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Venture Capitalist take a look at the challenges investing in African tech

VC4Africa was pleased to host the panel, ‘Strengthening the VC pipeline’  at the 9th Annual Conference for the African Venture Capital Association meeting hosted in Accra. 

I was joined by Yemi Lalude, Managing Partner of Adlevo, Tayo Oviosu, Founder and CEO of Paga, Karima Ola, CIO of the African Development Corporation, Mathew Boadu Adjei, CEO of Oasis Capital and Arjuna Costa, Director of Investments at Omidyar Network. The time we had was limited for getting into all of the issues we wanted to cover, actually there is more than enough content for a stand alone conference on the subject, but here are some of the points I felt were raised during our different conversations.

-       Within the emerging African focused VC space there is a inherent leaning to scalable concepts and a natural orientation toward financial services. As penetration rates increases across African countries, banking services are the first step to unlocking e-commerce activity that will drive the ecosystems development.

-       Challenges with market size remain a key constraint. Ghana at 8.4% Internet penetration is looking at somewhere around 1.2 million users compared to the 4.3 million found in Nigeria. The numbers are far less in countries like Tanzania, Ethiopia or Uganda. Innovation can come from anywhere, initially incubated and tested in Accra, Kampala or Dar, but how can a venture then find its way into bigger markets next door?

-       Operating in a country like Zambia can be extremely expensive. Sales operations might be in Lusaka, but don’t be afraid to put the back office in CapeTown. Where Nigeria is where a company might want to expand its network of merchants, the programmers and technical staff might be based in Accra.  Staff are easier to find, higher quality and therefore cheaper. And it can be as simple as the company needing better power supply and reliable infrastructure.

-       There is a need for more qualified entrepreneurs. For the organizations that can, investing into the support ecosystem remains important. Platforms like incubators are critical to developing new networks of entrepreneurs. That said, do the existing platforms successfully produce new ventures and how do we make sure entrepreneurs graduate and get into the market successfully? A stronger link to business development is needed and is a point being addressed by incubators like ActivSpaces in Buea, the Nailab in Nairobi and MEST in Accra.

-       There is a growing amount of capital looking to engage ventures at an early stage. It might not be enough, as many entrepreneurs are quick to make clear, but certainly the environment is improving. Two panelists had angels. One happened to be from the US and one happened to be Dutch.  Both offering a million USD plus. But we also met local Ghanaian angels investing in early stage ventures here in Accra and we see a growing number of ventures finding early stage support this way. No surprise we see the rise of local angel networks like the Ghana Angel Investor Network (GAIN). A challenge for many entrepreneurs is in developing these contacts and here more could be done to matchmake on a local level. At VC4A we do this via meetups brining the member base together in an informal way that sees lots of business cards exchanging hands.

-       Government does have a role to play. Legislation that helps to protect IP is critical. But also efforts like the Ghana Venture Capital Trust Fund. A facility that has helped Ghana based investors top up their funds. More success stories would give governments the opportunity to bolster these programs and expand them. In Kenya the government has gone so far as to promote the development of Konza, an entire tech city.

-       Tech is different than sectors like housing, education, agro, etc… Where the first subscribes to a culture more attune to Silicon Valley, the other, more traditional sectors, are more often family run businesses. The approaches to building a portfolio are quite different. The business model and exit plan are also adjusted. Taking from revenue might be more attune for a business when run by a family that isn’t actually looking for an eventual acquisition.

-       Average size of ventures on the tech side are still quite small in size. The economics for a pure play early stage tech fund in many cases doesn’t make sense. As a result, some investors have a carve out and allocate a % they can put into early stage technology ventures. Fitting the investments into a larger portfolio can improve a fund’s balance sheet and be more appealing to investors.

-       Costs are high. Traveling in Africa is more expensive than traveling across the US. Hotels are not cheap. Qualified staff are not cheap. Secure power and working infrastrcuture can add to the cost base. These costs stretch what can be facilitated with a traditional  managetment fee.

-       Exits were not a primary concern, although many investors question the point. That said, If you build a business with real scale, there is confidence exit opportunities will emerge. Possibly an exit within the industry as larger funds look to fill their own pipelines with qualified ventures. If you don’t have a long view, and an underlining faith in the market, you probably shouldn’t be involved.

I will look to build on these points moving forward and as always I invite your feedback, thoughts, questions and ideas. Certainly, progress is being made every day and this conference and our time in Accra was testament to that.

Africa’s revolution coming to you on twitter

Africa's revolution in one tweet

If you haven’t seen this yet, here is a great insight into the development of Twitter in Africa. The recent events in Egypt, and across the N.African region, have shown us what coming levels of connectivity can bring about. Youth connected can change the world?

Here were some facts from the Portland report:

· South Africa is the continent’s most active country by volume of geo-located Tweets, with over twice as many Tweets (5,030,226 during Q4 2011) as the next most active Kenya (2,476,800). Nigeria (1,646,212), Egypt (1,214,062) and Morocco (745,620) make up the remainder of the top five most active countries.

· 57% of Tweets from Africa are sent from mobile devices.

· 60% of Africa’s most active Tweeters are aged 20-29.

· Twitter in Africa is widely used for social conversation, with 81% of those polled saying that they mainly used it for communicating with friends.

· Twitter is becoming an important source of information in Africa. 68% of those polled said that they use Twitter to monitor news. 22% use it to search for employment opportunities.

· African Twitter users are active across a range of social media, including Facebook, YouTube, Google+ and LinkedIn.

Read the report in full detail.

VC4Africa and the emergence of an African startup culture

Want to know more about VC4Africa and our work to support starting entrepreneurs? Here is a presentation we recently recorded. I outline some of the recent trends and developments we are witnessing in the space and some of our thinking on how we can do more to support the emergence of an African startup culture.

Time to look beyond ICT4D: New media research in Uganda offers a different perspective

Beyond ICT4D: New Media Research in Uganda is a collection of ethnographic reports from diverse perspectives of those living at the other end of the African ICT pyramid. Crucially, these texts refocus on the so-called “ICT4D” debate away from the standard western lens, which depicts users in the developing world as passive receivers of Western technological development, towards Ugandans whose use and production of technologies entail innovations from the ground up. It is this ‘other’ everyday point of view that is too often missing in the ICT4D debate: valuable voices that put technologies, projects and organizations into their proper context.

Conducted in 2009 by a group of five Masters in New Media (humanities) students from the University of Amsterdam under the supervision of Geert Lovink the research examines both the role and implementation of ICTs in Uganda, covering a wide range of subcultures and projects, including internet cafe usage, print media, NGOs and communities, software subcultures and civic new media. The book argues that now is the time to look beyond the technology layer and instead focus on the social implications and local consequences of digital media’s widespread use. By recognizing the impact that ICTs have on society and identifying what functions currently and what needs to be improved, we can more effectively understand and develop these technologies in the future.

Initiated and introduced by Dutch-Australian media theorist and internet critic Geert Lovink this Theory of Demand publication was produced at the Institute of Network Cultures (HvA).

Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White (yours truly).

Colophon: Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White. Editor: Geert Lovink Copy editing: Cindy Jeffers, Lily Antflick and Morgan Currie. Design: Katja van Stiphout. DTP: Margreet Riphagen. Printer: ‘Print on Demand’.

Publisher: Institute of Network Cultures, Amsterdam 2011. ISBN:
978-90-816021-9-8.

This publication is also available through various print on demand
services.

Download the free pdf.

Fast Moving Targets: Africa as promising investment frontier

Here is an interview I did last week with Fast Moving Targets, a new series dedicated to showcasing innovation in media, technology and communications. They are very much tapping into Amsterdam as a creative media lab and the beginnings of a promising startup culture here in the city. Importantly, they ask the question, ‘what’s going on, what does that mean for whom and how do you actually get new trends and technologies to succeed?’

It’s great to see initiatives like this come online. It adds to The Next Web (many people do not know they are based in Amsterdam) and Hackers and Founders Meetups as important platforms for engaging the community, identifying key developments and highlighting protagonists in the space. Fast Moving Targets is an initiative of ‘The Crowds‘ and hosted by Erwin Blom and Roeland Stekelenburg. They have a great production team and it was nice of Johan Schaap, the founder of Probaton, to make the connection.

The show is filmed live which gives it an interesting character and streamed via the site. They film the chit chat before and after the actual show (so be aware:) and take questions from people watching via Twitter. The show has an interactive and relaxed feel to it. Mostly because of the Palm beer. It was also great practice for my Dutch!:) Here is the description as posted on the site: ‘Ben White van VC4Africa probeert werelden bij elkaar te brengen. Investeerders en ondernemers. Europa en Afrika. Omdat hij ziet hoe groot het talent in laatstgenoemd werelddeel is, omdat hij overtuigd is van het zakenlijk potentieel, maar ook omdat hij een idealist is die van Afrika houdt. VC4Africa gaat over geld, maar nog veel meer over netwerken. Met al duizenden aan boord. Een aflevering van Top Names van Fast Moving Targets.’

The Rise of a Startup Culture in Africa [Video Presentation]

Technology + Entrepreneurs + A vision = Startups in Africa in need of Venture Capital.

This is a one line summary of the presentation I recently gave at the 1% Event in Amsterdam, the Netherlands. In the presentation I talk about the rise of the techprenuer in Africa and the cheetah Generation that is now empowered with the knowledge and tools they need to change the world. This presentation builds on a lot of the ethnographic research I did in Kampala, Uganda and my experiences working on the ICT Entrepreneurship program at Hivos. I also talk about AfriLabs as a network organization connecting technology incubators in Africa and VC4Africa (Venture Capital for Africa) as a platform for crowdsourcing network, information and capital via the web.

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