This article was contributed to TechCabal by Kristin H. Wilson.
The narrative surrounding Africa’s economic future often oscillates between extremes of optimism and scepticism. However, the reality on the ground tells a more nuanced story—one of resilience, ingenuity, and untapped potential. As we approach 2050, with projections of Africa’s GDP reaching $29 trillion, surpassing the current combined output of the US and Eurozone, the imperative to harness and scale indigenous innovation has never been more pressing.
There’s a pervasive belief that African companies can only thrive by focusing on markets outside the continent. This view is often reinforced by examples of fintech startups that have shifted their focus to diaspora remittance and subsequently raised significant investments. However, this notion overlooks Africa’s vast untapped consumer base and the influx of foreign businesses eager to enter the continent.
It’s important to consider that many African startups often operate with significantly smaller capital injections than their global counterparts yet still make remarkable strides. The imbalance in investment size and the growing focus on diaspora markets skew the overall narrative. We must, therefore, acknowledge the role of local investors who provide a wealth of experience and support, offering a more accurate picture of the opportunities and realities of running a business in Africa.
It begs the question, why do more than 80% of African startups fail within their first few years? For those who have secured funding, this high failure rate can often be attributed only in small part to premature exposure to huge first cheques. This is in an ecosystem that also boasts of super brilliant African tech founders with impactful solutions. It’s telling for the future of an ecosystem when founders increasingly believe that instead of focusing on building a solid foundation for scalable growth, they ought to hack their way to venture backing instead.
Our VC cap tables have the same startups, which indicates we are having the same conversations with the same founders and might be overlooking other innovative ventures that could thrive with proper foundational support. In the venture capital ecosystem, some founders are seen as “unbackable,” often due to riskiness, a perceived inability to provide a venture-scale return, and sometimes a lack of investment readiness.
In our young ecosystem, perhaps we’ve been too hasty in deciding, with only about a dozen years of data, what ventures really could be delivering venture-scale returns. Perhaps local ecosystem players at the earliest stages, such as angel investors, have been too risk averse and, therefore, have not sufficiently supported founders whose proposals do not mimic Silicon Valley pathways to success.
There’s often talk of a need for a third force – a new group of support systems that can identify and nurture those overlooked ventures, helping them to be backable by addressing gaps in their business models and scaling strategies. I’d wager that we’ve got enough forces; we just need to mobilise the village a little better and a little earlier.
As an angel investor and a founder, I have had the opportunity to meet a steady stream of early-stage founders, many of whom are still under the radar but are tackling their communities’ challenges with fresh perspectives. These founders have the potential to generate outsized returns because they have already proven their value locally but need support to realise visions which can deliver impact and returns on a venture scale.
Indeed, this is why Christian and I have launched the Innovate Africa Fund, not as a third force but to organise our activities as angel investors better and to mobilise the community of incredible investors and operators we have had the privilege of building and investing with into an early-stage fund that supports African founders in achieving product-market fit. Our approach is simple: find someone delivering a million pounds worth of impact with a fax machine and help them optimise their way towards the equivalent of a 3D printer so they can provide at least a billion pounds worth instead.
We’re trying to galvanise existing players and hoping to bring new local actors into the fold who don’t necessarily revolve around the usual investment circles but are solving problems and creating innovations that deserve visibility and scaling. By improving the pipelines of companies supported and scaled through VC, we will see more startups making a difference across Africa.
Beyond providing capital, we have to roll up our sleeves and get involved as angels. Many founders could benefit from this level of engagement right now. Our mandate is to actively collaborate with founders, providing value-added services such as finance, governance, public relations, talent sourcing, and strategy guidance.
This hands-on approach allows founders to focus their energy on innovation and building transformative businesses that tackle complex challenges on the continent and generate value for all stakeholders, especially the community. I recall being part of a passive syndicated deal structure where a founder requested support with marketing, but the request went unattended for a month. This is less likely to happen within a dedicated angel investing framework, especially with early-stage startups that require steady attention, even less so with our fund.
Angels have a superpower: the ability to provide capital and infrastructure with agility, ensuring founders are well-prepared to attract substantial investment without fear of failure.
It becomes even more impactful when championed by homegrown entrepreneurs who understand the African context and share a profound vision for the Africa we want to see. To foster a more robust local investment ecosystem, we propose standardising and elevating angel investment practices, providing a framework for new and existing angel investors to engage confidently with startups directly and through hub networks. We want to be at the forefront of realising proposed tax incentives for local angel investors who support early-stage startups, encouraging more high-net-worth individuals to participate in the startup ecosystem.
Africa is a hotbed of innovation, defying expectations despite limited resources. With less than 30% internet penetration and a tiny slice of global investment, the continent has produced eight unicorns and five fastest-growing economies. The challenge on the continent has never been a lack of innovation; instead, it is scaling it.
To unlock Africa’s projected $29 trillion GDP in the next 25 years, we need to turn these innovative sparks into a full-fledged flame, and local angel investors are essential to this fire. Funds, like ourselves, provide the early nourishment needed for startups, preparing them for VC cheques at the ripe stage; we are laying the foundation for Africa’s economic future.
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Kristin is the Managing Partner at Innovate Africa Fund and Bold Angel Network. Her work empowers entrepreneurs and business teams to harness the power of data and technology. Kristin crafts innovative solutions that combine human operations, data analytics, and software to drive growth for SMEs and startups in sub-Saharan Africa.
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