African Startups Are Increasingly Attractive to Investors

http://afridigest.com/african-startups-increasingly-attractive-investors/?utm_source=hn&utm_medium=hn&utm_campaign=hn

by thought • 9 years ago

194 82 9 years ago

mc323• 9 years ago

And they should be. It's a big continent with lots of people a growing middle class and lots of room for all sorts of development. Im sure there will be some pushback about foreigners investing and making money off locals, but that's kind of the price of progress. Someone has to be the miss moneybags, be it locals or non locals.

arglebarnacle• 9 years ago

The obvious solution would be for foreigners to co-invest with local VCs/Angels. I think if investors have an eye toward making these kinds of investments in a sustainable and ethical way, it is definitely possible.

mc323• 9 years ago

It depends on the amount of bureaucracy (bureaucracy fosters working with locals who can navigate the system) as well as the trade barriers they might face. Not just vis a vis extra African countries but within Africa you can face lots of trade barriers.

majani3• 9 years ago

88mph, probably the largest angel fund in Africa in recent times, did this successfully in Kenya, Nigeria and South Africa. Results are yet to be determined

(disclaimer: I am an investee of 88mph)

1001101• 9 years ago

Africa's population is projected to ~quadruple to approx 4 billion by 2100 (will have almost as many people as Asia at this point), and will account for most of the world's population growth to 2050 (1.3 bil+). [1] It's a huge opportunity, and good luck to anyone who can provide value for the burgeoning population.

[1] https://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_...

dragandj2• 9 years ago

Considering how most African countries already have huge problems to provide even basic needs to already existing population, I can't see how that is a good thing. It seems to me that Africa does not lack headcount now, it lacks stable society and opportunities to emancipate vast masses of dirt poor people...

oh_sigh• 9 years ago

Except as countries get richer, they have fewer kids. Expecting the population to continue growing at a break neck pace, as well as have bug economic improvements per capita seem to be competing ideas

azundo2• 9 years ago

I think it is a little short-sighted to see local investment as the only path to a positive outcome. Assuming employees are getting a decent equity stake then what would be even more impactful in my opinion would be some exits that enable local staff to start angel investing and supporting the ecosystem. If there becomes a strong incentive for good talent to stay in Africa, make decent money and invest back then the fact that the current up and coming startups are backed by foreigners will matter little in the future. Overall I think the potential upside of any successful is huge and the more foreign money that can kickstart this the better.

azundo2• 9 years ago

Very encouraging to see this level of interest in investing in African startups from SV investors and not just from traditional impact investors.

There is an incredible amount of opportunity to build mobile digital services targeted at markets where offline functionality is a must and low-end Android devices are the norm. Hopefully the interest and investment in fintech will also mean that payments infrastructure will continue to improve and get relatively cheaper over time.

pkaler3• 9 years ago

I'm a very happy investor in Ensibuuko, mentioned in the article above. My hypothesis is that Africa over the next two decades will look like India and China the previous two decades. There will be a large Alibaba-like company that emerges from Africa.

aaron-lebo2• 9 years ago

I hope that company or those companies are truly African and not some neocolonial abomination essentially owned by foreign investment.

The excitement of Africa is the chance at something new - why not something local, sustainable, and not prey to the walled gardens and greed of the West? The idea of something uniquely African is far more exciting than SV Tech: A Foreign Adventure.

pinky1417• 9 years ago

Some flavor of neo-colonialism is possible, but I'd bet the biggest threat to African development comes from bad governance rather than the outside.

Africans have ingenuity and local knowledge. The developed world has cash and business know-how. So long as corrupt government officials can be avoided, there's a chance that there can be a symbiotic relationship.

tormeh3• 9 years ago

That's how China and India got their growth. They didn't bootstrap. Taking foreign investment is not some kind of sin against Che Guevara, but simply the best way for a country with cheap labor and visible growth potential to get richer.

indescions_2017• 9 years ago

Just curious how you sourced your Ensibukko investment. AngelList? Or direct relationship with the company?

