Is Africa an Investable Destination?
Insights from Adaverse’s Investor Roundtable — July Edition
Adaverse, a venture capital firm with a keen focus on Africa’s tech sector, brought together the global tech community on July 27th for the 2nd edition of the Investor Roundtable event. The key question on everyone’s mind was, “Is Africa still an investable destination?”
With a guest list featuring prominent investors, groundbreaking innovators, and forward-thinking entrepreneurs from across the global Web3 space, the roundtable scrutinized trends, identified opportunities, and debated the future growth potential of the continent on the world stage.
Here is a detailed recap of the event with questions spanning regional to global perspectives, the conversation dove into the nuances of Africa’s tech ecosystem
Keynote Speech by Joshua Murima, Head of Investor Relations, Briter Bridges
Joshua Murima opened the discussion by providing an analytical look at recent data and investment opportunities within Africa’s tech industry, setting the stage for the discussion.
Murima emphatically stated that Africa is an investable destination. He highlighted that over 10,000 tech companies currently operate within Africa, with total investment surpassing $21 billion. Investments saw a spike in 2014, particularly in Kenya, and were shaped by mobile money and impact investing. Even the COVID-induced slowdown did not stifle investment, with over $2 billion invested in 2023 alone.
Murima further emphasized the growing investment landscape in Africa, highlighting a rise in million-dollar rounds and democratization across countries like Morocco, Tunisia, and Ghana. There’s been significant growth in fintech, crypto, and climate finance, and increasing diversification across sectors such as healthcare, agritech, and clean tech. Also, the emergence and resilience of climate tech, reflect the evolving nature of investment in Africa, with major cities like Nigeria, Cairo, Nairobi, and Cape Town leading in investment volumes, while other regions drew increased interest.
In conclusion, Murima emphasised that despite occasional slowdowns, the overall trend of Africa’s investment value has increased, with diversification and new investment avenues offering exciting prospects for companies and investors.
The Panel Session
The panel session was moderated by Ishan Anand, Venture Partner at Adaverse, who engaged the panelists, including Mouloukou Sanoh, Investment Manager at Adaverse; William Phelps, Investment Manager at Adaverse; Sherif Nessim, Founder of Jedar Capital; Femi Awoniyi, Startup Fund Manager at Google; Joseph Lassen, Investment Partner at CMT Digital; and Joshua Murima, Head of Investor Relations at Briter Bridges.
Question 1: What unique factors in Africa’s current landscape make it an attractive destination for tech investments right now? And how does the socioeconomic dynamic influence this?
Joshua Murima: Africa stands out as a hub for tech investments. African founders are keen on addressing significant challenges related to financial access, energy, healthcare, and employment, with their solutions not only having a strong market within individual countries but also across the vast continent. From an investment perspective, firms interested in scaling their operations across Africa, and targeting these persistent problems, are likely to attract considerable investor interest.
Sherif Nessim, Founder of Jedar Capital, concurred with Joshua Murima’s insights, highlighting that African founders focus on solving large-scale, universal problems, although the unique nature of different countries and regions must be considered. He further emphasized the significance of Africa’s young demographic, noting that 40% to 50% of the population is 15 years old and younger, and that by 2050, half of the global working age will be in Africa. This youthful population, more likely to embrace tech-based solutions, creates a substantial middle class that can drive growth in various sectors. Sherif also pointed out that the African market is largely untapped, offering massive growth potential for at least the next decade. Even with rapid advancements in areas like mobile penetration, there is much room for development and innovation. This combination of demographics, market potential, and problem-solving focus renders the continent an attractive investment destination.
Question 2: In light of the global technological advancements in recent months, how has the African tech ecosystem evolved over the past few years? And what are some of the salient trends emerging from this evolution?
Femi Awoniyi, Startup Fund Manager at Google, reflected on the remarkable upward trend in Africa’s technological evolution. “Africa has experienced a significant increase in tech investments and exits since 2010, with the number of companies that have raised over a million dollars quadrupling since 2018. The rise of homegrown startups points to a positive trend towards local talent developing innovative solutions. And the importance of local tech hubs and accelerator initiatives in nurturing early-stage startups creates an ecosystem that fosters innovation and growth.
