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How tech startups became billion-dollar empires amid COVID-19 pandemic

For the first time since World War II ended in September 1945, the COVID-19 pandemic is arguably the worst crisis to hit the world. As of Friday, over 151 million people have been infected worldwide, out of which about 128 million people recovered, while over three million people have died.

Beyond the human casualties, which left affected families with varying doses of trauma, the pandemic shattered people’s aspirations and made a mockery of projections by companies, including startups and micro, small and medium scale enterprises.

It was only a matter of time before some began to fold up. The total lockdowns in many countries to contain the spread forced companies to shut their doors, and unknown to many, that was the beginning of their end.

In Nigeria, for example, the Association of Small Business Owners of Nigeria said last year that a number of MSMEs might never return to business and the government had to support critical sectors with intervention funds.

Similarly, New York-based Fortune reported in September 2020 that nearly 100,000 establishments that temporarily shut down due to the pandemic were eventually out of business. That invariably led to job losses, accompanied by its negative consequences. The world has not remained the same since then.

Another report by Yelp in September 2020 indicated that in the United States, 60 per cent of closed businesses as a result of the pandemic might not reopen.

But inasmuch as many companies had it rough, some others made a fortune during the pandemic.

For example, Stripe was named as the most valuable Silicon Valley startup. PaymentsDive reported that the pandemic, with its surge in contactless online purchasing, accelerated the company’s growth. Stripe raised $600m in its latest round of fundraising, giving the payments processing software company a $95bn valuation.

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Another classic example is Flutterwave, an African-cum-Silicon Valley payments company launched in 2016 by a Nigerian, Olugbenga Agboola, also known as GB. In March, the company announced it had raised $170m, raising the company’s value to $1bn. With that, Flutterwave became a unicorn, which is a term used for private startup companies that have a value of over $1bn.

Flutterwave’s Investor Relations and Business Manager, Kanyinsola Ajibade, in an interview said the COVID-19 pandemic also contributed to the company’s growth, given that more businesses opted for online payment solutions.

Earlier, Agboola, Flutterwave’s CEO, told TechCrunch that the company grew more than 100 per cent in revenue within the past year due to the pandemic.

A venture capitalist, Asheem Chandna, said in an article on Forbes that it had clearly been a mixed experience for companies; some have thrived while some have declined. “But overall, the net effect of COVID-19 has been to accelerate the disruptive role of technology across industries,” he added.

This was also evident in a London virtual events startup, Hopin, which grew from a value of $38m in January 2020 to about $2.1bn in November 2020, following a rise in demand for its product as a result of the pandemic.

The New York Times reported that the company’s chief executive, Johnny Boufarhat, said he was not planning on raising more money but that unsolicited offers from investors started pouring on. “It’s like a drumbeat,” Boufarhat was quoted as saying. As of March 2021, the company’s value has risen to $5.65bn.

The report noted that the boom was driven by higher demand for digital products and services and that low-interest rates pushed investors to seek returns on riskier assets.

CNBC also said, “With a $5.65bn valuation, Hopin is one of the largest unicorns – privately-held startups valued at $1bn or more – in Europe. The firm says it now has annual recurring revenue of $70m, up from $20m last year and is profitable.”

Speaking on the boom, an investor at Founder Collective, a venture capital firm, said, “I haven’t seen anything like this in over 20 years. The party is as loud and the drinks are flowing as freely as the dot-com boom, despite that we’re all drinking at home and alone.”

Another company that also made billions of dollars during the pandemic was Zoom, the videoconferencing company that created the Zoom app. Its valuation rose from $1bn to $116bn in less than two years. Zoom became one of the go-to apps for videoconferencing, necessitated by the need for companies and individuals to meet and work remotely.

Similarly, VAST Data, a tech company that focuses on data storage, specifically flash memory, hit the $1bn unicorn valuation due to the pandemic as transactions moved online. CNBC reported that part of VAST’s recipe for unicorn success in a pandemic could be the nature of its business.

