Investing in African Start-ups? 8 Things to Remember

Advice from an experienced venture capitalist.

One of the major stakeholders in the African start-up space is the investor – angel, venture capitalist, etc. Whether local or foreign, the continent offers great potential for investment in its ecosystem due to a growing population, a thriving tech sector and rapid urbanization,

Africa has abundant natural resources and a young, educated workforce that can drive innovation and entrepreneurship. Moreover, investing in African start-ups can help promote economic growth, create jobs, and reduce poverty; thus instigating an overall improvement on the continent and its citizens.

Here is some advice from a professional when considering investing in African start-ups:  

  1. “Never invest in a start-up whose founders have never failed before.”
    It is unlikely that they’d know how to handle that crisis when it eventually happens.
    And the inability to do so might lead to catastrophic consequences.
  1. “Never invest in a company whose pitch includes the word ‘disruptive.’ “
    The reason?
    It has been overused and become a cliché of sorts, an ego phrase founders employ to feel important.
  1. “The team is more important than the idea.”
    A mediocre idea with a great team will always produce better results than a great idea with a mediocre team.
    This is because the team can always adapt the idea or pivot accordingly.
  1. “Don’t be afraid to invest in messy, unattractive businesses.”
    The FinTech and AI industries have become crowded arenas with everyone jostling for a piece (no matter how little) of the pies that are currently the global belles of the start-up ecosystem.
    However, there are gaping holes in sectors such as agriculture, logistics, and retail.
  1. “Don’t hesitate to invest in a solo founder.”
    As the saying goes, two heads (founders) might be better than one, but one great leader is so much more appealing than five mediocre ones.
    Plus, solo founders can also pivot more effectively than a team or group.
  1. “Invest in industries you understand.”
    African start-ups are not that different from those elsewhere.
    Valuations, competitions, and business models are universal.
    When investing in an industry you understand, you can call nonsense on pitches that sound too good to be true.
  1. “Good entrepreneurs understand they are selling and not just building products.”
    Successful entrepreneurs are capable of selling their products to a client, an employee, or an investor.
    If they can not sell their vision, they will struggle to grow.
  1. “Africa is not a monolith.”
    Just because an idea worked in Kenya doesn’t mean it will work in Cameroun.
    Different regions have nuances.
    Understand the culture, regulations, and the industry of the country you plan to invest in.

This article, by Eunice Ajim, first appeared on LinkedIn on May 31. She is a founding partner at Ajim Capital, an early-stage fund providing financing for start-ups in Africa from Pre-seed to Seed.

Read also: The Venture Capital

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