5 Advantages of Investing in African Start-ups Over Their US Counterparts

Untapped market, youthful labour, key investors, funding gap.

Africa has its challenges no doubt. Perhaps the continent has more problems than any of the other continents. From infrastructure deficits to unemployment rates; from political unrest to leadership issues. But there is no denying that its unique situation is also chock full of opportunities for growth if its vibrant start-up ecosystem is anything to go by.

Furthermore, the continent’s largest economies, also known as the big four (Egypt, Kenya, Nigeria and South Africa), present most of its viable investment prospects for potential investors through their innovative start-ups.

Africa might be a developing environment; however, it holds certain investment advantages over even a superpower like the United States of America. Here are five of them:

The African market is a blue ocean. This is an analogy depicting the more expansive, deeper potential that can be found in an unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth. On the African continent, it is represented by profitable and rapid opportunities. In addition, there is a growing youth population. By 2050, Africa will have 452 million youth between the ages of 15 and 24. It is, after all, the continent with the youngest labour statistic. Then, there is a massive shift to technology. For instance, Africa has twice as many mobile phones as the US, and technology is the future.

Africa has a massive funding gap. Next is the funding gap existing in the continent. There’s only $1 in private equity per person on the continent versus $81 in developed economies. This means that the potential upside of investing in African start-ups is huge.

Absence of the California problem. In the US tech ecosystem, founders build start-ups for wants. In Africa, founders are building start-ups for needs. The challenges plaguing the continent are unique to its citizens and often alien to their US counterparts. This situation unlocks an entirely different type of entrepreneurship.

The African start-up ecosystem is young and vibrant. The continent’s start-up space can be likened to its labour statistic. Africa currently has a median age of 18.8  and as mentioned earlier, it has the youngest population in the world, compared to the global median age of  31 and the US’ of 38.8. Africa’s ratio of the working population to its ageing one is the highest in the world. Conversely, the ratio of the ageing people to the working population is the lowest in the continent. Little wonder, Africa’s start-up ecosystem is growing in leaps and attracting attention from investors outside Africa. Therefore, becoming a real player in a growing market is easier and more impactful than in a mature one. Becoming a co-founder of one of the yet-to-be-complicated businesses already sprouting up could be a wise move.

The African start-up ecosystem is attracting key investors. Recently, known names like Y Combinator, Techstars, 500 Global, Tiger Global, and Google for Start-ups are taking notice and registering their interest through their activities on the continent. The ecosystem appears to be growing quickly. There is no time like the present to get involved.

What is the advantage of investing in African start-ups versus those in the US? The advantage is the potential for high-impact innovation which leaves a positive mark on the citizens’ lives while providing lucrative returns for investors.

Make no mistake about it, the African start-up space is just beginning. It is a good time to get in there and ride the wave.  

This article, by Eunice Ajim, first appeared on LinkedIn.

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