2 Things Foreign Investors look for in African Businesses
Whenever the topic of investing in Africa comes up, there are two things that must be understood as truths.
- African businesses desire foreign investment
- Foreign investors desire to invest in Africa.
The first point is obvious, but the second generally does not seem believable from the African context.
In my early years I was in tech: I schooled at MIT and I worked at Facebook as an engineer. And the past few years, I’ve been at the intersection of investment and business in Africa.
As a Nigerian based in America, I’ve been able to observe both sides. Connecting with businesses from my home country seeking financing and interacting with foreign investors very interested in deploying capital Africa.
In my business Releaf, we often received requests from foreign investors desiring to connect with high potential businesses in Africa that we’ve worked with. So we’ve been able to meet, connect with, and befriend hundreds of investors interested in Africa.
Since we started working with African businesses, a large portion of businesses have repeatedly asked us how they can better attract foreign investment. 2 months ago, we decided to survey investors in our network on behalf of the businesses.
Now I will share the findings from that survey and provide some context around the results.
What does it take for an African business to get a foreign investment?
We understood that the investors we were polling were interested in or already investing in Africa. So we first wanted to ask what were the greatest barriers that were preventing this.
Though corruption and economic volatility are factors that affect an investor’s decision, these are generally not in an individual business’s control.
What is very interesting is that 55% of investors indicated their highest barrier was lack of information from the businesses and 40% cited lack of knowledge on opportunities in general. Provision of information is certainly something that a business has the ability to control.
Once it's clear that information is a major hurdle, the next question is what kind of information?
We found that the two most important things for an investor interested in Africa are the management team’s execution ability and traction/growth plan.
1. Management Team’s Execution Ability
90% of investors are most concerned with the management team’s background. They like to see the leadership’s educational background and previous employment experiences. They like to see distinguishments that set individuals apart as impressive. But, they most importantly want to see proof of a person’s ability to execute.
Investors should know about the most impressive thing you have ever done. Aside from business or academics, Investors want to know, that you are relentless and scrappy to accomplish whatever you set your mind to.
2. Traction/Growth Plan.
The first thing that you need to do make sure you clearly explain what your company is building in a simple and concise way. The moment you start using buzz words and sending very long executive proposals, investors are overloaded with too much content and absorb little information.
Investors must first understand the business, then they want to understand what current growth looks like. Show that your customers are increasing over time. Mention that you recently landed a crucial partnership. Don’t just describe the processing facility you want to build, demonstrate a proof of concept of its impact.
After seeing traction, an investor wants to see defensibility and a company’s growth potential. The secret sauce might be relationships, it could be a key insight and moving so fast that no one can catch up. But investors want to understand the unique qualities and vision that will allow you to become a big company.
Here’s an example of a company’s profile we designed for a Nigerian agri-business called Moju Industries. We optimized for their management team and business model.
Where Do I Begin?
Releaf serves as Africa’s largest business network with contacts to over 57,000 businesses across the continent. Unlike other business groups, we focus on addressing the most critical challenge of each business that enters the network.
We’ve helped hundreds of businesses frame their businesses and team’s experience in ways that are clear and appealing to foreign investors and African businesses alike.
If you found this useful or would like support in building a profile like the one above: