Tech entrepreneurs’ hopes of replicating Silicon Valley successes in Africa may have a roadblock, as early stage investors say it is unrealistic because of the peculiarities of constraints startups on the continent face.
The investors said this at the Africa Early Stage Investor Summit organised by VC4A and Africa Business Angels Network (ABAN) in Cape Town, South Africa. The summit which is in its fifth year, attracted over 300 active and aspiring early stage African investors from 35 countries – with 25 of them coming from Africa – to share expertise, experiences, and fostering collaborations to bolster the ecosystem of capital provision for African entrepreneurs.
Speakers at the summit said investors has a critical role to play in pushing founders to build profitable, sustainable, and locally-adapted businesses rather than spend their time “unicorn hunting”.
“Everyone should play their part in the investment capital supply chain,” Khaled Ismail from Ki Angels told participants. “When there are enough investors at every stage, we will be able to resolve the proverbial mismatch between investors and investees.”
The panelists also identified collaboration as a key element to building a thriving industry. In this regard, investors must become activists in attracting more capital and resources into African markets, especially from larger corporate, growth equity investors and development finance institutions (DFIs). More collaboration could also lead to designing instruments and financing structures tailored to African ventures.
“It is easy to invest money in Africa right now, but it is hard to make money in investing here,” Keet van Zyl from Knife Capital stated during the opening panel discussion. “The key is to be exit centric – we only invest in entrepreneurs who are focusing on building sustainable businesses that can exit.”
Startups success will also require human capital and diverse teams. In the coming decade, a statement from VC4A said, Africa will hold the majority of the global youth population, bringing a wealth of opportunity and innovation. Yet accessing strong talent and building diverse teams remains a stark challenge for most ventures. Investors want to see more female and locally-led organizations with thoughtful human capital strategies.
