Magma Founders Residency in Kenya

Crypto in Africa is not a counterculture or ideological movement. It serves as the only alternative for accessing stable money.

 min. read
June 4, 2024
Magma Founders Residency in Kenya

I recently had the privilege of spending a week with founders from Kenya, Nigeria, Ghana, Zambia, and South Africa at the Magma residency outside of Nairobi, organized by Yoseph Ayele. Here are a few reflections and eye-opening moments that make me super excited about the prospects for onchain apps in Africa.

One of the first things I noticed was that mobile money, such as MPesa, is already the standard in Kenya. People's relationships with their telcos are vastly different from those in Western markets. Upon landing at the airport, I set up a local eSIM with an MPesa wallet, which I could use for every transaction, from shopping to P2P payments. The transition from mobile money wallets to crypto is a much shorter leap in Africa compared to elsewhere.

Another striking observation was that crypto in Africa is not a counterculture or ideological movement. Instead, it serves as the only alternative for accessing stable savings and payment options. With runaway inflation and limited access to dollars due to government controls, dollar-denominated stablecoins have become critically important for people in their daily lives.

Interestingly, most people in Kenya don't acquire crypto from exchanges. Instead, they rely on networks of trusted agents, exchanging mobile money or airtime for USDT. Binance P2P facilitated an impressive $26 billion in transactions in 2023, leading to a recent crackdown in Nigeria. New startups like Onboard are working to bridge this gap.

USDT and Binance are the trusted entities in Africa, while in the US (in my experience), it's USDC and Coinbase. Celo, one of the most active L2s in Africa, has a much more prominent presence there compared to the US.

Local founders in Africa have traction that would make Western startups envious, but they struggle to attract investors who truly understand the market. Yoseph is working to bridge this gap, and the fireside chats we had with SF-based founders and investors highlighted the knowledge gaps that exist. When asked for advice, one SF-based founder recommended that local founders get on a plane and come to SF. While well-intentioned, this advice is challenging to follow, as the waiting list for visitor visas is 1-2+ years. It's disheartening to see how these talented founders are locked out of global networks and conferences. We need more events in Africa to help bridge this divide.

Building a startup in a government prone to regulatory mood swings poses immense challenges. I was blown away by the persistence and strength of the local founders who are solving real problems and know it. Compliance, licensing, and regulations vary between countries, and the best way to navigate this seems to be by creating a paper trail demonstrating a commitment to protecting consumers.

While dollar-denominated stablecoins are valuable, varying exchange rates and government controls make off-ramps difficult. Entrepreneurs in Nigeria and Kenya are building local stablecoins to streamline the last-mile off-ramp process.

Overall, it was incredibly refreshing to be somewhere where crypto is solving obvious problems, and founders are rapidly iterating towards powerful solutions. I want to express my gratitude to all the founders and supporters for making this possible.