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Earlier this month, I chaired two panels at the annual Africa Technology Business Forum in London which brings together entrepreneurs, investors, advisors and enthusiasts to discuss emerging trends on the Africa tech scene. There was super interesting content, some arguing lively debate and a lot of laughter – not to mention war stories from some of Africa’s most exciting emerging tech start-ups.
In my first panel we discussed the Africa tech investment landscape and how investors can add value to entrepreneurs beyond simply providing funds. It was fun to have such a great mix of perspectives from incubators, accelerators, angels and investors: Jessica Williamson (Techstars), Neku Atawodi-Edum (MEST), Yvonne Haizel (Mitsui), and Tomi Davies (Africa Business Angel Network).
We covered a range of issues on the panel and in the margins including:
Where do African tech start-ups go to find investors and is there enough funding available?
Why isn’t there more local investment in African tech ventures?
Why are so many African tech start-ups not bankable?
What can African start-ups do better to secure investment?
How can investors adjust typical due diligence procedures to better suit African tech deals?
How do accelerators like Techstars and Meltwater provide a route to funding for start-ups?
The most provocative question was probably ‘How can Africa tech investors improve upon the usual “Silicon Valley” approach’ to account for the unique characteristics of different countries, cities and markets across the continent?
I’ve listed (and expanded upon) some of the key observations made by the panellists that stood out to me:
Reconsider your idea of a ‘good’ management team
Unconscious bias. Investors often feel more assured by people of similar backgrounds that look, think and communicate in the same way. This means that a lot of funding for Africa-focused tech ventures goes to start-ups run by people that either live or were educated in the US (Harvard) and Europe (Oxbridge) as opposed to ‘home-grown’ entrepreneurs. Promising investments are overlooked as a result.
Expats and repats can add the benefits of international exposure and world-class standards to a team but they may lack the detailed local knowledge that the business requires. A team that has both ‘international’ experience and home-grown talent achieves the best of both worlds.
Invest in local knowledge
Not ‘Africa’ knowledge, local knowledge. Entrepreneurs that have grown up in Windhoek, Addis, Harare or Accra know what makes these places tick and understand what it takes to achieve product/market fit, identify hidden risks and navigate the idiosyncrasies of the operating environment. This is important in any market but is invaluable in a region that can be unpredictable and difficult to research.
Be prepared to provide both strategic guidance and operational support
A seat on the board is great but investors may need to go further than occasional guidance and get into the weeds a little bit more than usual to help the entrepreneur get things done. While a number of African countries have gone to great lengths to improve the ease of doing business, parts of the region still suffer from poor infrastructure which affects electricity, water, transport infrastructure and telecommunications including mobile and internet. This makes it difficult for entrepreneurs in some locations to deliver consistently or to scale when demand for their products and services increases. Investors may need to help entrepreneurs overcome some of these logistical difficulties by building infrastructure or introducing them to larger companies or organisations that might be able to help.
(Really) understand the local environment
To be able to provide this guidance and support you will need to have a good understanding of the local environment and the challenges that the external environment poses for the business. This includes separating fact from fiction, as many still overestimate certain risks or treat the continent as a cohesive block. If you understand the key regulatory, operational, political and practical considerations that the entrepreneur is navigating and how these vary across their different target markets, you will have a better chance at helping them to remove obstacles or pivot where necessary.
For verticals like retail and consumer goods, this means escaping Ivory Towers in New York and Toronto (and for that matter Cape Town, Nairobi and Lagos)! and experiencing the transport routes and supply chains leading to more remote locations where products are sold.
All in all, the panel agreed that a lot can be learned from the VC and angel communities in global tech hubs. But in order to successfully take advantage of the exciting opportunities in Africa tech, investors need to be less Silicon and more Savannah.