And I agree, Africa is hot hot hot ;)

Lordarminius5• 9 years ago

Just curious how you sourced your Ensibukko investment....

I'd like to know the answer to this too.

pkaler3• 9 years ago

Just curious how you sourced your Ensibukko investment. AngelList? Or direct relationship with the company?

Like all good investors, I know people. :)

Investors will feed you crap about being value-add, experience, help with sales, help with hiring, etc, etc. But good investors know people and bad investors don’t know people. They call it “proprietary deal flow”, but it just means that they know people.

Hasknewbie2• 9 years ago

> My hypothesis is that Africa over the next two decades will look like India and China the previous two decades.

I agree with the basic idea, but Africa is way too over the place for that statement to apply at the level of the continent. Some countries will still be down and out due to their economical and political instability (there is really nothing in the cards today indicating that Nigeria or Congo, for example, will be significantly better 20 years from now), and on the other hand I would not be surprised if some countries would outdo the "China" metric and be considered developed first-world economies by then (in fact I would be surprised if it did NOT happen for a handful of them).

Lordarminius5• 9 years ago

there is really nothing in the cards today indicating that Nigeria or Congo, for example, will be significantly better 20 years from now...

I am a Nigerian and I think you are wrong. There is a lot of agitation in Nigeria especially from the young people and an imminent collapse of the old order. An Arab Spring like revolution is imminent. There is a bubbling spring of young and hungry talent on the continent there is a definite acknowledgement that things need to change fast.

That aside, despite the upbeat tone of the article, investment is still very hard to source in Africa despite the fact that the amounts required by the continents entrepreneurs are really small. Most founders require seed funding in the 10 -20k range. I am trying to solve this problem. Anyone interested in joining forces can pm me.

djb_hackernews• 9 years ago

I've seen this prediction about Africa for the past 20 years. And it's probably even older than that. It's not a particularly bold one, in my opinion, but it is a flawed one.

Africa is not a country, it is a continent. Comparing it to India or China (whose economies haven't really paid off for foreign investors as much as you'd think) is a major flaw. China and India have an incredibly consistent society from corner to corner and well organized governments. Africa on the other hand is a few dozen sovereign countries, without a common culture or language between them. They are constantly at war with each other and within each other.

I think in order to extract the full economic potential of Africa you'll need to see unification at levels that put the EU to shame and at least a decade of trusted, non-corrupt, forward looking governance.

I think it'll happen, but not for a very, very long time. Until then, follow the Chinese govt investments in Africa and try to tag along.

michaelchisari• 9 years ago

India have an incredibly consistent society from corner to corner and well organized governments.

That is literally the first time I have ever heard anyone, Indian or not, describe India that way.

ChuckMcM2• 9 years ago

I tend to share your pessimism having been exposed to the "we can fix Africa" ideology for a while. That said, the Chinese have a much better track record of going into a place and not "fixing" it so much as adding a merchant class with a working payments exchange system which converts into much more fluid money markets. My grandfather called it mercenary mercantilism but it that was just his name for markets without judgement. You want to sell water wells? great, you want to sell slaves? no problem, etc. By not tying externalized notions of proper governance to the furtherance of economic development, things moved more quickly forward.

tormeh3• 9 years ago

I don't think size is the big problem. Nigeria is the seventh most populous country in the world; larger than Russia or Japan.

You don't hear these things through the media. Population numbers are consistently surprising to me at least.

majani3• 9 years ago

as much as Africa is not a country, it's absolutely crucial to be able to scale across borders to be able to achieve VC returns here. In Africa, if you stay in one country with an idea that's not a basic need you have very little chance of doing over $500k in revenue.

DrJid3• 9 years ago

Africa on the other hand is a few dozen sovereign countries, without a common culture or language between them.

