Navigating start-up exits: ‘Optimise for success’

A panel of prominent venture capitalists and investment analysts gathered at the AfricArena Tunisia Summit to discuss the nuances of start-up exits in the Middle East and Africa. They provided valuable insights into the challenges and opportunities faced by start-up founders in the region.

The discussion, moderated by Alyune-Blondin Diop, an investment professional and angel investor at LoftyInc Capital Management, delved into topics ranging from investment strategies to exit pathways, shedding light on the evolving landscape of entrepreneurship in Africa.

The panellists included Ayanda Bolani, an investment analyst at Knife Capital; Max Cohen, managing partner at yVentures; Walid Bellagha, managing director at Endeavor Tunisia; and Hamed Masri, partner at Silicon Badia.

Setting the scene to their respective investment approaches, Bolani said the South Africa-based investment firm focused on finding innovative businesses with great potential and supporting them through active engagement and monitoring. The focus is on Series A and Series B stages.

Cohen stressed the importance of scalability and impact investing, highlighting the need for companies to have a clear path to profitability and significant returns for investors. He also emphasised the importance of scalability and clear paths to exits for investors.

Bellagha explained Endeavour Tunisia’s role as a facilitator, connecting entrepreneurs with a global network of investors and leveraging strategic alliances for successful exits. He shed light on the significance of building sound businesses with good unit economics, especially in challenging times.

The discussion naturally gravitated towards the notable exits in the MEA region, including Expensya and InstaDeep. Bellagha highlighted, “These are Tunisian-born scale-ups disrupting industries in European and global markets. Disrupting big industries in markets that have a lot of activity and dynamics.”

Masri emphasised the critical role of building sound businesses with good unit economics, navigating tough times, and directing conversations with founders effectively. He also underlined the importance of competitive advantages for start-ups.

“They were competing with the best globally at a potentially lower cost per unit, so they had a very big competitive advantage. The product, obviously, is very, very solid and you know they had a huge market share in Europe. So, it made them very attractive acquisition targets,” he pointed out, emphasising the significance of robust products and market presence.

Cohen emphasised the need for start-ups to build global products. “Scalability is, obviously, a huge component for any LP and investor. Companies need a clear path to exitability. Investors love having an impact; a positive impact on the world and, especially, emerging regions.”

Bolani shared Knife Capital’s approach, stating, “Building a good business is [critical] and keeping the exit in mind from the initial investment decision optimises for that day because it might come. Also, there might be situations where the entrepreneur needs to exit because of lifestyle changes. Maybe the market has changed, so we encourage entrepreneurs to be open-minded and actually optimise for such events.”

The conversation also touched on diversification in exit paths. Masri mentioned, “If you’re trying to engineer an exit but you don’t have the right metrics on a unit economics level, on the size of a market, you’re going to have a really, really hard time. We kind of nudge founders at the right time to start thinking about an exit – and not prematurely either. We ride our winners to the best of our abilities.”

The discussion expanded to explore the potential of diversifying exit routes. Bellagha pointed out that start-ups in different African countries have varying dynamics. Some are naturally inclined towards Europe, while others build regional leadership in big industries, attracting attention and exits from various regions.

In response to a query about exits involving large corporations in Africa, Cohen highlighted the necessity for conducive environments. “Economies of scale, scalability, and an ecosystem in which foreign investors can thrive and succeed [is key]. The only way I get paid is upon exit,” Cohen stated, emphasising the need for supportive structures.

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