A Love Story
There is an unquestioned love marriage between venture capital and tech. Recent history of the venture capital asset class is inextricably linked to the story of Silicon Valley, where tellingly, is also the birthplace of the famous “software is eating the word” quip by one Marc Andreessen, a purebred son of Silicon Valley if there ever was one.
The questions linger;
Can venture capital work outside the world of bits and bytes? Can the business building techniques horned in northern California be adopted to the humble world of atoms, brick & mortar, hybrid businesses? Indeed, can venture capital work in far flung reaches of the globe, like say, Africa?!
It depends…
For one, a whole cloth importation of Silicon Valley practices with all it’s biases, knee jerk pattern recognitions, and often casino style investing practices will for sure fail. For instance, the notion of ‘just build it and figure out a business model later’, a very acceptable practice in Silicon Valley just won’t fly in emerging markets.
Its like Silicon Valley for the Savanna…
If venture capital is to work in Africa it must evolve to embrace local realities. However, when nearly all venture capital currently active in the local ecosystem has foreign origins and as such is more comfortable in the hands of expat founders mostly solving a narrow band of fintechie problems, one wonders how much contextualization is actually taking place. The inference to be drawn here is that current venture capital in Africa is fishing in tepidly shallow pools.
No matter how well intentioned and Ivy League ‘smart’ these adventuring first world entrepreneurs might be, they can’t be expected to fully and unreservedly commit themselves to solving the more closer to the bone, hard African problems, which in fact, is where the real transformational value lies. That is chiefly the African entrepreneurs challenge and opportunity.
Insight #1: local investors, there is a massive opportunity for you to reap huge rewards from the ongoing digital transformation of Africa
Build it and they will come…
I have recently witnessed more switched on local entrepreneurs invest time and small amounts of capital testing out their hypothesis in the real world and only investing in developing the technology that ties it all together after it starts to work. In Africa, the gap between effort and revenue is super narrow. In such an unforgiving environment, a pragmatic, first principles, eyes wide open approach are basic requirements.
Tip #1: Local founders, focus on building a real businesses first and the investors will break down your door.
Off course, for some purely tech products a test before build approach is not always possible. In these cases let lean methodology, speed, and dogged bootstrapping be your guides.
Fintech Bubble?
Contextualizing and right sizing venture capital for Africa will require bold, committed, innovative actors who deeply understand and embrace the entire African development project with all its challenges, warts and all, and not just the flashy, low hanging, techie bits. I am pretty sure yet another fintech app, couched under the PR friendly guise of financial inclusion, powered by extortionary interest rates is not the ticket. How different is this than local banks who charge eye popping interest rates? How many mobile wallets, micro-loan offerings, payment services providers does an African need?
Is there a fintech bubble? No, just an overcrowded space full of shallow fintech offerings. Will the real innovators please stand up!
The next wave of really valuable fintech solutions will emerge from non fintech startups seeking to round off their offerings to their existing customers. See Twiga Foods partnership with IBM.
Jungle VC
While the opportunity space for startups in Africa is massive, it is also on an entirely different level of depth, requiring VCs to develop deep context and a willingness to roll up their sleeves and get their hands dirty working with entrepreneurs to prepare their companies for growth.
Insight #2: What the African startup ecosystem needs is more local capital
VC, tear yourself away from the cozy coffee shops, flashy demo-days, highfalutin board meetings and get in the trenches with founders to help build value into the companies you purport to want to help. Make no mistake, startup investing in Africa is a demanding, high contact sport. It must therefore also be a labor of love.
Lazy, uncommitted, fly-by-night types need not apply. Entrepreneurs can smell you an Savanna mile away.
For the rest of y’all real deal innovators, entrepreneurs, investors, strap on and hold onto your hats, the ride and rewards over the next 10–20 years will be amazing.
Twende kazi!