Not too far off as a description of the EU either.

There's definitely a lot to fix regarding the political climate, and I agree with your sentiment that it'll take a lon time. But I do believe growth would be exponential given the common markets (EU with a diverse, culture, India, China) to learn from.

pkaler3• 9 years ago

Africa is not a country, it is a continent. Comparing it to India or China (whose economies haven't really paid off for foreign investors as much as you'd think) is a major flaw. China and India have an incredibly consistent society from corner to corner and well organized governments

I know. I’m ethnically Indian. I’ve been to India multiple times. If I were to invest in an Indian startup it would probably be in Bangalore or Chandigarh.

Just as it is highly unlikely that I invest in a startup in Wyoming, it is unlikely that I invest in startups in large parts of Africa.

Calling it “Africa” is just short hand for segments, categories, and locales in that space.

And boy is India far from consistent and organized. I speak Punjabi and don’t speak Hindi. There are 50 other states and 50 other languages that are spoken.

grecy5• 9 years ago

Africa on the other hand is a few dozen sovereign countries, without a common culture or language between them.They are constantly at war with each other and within each other.

I am on the ground in West Africa right now. I have been to 15 countries from Morocco to Gabon in 12 months, and will visit another ~22 in the next 12-18 months.

Your statement makes it clear you have absolutely no idea what you are talking about. Maybe what you said was correct in 1980, but things are changing faster than you can imagine.

There are 54 countries (not a few dozen), over 1.2 billion people in "Africa".

Your statement about war is so far from the truth it's laughable and absurd.

If you get your information from CNN and Fox, you need to stop. It is not giving you an accurate picture of how the world functions

rokhayakebe2• 9 years ago

Actually in West Africa and much of Arabian Africa we can communicate with one another in French.

_fizz_buzz_2• 9 years ago

Well, people were also talking about China like that for many years and even Napoleon already called them the "sleeping giant" (although probably in a militaristic context) and then suddenly, at the beginning of the 90s things started to take off.

zappo2938• 9 years ago

The best way to know what demand for a product is to ask yourself, "What do I need?" The people who know what demand is in Africa are people in Africa who ask that question. We can't answer it in San Jose. The solutions to their problems will come from within.

virmundi• 9 years ago

Other countries can help. "What do I need?" Answer:"scalable, mobile first (only) blah blah." If you don't know any of that, the how's, you can get outside help. Hopefully outside mentorship that comes from outside money.

darshandsoni• 9 years ago

As an expatriate Kenyan, looking back at home over the last few years has shown a huge increase in investment by both MNCs setting up there and investors flocking to back local companies. But it's usually a huge wave of euphoria, helped by a government that wants to appear welcoming, which then peters out as the company projects get bogged down in corruption, resource volatility and inconsistent outflow of human capital. Eventually it becomes a sunk cost but the company continues to operate there low-key while they look for other strategies.

I suspect a very similar situation is happening in many other African states that are pro-investment.

I would say that a key thing to bear in mind is that investments in Africa are first and foremost just that: investments. They could fail. And treating it as a homogeneous body is akin to saying you're investing in North America instead of saying you're investing in a specific company in South Carolina because of xyz economic, social and political factors.

grecy5• 9 years ago

I feel the need to make a top level comment here.

I am in West Africa right now, have been to 15 countries in 12 months, and will visit another ~22 over the next 12-18.

CNN, Fox, the whole western media are not telling you the truth about life here. They are showing you the sensational stuff that makes headlines, nothing more. Because of that, anyone that has never been has very little information about the realities.

The comments in this thread are so far from the truth they are a disgrace. People are commenting here that clearly have no actual experience, and are just parroting what the media said about africa in the 1980s. It is not the 1980s now.

Comments about constant war, "most African countries already have huge problems to provide even basic needs to already existing population", etc. just show how ignorant about the realities here people in the developed world are.

