African crypto startup Yellow Card raises $33 million in new funding

While many currencies in Africa are unstable or have seen their values plummet relative to the US dollar, making them undesirable to hold, Yellow Card has found a way to trade in local currencies with reduced risk. The startup says that capability has essentially made it a market maker for African currency transactions.

After years of working to build a critical mass of customers, Yellow Card can balance out deposits and withdrawals of a local currency, carefully managing its treasury.

“What Chris and [Co-founder and CTO Justin Poiroux] have built is a really defensible business,” said Aleks Larsen, a general partner at Blockchain Capital in an interview with Semafor. “It has taken them many years of blood, sweat and tears to build up local payment rails, connect them with stablecoins and make this useful to lots of companies.”

Yellow Card’s competitive moat in the countries where it operates has led to partnerships with major crypto firms, like Coinbase and Block, which have opted to use Yellow Card’s financial rails, rather than compete with it directly.

The company, which declined to disclose its current valuation, expanded to its 20th country this year. It has raised $85 million to date.

Maurice, who grew up in Louisiana, was introduced to cryptocurrencies in college by his co-founder, Poiroux, a bitcoin evangelist at the time. The pair started a company that sold bitcoin gift cards at big box retailers that could be bought with cash and redeemed for the cryptocurrency.

But his big revelation came when Maurice was waiting in line at a Wells Fargo in Alabama, where he witnessed a Nigerian man trying to send $200 to his mother in Lagos. The bank, Maurice said, charged a fee of $90. “I just became obsessed with this problem,” he said. “I found myself skipping class and just trying to understand the country and the banking system and the currency and the continent.”

He put an ad on LinkedIn that said “looking to speak to Nigerian men,” which he says “probably could have been worded better.”

But Maurice got the advice he needed. One of the Nigerian men who responded told him that “what you’re building will be a luxury product in the US, but it’ll actually help real people here.” In other words, they should come to Africa. Maurice then spent his life savings on a one-way ticket to Nigeria.

The Nigerian man Maurice met on the internet became one of the co-founders of the company, and Maurice spent the ensuing months hopscotching from one African country to the next, learning how the financial systems worked and setting up business entities that would become the foundation of Yellow Card.

Yellow Card doesn’t charge fees on transactions. Instead, it earns money on the spread between currency prices during transactions. Maurice says the cost amounts to a tiny fraction of the standard fees charged by money transfer companies and banks.

I met Maurice over coffee in San Francisco not too long ago and I asked him how a kid from Louisiana ended up starting a fintech company in Africa. He told me with a deadpan expression that a Nigerian man contacted him with a business proposition.

I don’t think I’ve laughed harder at an introductory coffee meeting.

Maurice is part of a new generation in the crypto industry that differs from the speculative crowd that gave the technology a bad name.

He’s more interested in solving problems. It’s a common refrain for startup founders, but there’s truth to it. If your only goal is to get rich, there are many less laborious ways than starting a company like Yellow Card.

And there are a lot of problems to solve. After all the aid money and loans that have gone to Africa and other emerging markets over the decades, antiquated banking systems and volatile currencies remain a bottleneck to organic economic growth and entrepreneurship. That’s begun to change in the last few years, in part thanks to new technology like stablecoins that are (theoretically) backed one-to-one by the US dollar.

The banking infrastructure of a lot of countries is about to change, offering new opportunities for local and foreign businesses, and for fintech pioneers who want to go overseas and start companies.

“If we ever got acquired, I would want my title at the new company to be ‘VP of markets that scare Americans,’” Maurice said. “Just work on changing people’s perceptions of these countries where there is a ton of economic opportunity, an insane amount of growth. This technology actually helps people and makes their lives better, as opposed to just saving two seconds of your morning routine in California.”

There’s plenty of skepticism and worry about the use of stablecoins in developing markets, mainly based on what might happen when nobody is really in control of financial structures. This is from a report by the Financial Stability Board in July.

“Emerging and developing economies [EMDEs] may be exposed to macro-financial risks arising from the use of foreign currency-pegged [global stablecoins], which can increase financial stability risks by destabilizing financial flows and straining fiscal resources,” the report said.