Sherif Nessim, Founder of Jedar Capital stated that despite the diversity across Africa’s 54 countries, the core problems that founders are seeking to solve remain the same across different markets. He highlighted the continent’s youthful demographic as a key factor, with 40–50% of the population aged 15 and younger, indicating a massive untapped market potential. By 2050, half of the global working age will be in Africa, opening up opportunities for technology-based solutions to traditional problems.
Question 3: Many experts liken the current African tech scene to Southeast Asia’s ecosystem 10 to 15 years ago, based on your investment and experience and insights. To what extent do you agree or disagree with this comparison?
Mouloukou Sanoh Adaverse Investment Manager stated that having grown up in Asia and spent significant time in Southeast Asia, I see numerous parallels between the regions. There are demographic similarities, with 70% of the population in both areas under the age of 30, and shared structural deficiencies such as difficulties in sending money and comparable infrastructure issues. Africa’s banking statistics closely align with Southeast Asia’s figures from five years prior. Additionally, the trend toward a cashless economy and similarities among leading companies further strengthens the comparison. In conclusion, Southeast Asia’s benefit of being adjacent to capital hubs and China helped accelerate its growth, a trend that Africa appears to be mirroring.
Question 4: Investing in any emerging market comes with its unique challenges and risks. Could you shed some light on some of the specific challenges associated with investing in African tech startups and how they might be mitigated?
Joseph Lassen, Investment Partner at CMT Digital: I believe it’s essential to recognize the differences among various countries. The ever-changing regulatory environment requires careful examination, and mitigating these risks involves an in-depth study of the market. Partnering with local entities or co-investors who understand the landscape is vital. Focusing on business fundamentals and investing in solutions that cater to specific problems within the population is a strategy we employ. Conducting character reference checks and understanding the founders’ history further enables us to navigate these complexities.
William Phelps, Adaverse Investment Manager: I agree with Joseph that while focusing on speculation, risk, or investment risk, one unique aspect of investing in Africa is the need for local knowledge, especially regarding the pain points and consumer behavior, particularly in B to C solutions. Often, international investors may become overexcited about solutions that may not fit the African market. Understanding the local context can significantly mitigate these risks and unlock valuable insights. For anyone considering investing in Africa, maintaining a presence on the ground, forming local partnerships, and engaging with the founders and companies directly can lead to a safer and more stable investment thesis.
Question 5: What specific strategies or best practices have you adopted or observed that are effective in identifying, supporting, and scaling successful African tech startups?
Joshua: Thanks to a more proactive approach among investors, the old way of simply waiting for email pitches has been replaced with a more engaged connection with the ecosystem. Understanding the mandate of the fund and the specific problems it aims to solve, and then finding entrepreneurs who align with that vision has proven effective. This shift has contributed to the rise of the venture builder model, with traditional investors backing venture builders to tackle specific problems or support entrepreneurs. Moreover, supporting founders by helping with often-overlooked areas of the business such as corporate governance, operations, and technology has been vital. This assistance helps talented entrepreneurs who may lack experience in building but are focused on solving the right problems.
Question 6: The African tech landscape is often touted as a leapfrogging economy, bypassing certain stages of technology to adopt more advanced systems. How does this notion impact investment perspective, startup growth, and overall tech industry evolution in Africa?
Femi Awoniyi: Thank you, Ishan. The leapfrogging perspective in Africa is evident to some degree, with access to latest innovations being a notable point. However, to see real growth, enabling factors such as the right regulations, digital literacy, education, wage rates, purchasing power, and a cross-stakeholder approach must be in place. If these elements aren’t considered, technological innovations might not translate into tangible solutions on the ground.
Sherif Nessim: Absolutely, the untapped opportunity and lack of infrastructure have led to leapfrogging in areas like mobile penetration and financial services. Without pre-existing access to communication or banking, people were able to jump directly to mobile technology, driving the adoption of these services. Lack of infrastructure catalyzed this shift, allowing people to move from being completely unbanked to using mobile money and payments.