There is a massive, massive amount of development here, and hundreds of millions of extremely happy, friendly and kind people pulling themselves up into the middle class and beyond.

If you "think" otherwise I challenge you to come here and see for yourself. You will be utterly shocked (I was, after years and years of research and talking to >50 people who have done what I am doing now)

rokhayakebe2• 9 years ago

Thank you.

I was in Africa last year for 2 months after 16 years in the US. I share your feelings 100%.

dnh44• 9 years ago

I'm not African but I have been there and do business with people in several African countries and I also agree 100%.

_fizz_buzz_2• 9 years ago

The thing is, Africa is also a huge continent. So, if something bad happens in Somalia people in the west assume that all Africa is in big trouble. In the west we have no sense of how big Africa is and work under insufficient information, e.g. I know someone who has a travel company in Uganda and when ebola broke out in West Africa, people canceled their trips and business plunged. There were no ebola cases in Uganda. The US or Europe were effected more by the ebola outbreak than Uganda [1]. The vast majority of people in western countries, don't understand Africa.

[1] https://en.wikipedia.org/wiki/West_African_Ebola_virus_epide...

grecy5• 9 years ago

The thing is, Africa is also a huge continent. The vast majority of people in western countries, don't understand Africa.

I agree 100%.

Said in another way, the Western Media is doing a terrible job of informing people in Western countries about Africa.

Having been here a year, I now go so far as to say the Media are doing a negligent job. It's disgusting and is causing real harm (as you illustrate).

RobertoG• 9 years ago

Here there is a sobering view of its size:

https://twitter.com/calestous/status/550661933096247297

Accacin• 9 years ago

So as one of the afformentioned ignorant people, where would you recommend in Africa? You're right, I know almost nothing about Africa but I would like to visit one day.

Edit: typo.

kampsy• 9 years ago

I completely agree that they are misinformed. A huge number of them think Africa is one big country.

And that the wars they read or see on the news is happening all across Africa. It really upsets me.

Am from Zambia and we have never experienced any war (yes not even civil war) its a beautiful, peaceful country. The only thing westerns know about Zambia is the Victoria Falls, because it was named after Queen Victoria. The rest is not important.

And FYI am the Co-founder of www.cognifly.com

A search engine for Zambian web searches.

sdenton42• 9 years ago

I'm writing from Nigeria! After talking to a bunch of tech people, and a great conversation with a different trying to start a restaurant chain, a common theme is onerous investment terms. Sounds like you can't get a investment unless you've been operations for a year or two already, and are already profitable. There is some amount of tech start up finding, but it's actually miniscule in the scheme of things.

You don't see many chains/franchises here: takes capital to start and expand them, which people can't get access to. So most businesses are one-offs. There's a lot of space for innovation here; living in Kenya, I used to say you couldn't walk down the street without literally tripping over a market inefficiency. Just gotta get the investment to come in and get to the right people...

(There's a direct flight from Atlanta to Lagos these days if anyone is interested in checking it out, by the way.)

OoTheNigerian• 9 years ago

Where in Nigeria are you? I'm currently in Abuja but I live in Lagos. Let me know if you need any pointers in getting around the startup scene.

My details are in my profile.

eksemplar• 9 years ago

I think most westerners would be surprised if you told them China had a 600 million middle class with better living standards than most Americans. We still have this image of a third world, but the truth is, that outside war torn areas, things have been improving for decades.

Hell, the now 14 year old African girl my daughters class sponsors, who is from one of the poorer areas, recently build a water filtration system and hooked it up to their solar panels and a raspberry piish device that I don't even know what is.

atentaten• 9 years ago

...and are just parroting what the media said... Now apply that further and you get an idea of how the we are conditioned to think and feel about almost every issue.

rorykoehler• 9 years ago

Where have you been? Where would you recommend the most for a first time visitor and why? Genuinely curious about visiting Africa in the near future.

kyrre• 9 years ago

How do they view the chinese?

jernfrost• 9 years ago

Reading some of the overly negative comments, I'd like to add some perspective. Africa might not make sense to compare to India and China earlier, but I like to often compare it to another troubled region, the middle east.

