The African technology ecosystem continues to project Africa as a significant destination for investment in technology. With a total of USD129 million in investments entering the continent in 2016, it is a fact that private equity firms from the US and Europe have been looking increasingly to Africa. However, as the African technology market continue
The African technology ecosystem continues to project Africa as a significant destination for investment in technology. With a total of USD129 million in investments entering the continent in 2016, it is a fact that private equity firms from the US and Europe have been looking increasingly to Africa.
However, as the African technology market continue to catch the attention of foreign VC players, local investment opportunities remain thin on the ground across most African countries. Just recently, a Nigerian startup had to go as far France to secure a $60,000 seed fund (24 million Naira) from French investment bank, BPI France. This is just one of the many cross-atlantic ‘voyage’ African startups make to get funds to keep their hopes alive.
In a quick interview with Maya Horgan-Famodu, founder of Ingressive, one of the few investment portals available for tech startups in Africa, Morgan believes the absence of local investors in Africa obtains largely as a result of a big disconnection that exists in the experience of potential investors and the African technology space. According to her, most of these potential local investors are usually from different sectors, have very little information, and are very wary to give financial commitment to ventures with little or no ROI.
“Locally, the biggest challenges for investment is that most potential investors are coming from experience in the extractive industries like Oil and Gas, Real estate, Minning and the likes, where return is almost always certain. So to invest in a startup with little or no revenue is really hard for investors because they don’t see massive numbers.”
However, she believes that while this skepticism is valid, a lot more can be achieved for both parties (potential investors and tech startups), if an effort is made to first re-orientate these people to understand the blooming technology ecosystem in Africa. Citing examples from her interactions with the Nigerian tech space, she says:
” The only thing needed is to establish connections with these young tech guys, and help them grow. When investors come to Nigeria through Ingressive, and make connections with startups, they always attest to Nigeria startups’ hunger for success. It’s there. I have never seen hustlers bigger than I have seen in Nigeria. “
She also did not fail to chip in the fact that foreign investment has been largely hindered by these uncertainties. She cited liquidity as the major concern of foreign investors looking to enter Africa. “For foreign investors, how to get their money back is the main concern here. If I invest, say,$ 1 million in a Nigerian startup, how do I get my money out with all these bottlenecks? ” she said.
The African reality is that investors are harsher on startups in this environment, largely because the risks are higher and there are very few entrepreneur-turn-investors, who truly get early-stage venture deals the way Silicon Valley venture capital would play. Here, there’s a lot of focus on early profitability, which usually takes a long time due to constraints such as penetration and adoption.