This Ethiopian Startup Valued at $1.9M In Pre-seed Round of $200K Funding From International Investors

Viable Solutions, an Ethiopian startup behind EPhone super dialer app, closed a $200K pre-seed funding valuing the company at $1.9M.

The round is lead by Ahmed Al Alola, an angel Investor from the Middle East. Other angel Investors that joined this round include Amadou Daffe, Co-Founder and CEO of Gebeya, a Pan-African talent marketplace.

EPhone is a super dialer app that brings advanced dialer experience along with smart SMS features, automates Telecommunication service provider’s USSD services, and aggregates third-party services.

Launched at the end of 2019, EPhone acquired 90K users in 12 months and 134K users in 18 months without any marketing. Today, 21 months since launch, the user base currently stands above 150K.

The startup is founded by Nohe Fekade, who is CEO, and Haileyesus Shitalem, who is the CTO. Nohe previously founded two startups and EPhone is his third venture. Haileyesus is a full-stack developer and the person behind “Ask Anything Ethiopia“, the Ethiopian version of Quora in Telegram.

EPhone has been a team of two people ( the founders ) until they brought a third finance person recently after the raise.

In a statement shared with Shega, Nohe said, “Fundraising is the most distracting task from growing a company, especially for a small team like ours. We feel very grateful and responsible for our investors who believed in us and our vision. After months of hard work, checking off fundraising from our to-do list allows us to focus on building our product and understand our users better,”

Ahmed Al Alola, the lead investor, said,” You rarely find a passionate, competent, and complementary team who share a very deep understanding of their customers and execute on a common vision that addresses a very big market.”

The Product

The app that is currently available on Google Play Store essentially brings together dialer features that allow you to make calls, list, and manage your contact and call logs, and SMS features.

However, the app is more than your typical dialer or SMS app. It introduces features that allow customers to access Ethio Telecom USSD Services without actually going through USSD steps. This automates the Teleco USSD functions and allows users to check/recharge their prepaid balance, buy and send packages and send call me back request with just one click.

In addition, the app also includes an emergency & important number list, and the ability to back up your SMS, logs & contacts without an email.

EPhone goal is to enhance the user’s default dialer and SMS app experience and save time by providing simple one-click buttons for the usually repetitive process.

Haileyesus, Co-founder and CTO of the company told Shega, “We created a valuable solution for the tenth of thousands of users using our app by solving a simple but frustrating problem we have ourselves. Understanding our users’ frustration and providing a relevant solution helped to us get incredible traction.”

Business Model

Ephone currently makes money in two ways. The first one is a commission from service availed in the app including airtime sales and as well as other third-party services that will be introduced on the app. The second one is from advertisement.

The startup was bootstrapping with its B2B offering called EPhone Bills, a service that helps corporates and organizations to top up Airtime virtually to their employees. The revenue from this operation and in-app airtime sales helped to cover the operation cost of the company and sustain the founders.

Raising An Early Stage Investment in Ethiopia

Speaking about the investment, Ahmed added, ” This is my first Ethiopian investment. Even though Ethiopia isn’t the hottest startup hub in Africa, it has a population of youth hungry for change and technology adoption.”

Nohe, Co-founder, and CEO of EPhone describe the process of raising investment as Ethiopian Startup as “very time consuming“.

The investment raising process took 9 months until signing and a couple of other months until the investors wire the fund. This is higher than the average time it takes for a Startup in Africa to raise a pre-seed round, which is 6 months according to Digest Africa deals data.

Initially, the founders reached out and pitched to various local angel investors even though that didn’t go well.

They later started to look to International investors. Nohe remembers reaching out to hundreds of Angel investors in LinkedIn until he received a commitment from the lead investors for this round.

EPhone’s plan was to raise a lower pre-seed amount. However, because of the minimum capital requirement of foreign investment to Ethiopian companies, the startup decided to raise $200K – which is the minimum capital requirement by Ethiopian Investment Law.

The startup is incorporated in Delaware, US in order to be able to sign SAFE ( Simple Agreement for Future Equity ) documents with the Angel investors.

Despite challenges, the investment closed by EPhone is a testament to the growing Ethiopian Startup ecosystem for three key reasons.

First, it’s not often that you see international investors backing Ethiopian technology startups. But, the few that did tends to be institutional investors rather than angels. This deal shows the possibility of International angel investors investing in Ethiopian companies and providing a wider funding alternative for early-stage startups that need smaller checks.

Second, the investment reflects on the increasing trend of what is usually called smart capital, a more mature startup founder investing in another early-stage startup. One of the Angel investors, Amadou Daffe, is the founder of Ethiopian Startup Gebeya. 

Third, the $200K pre-seed deal amount is comparatively a high amount for the general Ethiopian or even African Startup. Digest Africa deals data shows that the average deal size of Africa Startups who raised a pre-seed round is $ 80K.

Amadou, said, ” Ephone is a quite exciting startup with a product that has huge potential in a country like Ethiopia with more than 45M mobile connections. This is an incredible opportunity for a Super App that centralizes all the essential apps in the country.”

Moving Forward

EPhone will be using the secured funding to fuel product development and customer acquisition. The company has a plan to aggregate mobile money USSD services and add various third-party on-demand services like Ride-hailing and Food delivery to their platform.

Speaking about the vision of the company, Nohe Said, ” our vision is building a modern and relevant Dialer & SMS app specifically tailored for the African market, enabling users to hasten USSD codes and access integrated third-party services at one convenient place.”

“Many African countries are going through political & social stability leading to economic reform. With the advantage of having a young population, high mobile, and smartphone penetration, EPhone is positioned to serve that massive market with its innovative dialer app and its convenient value-added services. I believe the great founding team is capable of delivering on that vision.” Ahmed added.