SoftBank sinks $200M into Andela, propels company into unicorn territory

Andela, a fully remote company that helps tech companies build remote engineering teams (initially from Africa but now a global market), is currently valued at $1.5 billion following a $200 million Series E round led by SoftBank’s Softbank Vision Fund 2, the $30 billion venture fund of SoftBank Group.

Joining SoftBank in the investment was new investor Whale Rock and existing investors including Generation Investment Management, Chan Zuckerberg Initiative and Spark Capital.

After closing this Series E round, Andela has raised a total of $381 million since being founded in Lagos, Nigeria in 2014, according to Crunchbase data. Its last valuation of $700 million came when the company raised a $100 million Series D in 2019.

As part of the investment, Lydia Jett, founding partner at SoftBank Investment Advisers, will join Andela’s board. In a written statement, Jett said that “hiring remote technical talent is one of the top challenges that companies face today, and we believe Andela will become the preferred talent partner for the world’s best companies as remote and hybrid work arrangements become the norm.”

The company began a global expansion earlier this year following a regional one last year during the pandemic. The action coincided with Andela’s fully remote policy in a bid to tap into a talent pool of over 500,000 engineers in the coming years.

Up from seven African countries and 37 at the beginning of the global expansion, Andela now has engineers in more than 80 countries today, CEO Jeremy Johnson told TechCrunch. It also boasts a client list of over 200 that includes GitHub, Cloudflare and ViacomCBS.

To Johnson, working with SoftBank means more acceleration of what the company is doing now, especially as the world has become more comfortable with remote work. Andela evaluates technical and soft skills of engineers and matches them with the teams that most closely fit.

“Remote is why Andela has worked in the first place,” he added. “In some ways, it is also a stamp of approval that top tech companies are looking for remote approaches to building engineering teams and sourcing talent. We hear from SoftBank, and others, that finding tech talent is tough. Andela becomes pushing the easy button on all of that.”

Andela has over 300 employees and will use the new capital to add to that workforce, particularly in product, engineering and growth, Johnson said. In addition, the company is investing in growth, continued expansion of technology and product development and M&A.

While he doesn’t have specific acquisition targets at the moment, Johnson did say Andela was looking for talent networks to expand geographically or in terms of client and talent bases, as well as technology to enable it to better source and access talent while also managing delivery.

“There are a lot of moving pieces, so additional technology to do that faster is always interesting,” he added. “In the process, we are moving into AI as a part of that.”

Earlier this summer, Andela and several of its employees were sued by freelancer marketplace Toptal. The lawsuit, filed in the Supreme Court of the State of New York, alleges the theft of trade secrets in pursuit of “a perfect clone of its business,” according to the complaint.

The complaint also alleged interference with contract, unfair competition and misappropriation of trade secrets.

Despite the allegations, Johnson noted that there has not been movement there. He considers the lawsuit as “the price you pay for doing things that matter,” and that it was a tactic to scare employees.

“If they were serious about damages, they would be trying to settle, but they just want it to drag on,” he added.

Though the company has attracted some big investors, it continued to struggle with its business model, including laying off employees in 2019 even after raising a $100 million Series D. Its pivot to being a global technology network from its African roots as a talent accelerator was not to find favor with investors, but “the journey of finding ourselves, similar as all startups go through,” Johnson said.

An early investor in the company, Idris Ayo Bello, the managing partner at Africa-focused VC LoftyInc Capital, says investors remain optimistic about the company because they know Andela’s impact will be greatly felt in the coming years especially when individuals or developers who have worked at the company fully come into their own.

“Combining financial returns and human development isn’t an easy task but they have done it and are just getting started,” he told TechCrunch. “Even as one of the company’s first local investors, we didn’t foresee the scale of Andela’s impact as it has inspired people to launch their own ventures and attract global investors to back them.”

Most of Andela’s technology is still from Africa, and the company continues to grow in Nigeria, the CEO added. It is less of a shift there and more of a “natural evolution of the company” into more of a marketplace to be able to expand quicker around the world.

The marketplace model is also used in niche regions like Africa, where Andela arguably pioneered tech talent matching. Now, tech talent matching sites — Gebeya, TalentQL, eWorker, GetDev among others — deploy similar tactics but with different business models and operations to pair engineering talent with those needing of them within and outside the continent.

Other platforms like Semicolon and Decagon have tweaked Andela’s previous model to work for themselves and continue to train engineers before releasing them into the market.

That said, now that Andela is a unicorn, Johnson sees more competition coming into the tech talent space to enable global hiring, but says the company is out in front, particularly with a 96% success rate in placing engineers where they will be most successful. He doesn’t see Andela competing with Toptal at all, looking at his company as a hiring alternative rather than a gig economy marketplace.

That success rate is a testament to the company’s shift to focusing on its matching technology and forming longer-term relationships with customers and talent, he said. In addition, Andela is able to increase income by 64% on average from an engineer’s previous job.

“It is a meaningful shift, especially when you expand that to thousands of engineers,” Johnson added. “It also changes the economic development in the countries where they live.”

Meanwhile, in addition to expanding into 80 countries, Andela has thousands of developers using its platform and saw the number of applicants increase five times in the past six months. Johnson confirmed in 2019 that its annual revenue rate was $50 million, and though he did not get specific, he did say it is now “so meaningfully higher than that.”

Next up for the company, it will continue to roll out design as a vertical, which follows its recent launch of data and Salesforce engineering verticals. They are in addition to verticals in Angular, DevOps, Golang, iOS, Java, Python, QA, React Native, React.js and Ruby.

Andela is also supporting the expansion to a full digital product suite and adding a more diverse set of skills to cater to its increasingly enterprise clientele, Johnson said.

“Larger companies need a broader diversity of skills on a consistent basis, and now we are expanding the depth and breadth of our talent offering as enterprises become more comfortable with remote work,” he added.

SoftBank’s investment in Andela is its second lead investment in quick succession in Africa — it is only coming a month after the $400 million Series C round of fintech platform OPay.

Both unicorns, they join fintech platforms Flutterwave and Wave as the region’s only billion-dollar companies from this year.

In 2016, Africa minted its first unicorn in e-commerce company Jumia (now a publicly traded company) and waited three years later to get another, Interswitch. The continent has seen four already this year, and now has five in total.

With many first-time investors like SoftBank returning to write back-to-back checks and Andela becoming only the second non-fintech unicorn produced on the continent, it is safe to say that Africa is reaching a tipping point.