Also, Instacart, an American company that operates a grocery delivery and pick-up service in the United States and Canada, almost doubled its valuation in 2020, rising to about $17.7bn.

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CNBC reported, “Instacart was valued at $7.9bn at the start of the year (2020) and raised another round of funding in June led by DST Global and General Catalyst. Instacart is now valued at the same level as Airbnb in private markets, highlighting the diverging fortunes startups have seen this year. Instacart has seen its share of the grocery delivery market surge to nearly 50 per cent as more consumers buy extra groceries than before and restaurants operate at limited capacity.”

Also, Clubhouse, a startup that started in 2019 and was valued at $100m was valued recently at $4bn. Reports said the demand for the app, which is still on the iOS platform only but might soon have its Android version released soon, rose because of the pandemic and the need for virtual meetings.

Meanwhile, CNBC said in a report in December 2020 that between October and November 2020, 28 companies became unicorns. It cited the example of Klaviyo, which raised its valuation from $800m to over $4bn in November 2020.

“In a robust year for venture capital investments, Klaviyo and dozens of others rode the digitisation tailwind into unicorn territory,” the report added. Klaviyo Chief Executive Officer, Andrew Bialecki, told CNBC in December, “Between March and the end of the year, the number of customers, the number of brands building on Klaviyo doubled.”

It also cited MessageBird, a cloud platform facilitating communications for companies like Uber, SAP, and Lufthansa across Southeast Asia, Europe, and Latin America, was said to have tripled its valuation to $3bn during the pandemic.

It cited Unqork, Faire and Calm, a unicorn founded in 2019 and grew its valuation to $2.2bn during the course of the pandemic, likely driven by increased venture interest in mental health apps amid the global health crisis.

Duolingo, an education app suitable for learning languages, also saw its value rise significantly. Its value rose from $1.5bn the previous year to $2.4bn. According to CNBC, the COVID-19 pandemic led to the 500 million-download mark for Duolingo.

Co-founder of the app, Von Ahn, said, “We’ve been very fortunate that our growth has been organic. And it’s not just been organic – it’s been rapid.”

TripActions, a Silicon Valley-based startup, raised $155m funding, leading to a valuation of $5bn, according to

It listed several other tech startups capitalising on growing demand amid the disruptions caused by the pandemic for tools in the world of big data, DevOps, cloud, mobility, the Internet of things and cybersecurity. The startups include Cockroach Labs, Cohesity, Confluent, Front, Funnel, GitLab, Graphcore, Snyk, Tanium and Tessian.­­­­

GeekWire also reported that US startups broke a record in 2020, reeling in $156.2bn, topping $142.7bn in 2018, and $138.1bn in 2019.

Notably, several other startups within and outside the Silicon Valley in the United States raked in billions of dollars in investors funding during the pandemic. In Nigeria also, some sectors of the economy witnessed growth but some experienced a decline.

However, speaking to this and how Nigerian companies fared during the pandemic, the Associate Director, Strategy and Economics at KPMG, Mr Olusegun Zaccheaus, explained that it was important to point out that most of the referenced growth was based mainly on the valuation of the companies.

“The question you want to ask is what drives valuation increase? If you are in an industry that people think would be the future, you get a lot more investments and there is high liquidity in the economy, so people invest in the company significantly and your valuation goes up. That happened for many tech companies. It’s not tied to their profits but valuation at the stock exchange.

“However, if you want to talk about the Nigerian context, look at the sectors that did well, like ICTs, telecoms, cement and we saw that Dangote reached the revenue of N1tn mark. The other sector that did well was financial services and we know the story.”

Zaccheaus said the logistics business also did well, even though they were not listed on the stock exchange to be able to measure how well they performed.

He added, “Logistics is one of the major sectors that is doing well this period and the reason is straightforward; people could not go out. On the other hand, any sector affected by foreign exchange and consumer power didn’t do quite well because sales didn’t increase as such.”

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