Asaak

Asaak is raising capital via a SAFE with a $10 million valuation cap and 20% discount. These terms are more or less appropriate based on the company’s current stage. The valuation is reasonable, and the 20% discount is attractive for investors. Thus, the price score for Asaak is above average.

The market opportunity for Asaak is an interesting one. According to one source, the credit gap in Africa is around $360 billion. Of course, this covers all uses of credit. One source estimated that the total Sub-Saharan motorbike taxi market is worth somewhere around $80 billion. If this is the case, the true market opportunity for Asaak is bound to be lower than that, since its benefit is based on the interest rate charged to motorcycles that are purchased. One source estimates there are around 20 million motorcycle ride-hailing operators across the globe. No specific estimate for Africa was provided, but that source did say there are around 1 million providers in Nigeria alone. It also estimates that the market throughout Africa is growing at a rate of about 15% per annum.

Assuming management’s plans involve taking this globally in time, it’s possible to get an approximation of the upper range of this niche. According to the firm, its monthly recurring revenue per motorcycle is around $38. At a maximum of 20 million motorcycles, this would work out to about $9.12 billion in revenue. Assuming a lifespan of a motorcycle of 10 years, investors are looking at around $912 million annually. Obviously, management’s expansion plans into other avenues makes this an even larger opportunity, but until it provides more insight, nothing is certain. However, with a healthy growth rate, Asaak does have an attractive market in front of it. Therefore, the market score for the company is strong.

Asaak has a fairly sizable team. The key individual in charge is Kaivan Sattar, the company’s founder and CEO. In the past, Sattar worked as an instructor at FinTech School where he taught a class titled Alternative Lending Emerging Markets. Before that, he served as a data scientist at LendingHome. While there, he worked with machine learning and time series data to model credit risk and to forecast the company’s sales. Sattar’s job prior to that was a senior model developer at the Federal Reserve Bank of New York. While there, he worked on consumer and small business loans involving the discount window. With all of this experience, Sattar certainly brings industry expertise to Asaak. 

Sattar is the sole founder of Asaak, but he is not alone on the team. The company also includes Edward Egwalu as COO. Egwalu has served as an IT consultant for three different companies throughout Uganda. He has also been an IT officer for Pilgrim Africa, a non-profit organization. Another important individual at the firm is Anthony Leontiev. Leontiev currently serves as Asaak’s CTO. In the past, he has worked as a back-end engineer at AltSchool. Before that, he was a lead software engineer at Honest Buildings, where he focused largely on Salesforce integration. He was also a software engineer at InsightsSquared, and he worked as an application systems director at Loews Corporation. His experience clearly demonstrates knowledge and expertise on software applications and systems. That is definitely a value to a firm like Asaak.

The final individual is Dylan Terrill. He operates as the company’s CBO. At present, he is also the co-founder and CEO of Chara, a platform that focuses on holistic health and wellness services. Before that, he worked at TikTok under the performance partnerships and monetization department, and prior to that, he worked in the strategy and operations division of DoorDash. These roles clearly demonstrate business development experience, but they do not necessarily seem to translate directly to a CBO position. 

The Asaak team is well-balanced across multiple facets of the business’s operations. The one drawback is the lack of past entrepreneurial experience. Taken all together, Asaak’s team score is high.

Microlending throughout Africa has been a big business for several years now. Globally, the microlending market is expected to grow from $134.35 billion in 2019 to $343.84 billion by the end of 2027. A sizable portion of this opportunity stems from Africa. Big companies include firms like Tala and Branch. Loans tend to be fairly small — rarely exceeding $700.00 — and they often carry very high interest rates. Some can exceed 400% per year.

Where Asaak differs is that its primary focus today is on the motorcycle market for ride-hailing businesses. That niche is something that we have not seen any other companies specialize in. In addition, Asaak does not seem to be out to offer predatory interest rates. Yes, the average interest rate on its books today is around 34%, and while that is high, it’s a far cry from other platforms. Due to its focus on ride-hailing businesses, Asaak does not face much competition currently. However, the company holds no patents, and there is little that prevents another company from replicating Asaak’s services and platform. Thus, the differentiators score for Asaak is above average.

One area where Asaak has excelled is performance. Since inception, the company has issued more than 1,300 loans. This totals $2.2 million deployed. Some specifics have not been provided, but we do know the business is also continuing to grow. In 2018, revenue was $126,447. This grew to $166,003 in 2019. Over this two-year window, the company has lost money, incurring a net loss of $1.24 million in 2018 and a loss of $391,364 in 2019. Operating cash flow was not as bad but in both years was negative. Management has not provided any real details about 2020.

Asaak did temporarily stop giving out loans to instead focus on building additional products. It began originating loans again last October. In the six months that followed, the company boasted that it saw a month-over-month growth rate of 97%. For 2021, management expects to give out loans for 3,400 motorcycles, which would work out to $5 million in volume and $1.6 million in revenue for the firm. This will be made possible through a $10 million term sheet it has been provided. In addition, thanks to a partnership with Untapped, Asaak has the option to generate revenue by selling off the loans it originates. Due to all of these factors, the company’s performance score is its highest across all five metrics.

In all, Asaak looks like an appealing opportunity for investors to consider. Having said that, there are some bearish considerations to keep in mind. For starters, the price of the transaction looks a bit lofty, and the market opportunity does not look stellar. Another problem is investors have no idea how well these loans will hold up in the event of a regional or global economic downturn. The firm boasts a 95% repayment rate, but with the exception of the COVID-19 pandemic, economies have generally fared pretty well. This is something that only time can test.

The bearish considerations notwithstanding, there are plenty of bullish items for investors to keep in mind. This differentiated product clearly does stand out as an attractive concept. The team appears fairly solid, and its performance since inception looks to be really strong. This is especially true if management can succeed in reaching their targets for 2021. On top of this, there’s also the benefit that investors get to buy into a company that is doing well for itself while doing good for others.

Putting everything together, it appears to us as though Asaak is a compelling prospect for long-term investors. Management has done well to launch and grow the enterprise, and it is clear by this point its customers want the services it provides. Add in the social component that the firm is focused on, and it’s hard not to like what we see. By our assessment, the risk/reward opportunity here clearly favors the reward. Because of this, KingsCrowd has rated Asaak a Top Deal.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Daniel Jones.