We have seen far more positive developments towards democracy in Africa than in the middle east. Military conflicts in Africa seems to be winding down, while they just seem to get worse in the middle east.

More religious diversity, not just Islam, I think is a gain for Africa. I don't think they will get bogged down in religious extremism as in the middle east.

To those who claim unified India and China as such a big advantage. I think being unified has just short term advantages, but lots of longer term problems. Look at Europe. A key reason Europe sped past China in the past, was because it was NOT UNIFIED. No single stupid leader could ruin European progress. It worked like a free market of ideas where bad ideas get weeded out. In China you had emperors who would declare that going overseas is bad. And then with a brush stroke, an area the size of a continent stops trading or exploring overseas completely, leaving that to the European upstarts.

The advantage of Africa being divided is that it provides a big sandbox to experiment with what works and what doesn't. We see many smaller countries have success like Rwanda. This allows other countries to evaluate what works and copy good ideas and discard bad ones.

Another key advantage today, is that we are passed the naive western aid of the past. Today we got China making big investments in infrastructure, mines etc getting the economies going. And I think it is a positive thing with all the people they are sending in as it allows Africans to learn from other countries how they work and do things. China not being as developed as the west is probably an advantage as it is easier to understand each other.

Western countries are so far ahead that we often have no clue about how to operate or do business in less developed countries. We make a lot of stupid assumptions, which only work in modern well developed economies. I think the Chinese understand a lot better of to get things working in Africa.

And finally lets not forget another advantage. Unlike the middle east, African countries can take advantage of their heritage of English and French from colonial times, which makes it easier for them to connect to the global economy.

IkmoIkmo• 9 years ago

More religious diversity, not just Islam, I think is a gain for Africa. I don't think they will get bogged down in religious extremism as in the middle east.

The biggest religion in Africa isn't islam, it's Christianity. Meanwhile, the biggest religion in Asia is Islam and it does just fine. The middle east's problem's aren't religious, they're political. Nationalism and geopolitical conflicts get wrapped into the most convenient us vs them wrappingpaper available, in the middle east it's often religion. But let's be frank here, Saudi Arabia and Iran aren't in conflict because they believe in a radically different way of religious life.

Your stuff about unification conveniently skips over the part where China sped past every other poor country in large part because it was unified and could move in one direction.

Rwanda is tricky... it's probably home to the absolute worst tragedy in my lifetime. 70% of a peoples was eradicated. Beyond that, it's still dirt-poor, 90% of the population is engaged in subsistence farming, 80% live on less than $3 a day, 60% less than $1.90. I assume you're referencing to economic growth which has been really nice, but it's tricky to see it separate from the foreign aid which represents 30-40% of the budget. It's not particularly hard to improve income levels from $1.90 a day to $2 if you're pouring in $100 of foreign aid per person per year and lots more financing. (a great playing ground for Chinese companies to build an economy indeed.)

Beyond that, there are 25 different countries who've had at least 75% of the average growth rate of Rwanda in the past 10 years, its economic growth has been great but things have actually gotten quite a bit better in Africa across the board. When Rwanda's foreign aid was temporarily cut a few years ago after accusations of aiding rebels the growth rate halved.

I don't see the Rwanda (0.9% of Africa's population) necessarily as a model for the rest (99.1%) of Africa.

Agreed on all your other points.

puranjay• 9 years ago

Lots of very promising ideas here.

I particularly like this one: http://twigafoods.com/

We're so focused on solving the middle class problems in my country (India) that we've forgotten about the problems lower class people serving the middle class go through.

ge96• 9 years ago

Could they put solar panels everywhere in Africa and sell power to other continents by undersea cables like internet that would be interesting.

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