Building An African Angel Investment Community One Step At A Time
Last week, for the fourth year in a row, the investment community of Africa came together in Cape Town to discuss trends, opportunities and pitfalls with regards to backing African startups.
It might not seem that big of a deal, but in the embryonic days of African angel and venture capital, where the vast majority of startups lack access to funding, the signs that a dedicated community of investors is being built are positive.
The African Angel Investor Summit (AAIS) was put together by the African Business Angels Network (ABAN), which comprises a large number of local investor groups across the continent.
According to Tomi Davies, president of the African Business Angels Network, and co-founder of the Lagos Angels Network (LAN), there are now 63 such groups across the continent, a sure sign that access to capital for early stage startups is on the up.
Introducing the event, Davies stressed the importance of “hunting in packs”, and creating angel investment networks so people can co-invest and learn from their peers. With so many groups emerging, and so many of these members attending the event, this trend is becoming well established.
But what does the African investment community look like?
Very different to that of Silicon Valley, according to most investors present. Keet van Zyl of South Africa’s Knife Capital decried the obsession with building and funding “unicorns” – startups valued at more than $1 billion – saying these were unlikely given Africa’s current state of development and advising investors to focus on “gazelles” – companies that have seen significant growth over a prolonged period of time.
Paul Cook of Silvertree Capital Holdings said the traditional, Silicon Valley-style accelerator and incubator models were not working in Africa, as there was not a huge funding pool awaiting graduates, and advised hubs to go for more hybrid models. And Ido Sum, partner at TLcom Capital, warned that overseas founders leading Africa-focused startups are still more likely to secure funding given their networks and experience.
Yet there was plenty of good on display. A total of 19 startups taking part in the World Bank’s XL Africa programme – probably 19 of the most investable startups on the continent right now – pitched their businesses to the investor community before heading into “deep dive sessions” to try to negotiate deals.
I was involved in a research round-table where we discussed the growing amount of research and data – from Disrupt Africa to VC4A to Thomson Reuters to Goodwell Investments – that is available to investors, a vital development as far as the ecosystem is involved, while investors focused on places such as Liberia and Mauritius discussed how investment was growing in their countries.
Speakers such as Wale Ayeni of the International Finance Corporation (IFC) and Jocelyn Cheng of the Global Innovation Fund had positive things to say about how diaspora and international capital is being unlocked for African startups, and key figures from a host of accelerator programs explained how they were building investable startups on the continent and connecting them with investors.
Key to the whole event was the networking, and establishing better links between different aspects of the finance ecosystem.
There is a need to ensure a more coherent interface between investment sources from startup to scale-up, and for this angels, venture capitalists and impact investors need to get along. The chance to discuss issues and build relationships is one that was taken across the board.
The event also saw key developments in terms of providing funding, with the launch of the Rising Tide Africa fund.
Focused on female-run businesses, the fund is attempting to put together a group of female angel investors for the continent who will invest together, and help train others on how to get involved with investing. It is a significant achievement, and will make a serious impact.
The key takeaway from the African Angel Investor Summit was that there is an investment scene in Africa, and it is growing. As more coherence is put into the space, and more investors join the party, it is a scene that can only continue to grow, to the benefit of African startups everywhere.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.