Noth­ing would prove more con­tro­ver­sial than our de­lib­er­a­tions re­gard­ing the is­sue of in­vestor bias, ap­par­ently preva­lent across the con­ti­nent.

African Independent - - BUSINESS - ANDILE MA­SUKU

ap­pears Vil­lage Cap­i­tal has been able to iden­tify at least four rea­sons for the ex­is­tence of this dis­crep­ancy.

The first is what they call the “the hu­man cap­i­tal trap” – a phrase that de­scribes the dilemma faced by home-grown start-ups that fail to raise cap­i­tal be­cause they don’t have the right team but yet can’t af­ford to as­sem­ble the right team with­out rais­ing cap­i­tal.

The sec­ond fac­tor is “busi­ness model con­straints”. This speaks to the chal­lenge start-up founders face in com­ing to terms with how far be­hind the dig­i­tal adop­tion curve some African mar­kets are, rel­a­tive to more de­vel­oped coun­tries, in terms of ac­tive par­tic­i­pa­tion in the new dig­i­tal econ­omy.

While in­vestors typ­i­cally want to see ev­i­dence of trac­tion and prof­itable busi­ness mod­els right away, in Africa, time, cap­i­tal, and agility are re­quired for founders to over­come key struc­tural en­vi­ron­men­tal fac­tors in or­der to demon­strate the scal­a­bil­ity of their ef­forts.

Then there’s the “debt cap­i­tal gap” which re­lates to the up­hill strug­gle lo­cal founders face in at­tract­ing the cap­i­tal they need to achieve proof of con­cept.

Start-ups on the con­ti­nent lack ac­cess to in­no­va­tive and risk­tol­er­ant back­ers who can pro­vide them with work­ing cap­i­tal to sub­stan­ti­ate the vi­a­bil­ity of their ideas by demon­strat­ing trac­tion.

The fourth and fi­nal is­sue flagged by the study is what Vil­lage Cap­i­tal calls “the pat­tern­recog­ni­tion prob­lem”.

It turns out African start-ups don’t fit the in­vesta­bil­ity mould that in­vestors recog­nise, and founders lack the aca­demic pedi­gree and elite peo­ple net­works in­vestors favour.

The most com­monly ex­pressed frus­tra­tion in chat­ting with startup founders who are on the hunt for ven­ture cap­i­tal is the fact that, as Sankara puts it, “bad busi­ness ideas from for­eign founders get cap­i­tal and good ideas from lo­cal founders do not”. I’m told in­vestors be­tray their deep-seated bi­ases by turn­ing up their noses at African in­vest­ment prospects due to a per­ceived “lack of ex­pe­ri­ence”, or the be­lief that lo­cals “do not un­der­stand cor­po­rate gov­er­nance”, and of­ten cling to the dense no­tion that lo­cal founders are in­her­ently poor ex­ecu­tors who aren’t up to build­ing “the next Face­book”.

It’s im­pos­si­ble to deny these is­sues are con­founded by the fact that the ma­jor­ity of the con­ti­nent’s most ac­tive ven­ture cap­i­tal firms, as well as key sources of al­ter­na­tive in­vest­ment like high-pro­file in­vestor net­works, con­sist of a tightly-knit com­mu­nity of ex­pats and Ivy League-ed­u­cated Africans.

Via their handy Sil­i­con Val­ley con­nec­tions and strong af­fil­i­a­tions to lead­ing start-up ac­cel­er­a­tor pro­grammes, they are well­po­si­tioned to set a con­ti­nen­tal in­vest­ment agenda that favours peo­ple who look, sound and be­have Euro­pean or North Amer­i­can.

By drag­ging these is­sues into the sun­shine, I hope to en­lighten us to how empty the rhetoric around Africa tak­ing charge of her own fu­ture is if we don’t face up to the dam­ag­ing im­pact of al­low­ing in­vestor bias to per­sist.

It’s clear that we can’t ex­pect for­eign in­ter­ests, how­ever wellmean­ing they are, to ad­e­quately ad­dress the par­tial­ity that ex­ists. Case in point, at the re­cent G20 Sum­mit in Ham­burg, Ger­many, French Pres­i­dent Em­manuel Macron ex­pressed the wide­ly­held prej­u­diced view that Africa is suf­fer­ing a “civil­i­sa­tional” cri­sis.

Right. Clearly, we need to be set­ting our own in­vest­ment agenda and so­lid­i­fy­ing our own king-mak­ing cri­te­ria. We sim­ply can’t af­ford to leave that up to Ivy League alumni, Sil­i­con Val­ley club mem­bers, or even “Africa-friendly” pres­i­dents like Macron.

In a re­cent chat I had with App­sTech founder and chief ex­ec­u­tive, Rebecca Enon­chong, she high­lighted the im­por­tance of pro­mot­ing the for­ma­tion of an­gel in­vest­ment syn­di­cates across Africa. That’s a mes­sage I be­lieve we need to spread ag­gres­sively if we are ever to see real change start to take root.

As the co-founder of the African Busi­ness An­gels Net­work, Enon­chong is one of the dozens of in­di­vid­u­als who strongly be­lieve that home-grown syn­di­cated an­gel in­vest­ment ef­forts ought to be the bedrock of the con­ti­nent’s start-up ecosys­tem. While it’s true that most ma­jor African mar­kets are un­der im­mense pres­sure right now, and that the con­ti­nent rep­re­sents a tricky propo­si­tion in as far as be­ing a se­ri­ous global tech in­vest­ment des­ti­na­tion, the record in­vest­ment Africa’s tech in­dus­try has been at­tract­ing of late is proof our po­ten­tial is clearly too much for for­eign in­ter­ests to ig­nore.

Andile Ma­suku is a broad­caster and en­tre­pre­neur based in Johannesburg, South Africa. He is the ex­ec­u­tive pro­ducer at AfricanTechRoundup. com. Fol­low him on Twit­ter @Ma­sukuAndile and The African Tech Round-up @ african­roundup.


PARLEZ-VOUS? French Pres­i­dent Em­manuel Macron poses next to a ro­bot at the Viva tech­nol­ogy event in Paris ded­i­cated to start-ups de­vel­op­ment, in­no­va­tion and dig­i­tal tech­nol­ogy.

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