Question 7: Global tech trends often dictated by Silicon Valley or Twitter or other entities shape many investment decisions. In your experience, how do these trends translate to the African context? And what are the key considerations for both entrepreneurs and investors, especially with regards to new ideas coming from crypto Twitter?
Femi Awoniyi: It’s vital to understand available trends, but equally crucial to adapt them to the local landscape. Whether it’s new blockchain technology or other innovations within the Web 3 space, if they don’t address the real needs and varying requirements of the African market, they will fall flat. Solutions must be practical and focus on solving the customers’ pain points, regardless of the underlying technology.
Mouloukou Sanoh: The global trends don’t really translate to the African context. While they might work conceptually, practically they often don’t translate into effective solutions. In Africa, especially in the Web3 area, the best solutions are those that directly address the pain points of customers or improve existing inefficiencies.
Question 9: To what extent should African entrepreneurs align their ventures with global trends? And how should the context of Africa influence the investment thesis and strategy?
William Phelps: Entrepreneurs in Africa must prioritize the consumer’s needs over global trends. Solutions, particularly in the B to C space, are successful only if they have actual users. Instead of looking at trends, the focus should be on what pain points are being solved and how to attract users. A consumer-centric approach is key for companies that want to scale and grow within the continent.
Mouloukou Sanoh: African founders should concentrate on solving African problems rather than following global trends. The real opportunity lies in addressing specific solutions to local challenges. Understanding the market, consumers, and their pain points is vital, and solutions should be targeted at addressing those specific issues. This principle applies across various Web technologies, including Web2 and Web3.
Question 10: In the context of diverse African markets, what criteria do you prioritize when evaluating the scalability and growth potential of African tech companies?
Joseph Lassen: Evaluating scalability involves looking at the total addressable market, considering the population size and regional expansion potential. If a company starts in a country with a smaller population, the focus may be on spreading regionally. In contrast, in more populous countries like Nigeria, regional expansion may be emphasized less. The quality of the entrepreneur, their ability to go to market, and building a business development function also plays a key role in assessing growth and scalability.
William Phelps: The focus should be on the market that can be captured, rather than merely addressed. Consideration of various multifaceted layers, different groups, and demographic segments with diverse needs is vital. Assessing these segments or layers and targeting the social, regional, or cultural specifics that a company aims to address gives a more accurate measure of its real growth potential. Targeting niche but influential market segments can also provide an interesting prospect for scalability.
Question 11: Looking a decade into the future, how do you envision the African tech landscape? What sectors, technology or trends will define the continent’s digital economy?
Joshua: I see a focus on climate technology and finance in the future. Also, business-to-government is an overlooked sector, and we’re noticing a trend in digital businesses addressing treasury and central banking issues like Forex. I think this will be a defining model for the next decade in Africa.
Femi: I’m excited about the growth of innovation within African SMEs, especially in web three solutions and the untapped insurance space. These sectors are promising, and I anticipate more successful ventures in the next decade.
Joseph: Our fund is mostly focused on Blockchain and Web3 investments. I would argue that these technologies will be implemented on the back end of functional consumer applications in 10 years.
Sherif: I believe we’ll see more startups trying to solve around digital trade enabling. When you look at any country now in Africa, inter-African trade wouldn’t be more than 5% of the GDP. So I think the digital trade enabling sector is a trend that will see the next boom in the next 10 years.
Mouloukou: I’m super bullish on Africa and emerging markets in general. In the next 10 years, we’ll see more African innovations going globally, more African companies list, more M&A as well. So the last thing I would like to say is, “ ignore Africa at your own risk”.
William: I think Africa still needs to go from 0 to 1 before it goes from 1 to 10. Focusing on areas that are essential and are already proven within Africa, like payments, commodities, agriculture, and building on top of them is very important. Starting with those core industries and looking at what can be built on top of them as a starting point for the next decade is key.
George Payne, Adaverse Venture partner rounded off the event with words of gratitude to all speakers and participants, mentioning how unanswered questions should be sent by email and a call to action for further engagement, emphasizing the importance of ongoing collaboration and dialogue among the attendees and panellists.
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