There has been a recent surge of interest in people across the world who are keen to learn more about how to become angel investors and get involved in creating world class companies. But the rise of African angel investing ecosystem requires more than the money.
There is still talk of angel investing as something people do for reasons other than getting returns and that is very dangerous because it fails to attract local capital that can see big returns in other areas including the banks or government bonds that are less risky.
Like one banker told me last week, all of this angel investing nonsense will not work in Nigeria because there is no trust, people want their returns and they still treat angel investment like any other investment ie real estate or government bonds; so if we want more Angel investing in Africa, then let’s talk about returns because that’s what matters the most.
In our Investing in Africa August update we highlighted some of the reasons why it is time to invest in Africa and i would like to elaborate further and give you 5 reasons why early stage investing present a tremendous opportunity for those with the cash and know how. Like any other form of investing ,angel investing is a dangerous sport and people make or lose money but the returns are tremendous. Besides profits Angel investing also offers an opportunity that other forms of investments don’t offer, the ability to shape and influence a new generation of business leaders by coaching and mentoring them.
We are also starting to see a new trend of investors and entrepreneurs starting to take entrepreneurship seriously , from His Royal Highness, The Duke of York KG, Mr Aliko Dangote and His Excellency Olusegun Obasanjo agreeing a partnership to support Entrepreneurship in Africa to Tony Elumelu foundation TEEP programme and as recently reported byDisruptAfrica the legendary musician entrepreneur Reggie Rockstone invested in a Ghanaian startup called Suba.
For those who are less experienced with investment lingo there is a big distinction between a Venture Capitalist and an angel investor. The important difference is that an angel investor work directly with the founding team to develop their business and gives the startup money out of their own pocket in exchange for an equity stake in their business whereas venture capitalists invest institutional money from Pension funds, university endowments or family offices.
The intuition backs up our argument, as the costs of creating value continue to decline, agility and adaptability are coming to be far more relevant than scale. This means that, on average, lean, innovative startups are better positioned to spot opportunities that generate returns for their investors than are larger companies. Startups are also better equipped to move fast because they don’t have complex bureaucracy and hierarchy that tends to slow down larger companies.
1. Valuations are still low (for now)
One only have to look at the rounds that are being raised today across the spectrum from (Seed to A,B) to see that there is still tremendous bargains. It is a question of supply and demand,obtaining venture funding is still a brutal experience for most founders because it is still a buyers market at the moment. Investors can pick and choose but the good news is that a $20K–$200K invested directly or via syndicates in african startups today will most likely yield tremendous returns whereas that amount would not even register if one is investing in Europe or US where capital is abundant. Valuations are still low but it will not be the case for so long.
A Kenyan company called Wezatele realised an exit early this year and we are confident that we will see many small wins similar tohttp://wezatele.com/. We predict that Sub $20M exits should be common across Africa in the next 2–5 years. These are going to be as a result of strategic acquisitions by multinationals looking for African exposure or other forms of buyouts as IPOs are still not a viable exit strategy for most startups.
For example we have an exciting opportunity to invest in the next round of Heels.com.ng a premier female shoe megastore offering a wide selection of hand picked designer shoes across Nigeria and Heels was recently covered byCNNAfricanStartups . Contact us for an investors pack and further discussions.
We believe that this will be the zappos of Africa.
2. An abundance of bootstrappers solving real problems.
Africa is home to some of the world’s best bootstrappers, like the founders of Nigeria’s Printing company Printivo who worked for 3 years to save up the startup capital.
From Mergims in Rwanda to PayKind in Kenya and countless other startups that are tackling real problems and coming up with viable solutions without waiting for any angels to descend from heavens and rescue them by funding their prototypes.
There are also other people across the world that are looking at Africa and seeing opportunities to create world class companies like Africa angels Network portfolio company Oradian or the Uganda based awamo which offers a mobile, cloud-based hardware and software solution to microfinance lenders in emerging markets, simplifying the credit management process and providing lenders with a professional credit risk management solution.
People are bootstrapping their startups and leveraging social media and other avenues such as competitions to get the attention of investors. Perhaps the most exciting example of this notion in practice is of Mark Essien of Hotels.ng which recently raised $1.2M , as detailed by one of their earliest angel investor Jason Njoku of Iroko Partners .
Companies like Truppr a social tool that connects YOU to events and people to help make regular exercise a lifestyle.
Another interesting company that i am very excited about is a Uganda basedhttp://fezah.com/ that solves the issue of booking performing artists for any occasion.
Last but not the least is TajiriWealthManagement which is aiming to be the 1st Pan-African online wealth management platform . Making premium quality investment advice available for all by embracing the Robo advisory model.
