We need more local investors. We need more patient local angel investors. If the technology startup ecosystem in Nigeria and Africa is to grow and attract talented nascent founders, our local angel investors should be patient and creative. That is one of the ways naïve but gifted founders can blossom. The local investors are pushing the boundary. They are discovering talents. They are providing funds to actualise dreams. But juxtapose with foreign counterparts, the local investors are scratching the surface.
In the last five years, the African Private Equity and Venture Capital Association informed that North America-headquartered investors have accounted for 42 per cent of all African venture capital deals. Only 20 per cent of venture fund came from Africa-based investors. This has forced the continent’s entrepreneurs to seek support from the westerners. Of the top 10 African-based startups that received the highest amount of venture capital in Africa in 2019, eight were led by foreigners.
Viktoria Ventures analysis revealed that in Kenya, for instance, only 6 per cent of startups that received more than $1 million in 2019 was led by locals. In Nigeria, 55 per cent of the big-money deals went to local founders. In South Africa, the figure was 56 per cent. There is still more work to be done in Africa.
Of the top 10 African-based startups that received the highest amount of venture capital in Africa in 2019, eight were led by foreigners.
Media reports have also indicated that more local venture capital funds and angel investors are out to address the absence of patient capital and the funding disparity. Africa needs more patient investors. For instance, MyPadi and others were funded by EchoVC Partners. It is a seed and early-stage venture capital firm. It focuses on financing and cross-pollinating leading technologies in Sub-Saharan Africa and North America.
As early stage-agnostic investors with a combined network of local and global connections, it has a disruptive approach to investing in the technology intersection of consumer, media, data, and devices. It leverages knowledge transfer from Silicon Valley as a driver to seed growth across borders. Also, the Lagos Angel Network is one of the most active in Africa. It put startup funding and mentoring into early-stage ventures in Lagos. In 2014, Lagos Angel Network opened its business and has invested in over a dozen startups based in Lagos. It is co-founded by Tom Davies. Collins Onuegbu is equally playing an active role.
Other global heavyweights such as Goldman Sachs, Stanford University, Chan Zuckerberg Initiative, Andreessen Horowitz and Sequoia Capital have all invested in startups started by white founders in Africa more frequently than they have invested in firms led by black Africans. The white entrepreneurs have an advantage over black Africans. The advantage includes a safety net to take time off to travel to Africa, backgrounds in elite education and better access to US-dominated funding funnels. The local founders do not have this advantage. The local startup founder cannot afford to take a year off and travel to Europe!
On the other hand, stories abound about the experience of black founders that are at the mercy of white mercenaries. For instance, while many of these startup founders cannot speak publicly, reports have emerged that stereotyping and racism is what the startup founders have to endure with some of the world’s most prominent investors. Nomahlubi Nazo, a South African polymer technologist explained to the Guardian UK that if she was white, “my idea would have been taken at face value. But because I’m black, I need to go the extra mile. I need to make sure that my education level is right, that my product actually does what I say it does.”
In Kenya, Stephen Gugu, a co-founder of ViKtoria Angel Business Network has followed the flow of capital into the so-called Silicon Savannah. He noticed that foreigners sell their vision better. “In all honesty, the expatriate founders pitch better than we Kenyans do. They’re able to paint this picture of an Africa that is full of opportunity. Local founders are not as aggressive in their pitches. At times the foreigners lack substance but they are good at telling their stories.”
As a result, a white founder is 47,000 per cent more likely to be funded in Kenya than in the US. White people are less than 1 per cent of the population. Gugu discovered that 65 per cent of expatriate founders from the US, the UK, Italy, Denmark and Germany had not even lived in Kenya before they started their companies.
The co-founder of Andela and Flutterwave, Iyinoluwa Aboyeji in a media report recently blamed the lack of venture capitalists in the continent on the local banks and pension funds that have not embraced venture capital. He recalled that two of his six co-founders in Andela are white. He informed that this hurt Andela’s earliest fundraising as much as it might have helped. “Our presence actually helped to assuage a lot of investors that they weren’t throwing money into some white saviour project.”
In fact, it is foolish to blame the person who pays the piper because he dictates the tune. But if the piper is an excellent one, the piper can name his price.
To build Africa’s tech startup ecosystem, Aboyeji’s Future Africa allows anybody to fund the continent’s innovators with at least $10,000. He declared that the first deal was fully funded in 72 hours. The second deal came in six hours both for over $100,000. Aboyeji explained that if “Africans keep denying young people the opportunities to make mistakes and impact and then go on to blame racism for the discrepancies in funding, we are only interested in pointing fingers at the deep structural changes that are in our power to turn around.”
This is not wise. In fact, it is foolish to blame the person who pays the piper because he dictates the tune. But if the piper is an excellent one, the piper can name his price. If we build the continent well with an enabling infrastructure, we can name our price. But if we keep waiting for one white boy to stroll in with a trolley load of dollars, we cannot command him. He has earned his right to issue orders. That is why we need more local investors. We need more local patient investors.
We may have discovered such an investor in Ingressive Capital. Founded by Maya Horgan Famodu, a 29-year-old Nigerian-American, Ingressive Capital has doubled the size of its three-year-old fund to $10 million. She will invest in early-stage tech-enabled startups in Nigeria, Kenya, Ghana, Egypt and South Africa. She believes there are so many brilliant youths across the continent that need a little bit of access, introduction and seed financing to build the next billion-dollar business. That, in my view, is one of the ways we can build Africa’s tech ecosystem from startup.
*Olaegbe ([email protected])
