New Report Calls For Changes To VC Strategy In Africa

Kinyungu Ventures, an East African venture advisory firm has published a white paper, titled Chasing Outliers: Why Context Matters for Early Stage Investing in Africa. According to the report, there is a “wide misalignment between traditional venture capital models and the African market.”

Tony Chen, Managing Director of Kinyungu Ventures and co-publisher of the report comments on its findings. 

Read also: Nigeria’s Print-On-Demand Startup Expands To United States And Canada After South Africa

 “Capital in Africa is scarce and pursuing a “growth at all costs” strategy where capital pools are shallow presents huge risks for companies. We’ve also found that many great businesses don’t fit the typical VC profile, but have tremendous unfulfilled potential”.

The findings of the in-depth report were gathered from 100 Pan-African founders, investors, limited partners across 15 African countries. 

According to a press statement by Kinyungu Ventures, a broader approach to institutional investment must be implemented in Africa. 

“‘…the research suggests investors should prioritize investing structures and practices that reflect the realities of operating in Africa. This includes adopting more flexible investing structures with longer time horizons.”


Click here to find out more!

Why the VC cut-and-paste method must change

The white paper has revealed that there are numerous mismatches between key characteristics of the Silicon Valley VC and African markets. This, in turn, influences how startups and funds maneuver as well as what outcome they expect and produce.

Tayo Akinyemi, lead researcher and writer of the report provides insight into the key findings and the overall impact on startups. 

“In our conversations with numerous investors and founders, it is clear that nuances in variables such as consumer behavior, cultural norms, and business practices impact startups significantly, and being on the ground is crucial for success. While African markets aren’t always able to provide the outsized returns that Silicon Valley typically looks for, in high-growth companies, a more focused strategy here could unlock real gems, as has been proven by some of the startup successes the continent has seen over the years.” 

In addition, the report has found that African markets albeit large, are highly fragmented with their consumers limited in purchasing power. 

“Furthermore, consumers on the continent are difficult to acquire and retain, yet the sheer size of the African market also presents a real opportunity for profit once the environment is clearly understood,” explains the venture firm. 

Key recommendations

The report recommends the following for VC funds to change the existing narrative and adjust the current strategy used. 

The paper’s key recommendations for funds include:

  • Adopting more focused investment strategies, such as investing in b2b companies or cross-subsidizing a portfolio with less risky, steady return assets 
  • Considering non-unicorn investing models geared at more resilient companies, with returns distributed more widely across the portfolio
  • Using flexible structures such as debt or PCVs to accommodate market-level changes, where feasible
  • Allowing a longer time horizon for returns, understanding that growth could be slow and difficult to achieve for many companies. 

Read full article here

GetFundedAfrica’s mission is to uplift people and economies in Africa through entrepreneurship; helping companies find funding, grow, create jobs and solve society’s greatest challenges

GFA Attract, GFA Mentorship Program & Application Portal For Funding

Would you like to be an impact mentor?

The African continent is going through a revolution driven by its startups. Your experience could help develop the next Facebook, Google or Netflix. You can be part of this story by volunteering your time to mentor an African startup. Apply Here

GFA Attract Interview With Mostafa Khaled Abdel Akher (Entrepreneur Edition)

In this episode of GFA Attract (Entrepreneur edition) we interviewed, Mr. Mostafa who graduated from the German University in Cairo in 2013, where he received a B.A degree in Management Technology with double core majors in Economics and Innovation. Mostafa now works with Makwa. An Egyptian startup focused on innovation, Makwa aims to offer convenience in the dry clean & laundry sector, through the application of digital technology. Watch Here

Apply For Funding

GetFundedAfrica provides equity capital from $1,000 to $50,000.
For larger amounts (Above $50,000)
we organize syndicated funding rounds of up to $500,000.
Apply Here

Follow Us

See the source image
See the source image

“Business is always a struggle. There are always obstacles and competitors. There is never an open road, except the wide road that leads to failure. Every great success has always been achieved by fight, every winner has scars. The men who succeed are the efficient few –they are the few who have the ambition and will-power to develop themselves. So choose to be among the few today.” – Chris Kirubi, Centum Investment, Kenya

Nichole Manhire

Is the media and brand manager at GFA News. She works very closely with editors and podcasters that contribute to telling the African business success story. For marketing and advertising send Nichole an email:

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button