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Africa no Silicon Valley and other key takeaways from AESIS 2018 VC summit

Cape Town last week welcomed over 300 active and aspiring investors from Africa’s early stage investing ecosystem for last week’s two-day Africa Early Stage Investor Summit (AESIS) organised by online startup funding platform VC4A and the African Business Angels Network (ABAN).

Celebrating its fifth year, the summit attracted the highest ever number of early stage African investors from 35 different countries, including 25 African nations representing over 110 investor organisations — to share expertise, experiences, and fostering collaborations to bolster the ecosystem of capital provision for African entrepreneurs.

Key takeaways from the two days included:

  1. Silicon Valley will not be replicated in Africa. Though there are lessons to be learned from the Valley, African VC faces unique constraints in scale, capital and exit opportunities. Rather than spend time “unicorn hunting”, investors should push founders to build profitable, sustainable, and locally-adapted businesses.
  2. Collaboration is required to build a thriving industry. Investors must be activists in attracting more capital and resources into African markets, especially from larger corporates, growth equity investors and development finance institutions (DFIs). More collaboration is needed in designing instruments and financing structures tailored to African ventures.
  3. Human capital and diverse teams will be a key to success. In the coming decade, 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 organisations with thoughtful human capital strategies.

‘Hard to make money in Africa’

As Keet van Zyl from Knife Capital expressed during the opening panel discussion: “It is easy to invest money in Africa right now, but it is hard to make money in investing here. The key is to be exit centric. We only invest in entrepreneurs who are focusing on building sustainable businesses that can exit.”

VC4A CEO Ben White said the conversation captured the challenges that venture capital faces in Africa and why stakeholders need to keep working to strengthen and support the entire African venture ecosystem.

Rather than spend time “unicorn hunting”, investors should push founders to build sustainable and locally-adapted businesses finds AESIS 2018 VC summit

At the summit, IFC Venture Capital’s Nikunj Jinsi announced the launch of the World Bank Group’s L’Afrique Excelle, a post seed stage acceleration programme and showcase of the best startups from Francophone Africa.

The programme, following the first XL Africa cohort, will target and select high growth business in order to provide much needed support to the region’s nascent ecosystem.

In addition, ABAN president Tomi Davies presented “Finding Product/Market Fit: The State of Angel Investing in Africa” — a first ever scoping study by ABAN in partnership with infoDev and The World Bank Group on angel investing in Africa.

The ABAN network has grown from five to 80 active networks and it is important to now have research that captures this emerging investor segment.

ABAN, AU sign partnership

Also at the summit, the AU’s regional trade adviser, Babajide Sodipo, announced a new partnership between the AU and ABAN formalising their joint ambition in supporting entrepreneurs and SMEs across the continent.

ABAN executive director David van Dijk said he was excited by the level of engagement at the summit between those on the continent. “Now is the time to take an active role and to be part of the next great African success story. We invite all actors and stakeholders to join the conversation,” he said.

White concluded that the summit was VC4A and ABAN’s “largest and most successful” so far, with over 60 speakers participating in the summit.

Concluded White: “The passion and commitment shown by speakers and participants alike to partner with entrepreneurs to unlock the continent’s opportunities demonstrates how much there is to still achieve and I have no doubt that this ecosystem will prosper”.

Read more: Here’s why the World Bank Group moved to launch the Afrique Excelle programme
Read more: Obsession with raising $1bn to become a unicorn is wrong says Silvertree man

Featured image: Ventureburn founder Matthew Buckland (far right) in conversation with (from left to right) Silvertree Internet Holdings’ Manuel Koser, Branison Group’s Craig Mullett, the IFC’s Wale Ayeni and Village Capital’s Adedana Ashebir (Supplied)