3. Increased global awareness of African early investing opportunities.
BidNetwork a Dutch organisation that offers technical expertise to startups and SMEs across Africa and other emerging markets is organising a trip to Rwanda for Impact investors and the quality of the companies that they have selected is a testament to some of the opportunities that are available across Africa. Learn more about the trip herehttp://www.bidnetwork.org/investor-trip/
On the other end of the spectrum ,the south African behemoth Nasper is actually abandoning china and setting up a channel that will leapfrog Netflix in Africa .
John Melas-Kyriazi a VC at Spark Capital in Boston explains why the company sees enormous potential of Andela. Referring to an earlier blog post about three ingredients for why VCs invest, John catalogs where Andela is which each of them and how Spark Capital’s investment in Andela was a clear choice. It also shows that world class investment shops have taken a keen interest in African opportunities that are on par with investment opportunities available in India, China or Latin America.
I recently had an opportunity to discuss with #SocialMediaWeekLagos how African entrepreneurs can leverage social media to market themselves to the rest of the world.
4. Big firms are betting on ecommerce opportunities.
Peoople have the same needs and often desire the same conveniences, as the Africa middle class starts to really take off , ecommerce is going to be one of the biggest beneficiaries because people want to shop without the hassle and bassle of traffic in cities such as Lagos or Nairobi or the inconvenience presented by the lack of brick and mortar shopping malls. Entrepreneurs that have spotted gaps around these opportunities are building great companies such as Nigeria’s ACE Africa Courier Express.
The ecommerce has tremendous forerunners already such as Konga andAfricaInternetGroup has backed various companies across Africa which means that this segment is only just beginning to take shape and there are other pockets that haven’t yet been explored. So this is the time to get in.
Apart from ecommerce, Insurance fintech,education and agritech present tremendous opportunities .
For example “Kenya’s non-life insurance market is growing at 20 percent per annum, with health insurance leading the charge at 38 percent” according to Leapfrog
5. Big rewards for those with capital and know-how.
It’s true, there has never been a better time to become a tech angel investor in Africa .
I always say that most people who have the money in Africa don’t necessarily understand technology and the opportunity presented by the tech sector. Those with the knowledge of the tech sector don’t have the money so it is an interesting dilemma that also present a tremendous business to offer angel investing training across Africa, which is why we have partnered with Angellabs , our colleagues at ABAN have also secured support from Lions Africa to offer similar training to their members as recently documented in their series here
Africa’s abundance of opportunity is only rivaled by it’s supply of pitfalls and insufficient infrastructure in some parts of the continent. This means that one has to do their homework and due dilligence before taking the plunge but this applies to any market not just Africa.
If you are looking for an investor, here are the 5 things you should considerto ask them before taking their money . It was noted that lack of funding and technical skills are the best obstacles for most African entrepreneurs and that’s why we took a decision to expand FoundersHive into Africa.
The Founders Hive is an Advisory Firm for Startups and Founders who are on their way to build world class technology companies. We support them from an early stage level to accelerate their growth by focusing on their Concept Development, Branding, Operations, Financing & Project Management.
FoundersHive have collaborated with iBiz Africa in Nairobi to run MonthlyMVP DEMO Days a platform where entrepreneurs get an opportunity to present their startups to a diverse audience of mentors, advisers, investors and fellow entrepreneurs. We have had two successful events in Nairobi. Read more here and pictures. MVP DEMO Day, Africa is a Spin-off of our successful events in the UK that were held at Google Campus .
We launched MVP Demo Days in Kigali on 18th August at kLab and will have the next one on 16th September(articleand pictures). We plan to host the Kigali Demo Days once a month.
If you are an investor looking to get involved in African startups, talk to us(NewGenAngels) or Consider partnering with the following organisations
1)http://www.chanzocapital.com/ Chanzo Capital
2)http://www.africaangelsnetwork.com/ Africa Angels Network
3)http://www.renewstrategies.com/ Renew (Impact Investing in Ethiopia)
4)http://abanangels.org/ (Africa Business Angels Network)
5)http://www.cairoangels.com/ (Cairo Angels)
6)https://www.emergingcrowd.com/ (Emerging Crowd)
7)http://gain.com.gh/ (Ghana Angel Investors Network.)
8)http://viktoria.co.ke/ ( Angel Investing in East Africa)
Lastly consider to attend the following events to increase your knowledge and network
- Angel Fair Africa http://www.angelfairafrica.com/ (Ghana)
- Demo Africa http://www.demo-africa.com/ (Nigeria)
- Frontier Investors Dinner (London,UK)
written by S.N. Obedih