, the company announced that Mastercard Europe had agreed to “purchase €50.0 million of our ordinary shares in a concurrent private placement at a price per share equal to the euro equivalent of the initial public offering price per ordinary share”.

The Numbers

Per the prospectus, Jumia assesses the success of the business “through a set of key performance indicators such as the number of Active Consumers, GMV and Adjusted EBITDA.” They also happen to be the key metrics that valuation for e-commerce businesses is predicated on.

Jumia defines GMV as “the total value of orders including shipping fees, value-added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns.”

It also defines an active seller as one that “received an order on our marketplace within the 12-month period preceding the relevant date, irrespective of cancellations or returns.” While, an active consumer “means unique consumers who placed an order on our marketplace within the 12-month period preceding the relevant date, irrespective of cancellations or returns.”

When it comes to the adjusted EBITDA, it “corresponds to the loss for the year, adjusted for income tax expense, finance income, finance costs, depreciation and amortization and further adjusted by share-based payment expense.”

According to the prospectus, as of December 31, 2018, the number of active sellers on the Jumia platform was 81,000, and the number of active consumers was 4 million. In 2018, about 90% of the items sold on the Jumia market platform were provided by third-party sellers, and the remaining 10% were sold directly by Jumia to enhance consumers in major product categories and regions. The company’s number of users jumped from 2.7 million in 2017 to 4.0 million by close of 2018, a growth of 48%.

According to the prospectus, JMIA's revenue in 2018 was 130 million euros (about 149 million US dollars), and the gross profit was 45.7 million euros (about 52.4 million US dollars) but the company lost 169 million euros (about 194 million US dollars) in the same year.

As of Dec. 31, 2018, the filings show the company has accumulated losses of nearly $1 billion (the exact number is $960 million. Broken down, Jumia incurred a loss for the year of €165.4 million in 2017 and a loss for the year of €170.4 million in 2018. The company’s GMV was estimated at US $930 million for the year 2018 up from US $570 million in 2017. Based on a 1 billion-plus valuation, this represents a multiple of at least 1.1 times GMV alternatively at 4 million active customers, this is a valuation of $250 per customer.

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