2020 Africa Early Investor Summit — Day 1 Recap
Tuesday, November 3 kicked off day 1 of the two-day 2020 Africa Early Investor Summit, co-hosted by the African Business Angels Network (ABAN) and VC4A, which brought together hundreds of investors from across the African continent and the rest of the world to discuss the investment landscape of Africa. The event was open only to self-identified investors who registered with VC4A in advance (though it may still be possible to register for Day 2 here). If you missed the event, here’s a quick recap of some of the highlights from the day:
Early-Stage Investments in Africa are STRONG and Growing Stronger
Serial angel entrepreneur and ABAN founder Tomi Davies kicked off the summit with opening remarks where he made clear that investments in early-stage startups in Africa are on the rise, from less than $300 million in investments in 2015 to more than $750 million so far in 2020 (with additional reports that funding raised so far this year is well over $800 million).
Following this, Rebecca Enonchong (serial entrepreneur and AfriLabs Board Chair) and McKinsey’s Africa Chairman, Acha Leke delved deeper to discuss the current startup/investment landscape in Africa. Among the key takeaways from the conversation is that with the fastest growing population and the largest youth population, the African market cannot be ignored.
To that end, the question then became what tools are needed to ensure the continent’s ability to take advantage of the growing investment opportunities. Enonchong and Leke emphasized the need to encourage more local early-stage investors to take the risk and invest in African startups. They also discussed the need for continued digitization across the continent in order to better facilitate cross-border collaboration among startups/investors.
How do You Value an African Startup?
In the first technical session of the day, Tomi Davies moderated a conversation between angel investors Gerrard Olisa-Ashar and Sewu-Steve Taiwa centered on the techniques they employed to determine the valuation of an African startup. Olisa-Ashar eschewed the traditional Silicon Valley approach which generally employs the “scorecard evaluation” method, instead opting for his own “camel approach.” He described his method as looking for camels, rather than horses/zebras, that “can see through opportunities in the most risky of environments and get you that reward, like a camel does.” Digging down into the numbers, Olisa-Ashar generally looks for startup valuation at roughly 2x-4x the amount the startup is seeking to raise, with a solid plan to get from the current valuation to 10x value in a set timeline.
On the topic of evaluating startups across the continent, both Olisa-Ashar and Taiwa agreed that one has to adjust their valuation method depending on the startup’s location. A startup in francophone west Africa will face different cultural hurdles compared to a startup in francophone central Africa, though the startups in both regions will share the benefit of a common legal system, which can’t be said for startups in other countries. Similarly, a fintech startup in Nigeria is going to be valued differently than the same fintech startup in Uganda because of the different regulatory hurdles as well as the differences in potential revenue and so forth.
Both panelists also agreed that when they calculate for potential exits, though they lauded Stripe’s acquisition of Paystack, they largely plan forAfrica-Africa exits, rather than acquisitions led by non-African entities. Olisa-Ashar in particular explained that as an angel investor, he tries to determine which local (Africa-based) venture capital funds are likely to get into the deal and to what degree will those VC funds be able to help build the startup.
On a closing note, Taiwa addressed the issue of there being typically a 30% valuation discount when investors value an African company as compared to its western counterpart. Taiwa explained that such discounts are largely based on a combination of both accounting for the legal risks that foreign investors may face as well as a psychological barrier to accepting African startups as being on par with non-African startups.
Scaling African Innovations
Later in the afternoon, panelists discussed what it takes to scale African startups. The panelists (Brett Commaille — Hlayisani Capital; Tarek El Kady — Alex Angels & MED Angels; Tim Harris — Wesgro) led by moderator Hannah Subayi Kamuanga (Dazzle Angels) emphasized the need to present a holistic African story to investors, making sure to include both north Africa and sub-Saharan Africa. Commaille advised founders to be wary of angel investors who take too much ownership of the company, eventually pushing the founders off of their own cap table. Instead, founders (and angel investors) should ensure that a company’s valuation takes into account future funding rounds and subsequent valuations.
Turning to a discussion of Covid’s impact on startups, Harris and El Kady doubled down on the notion that times of difficulties such as these are where entrepreneurs thrive. Harris noted that the global shift to “work-from-home” helps to validate founders seeking to convince investors that location is not a barrier to the startup’s success.
Seed Stage Pitch Showcase
In between sessions, a total of ten startups pitched attendees for seed stage funding. You can find the list of startups below:
GoBeba (Kenya) — GoBEBA is a consumer goods distribution company helping consumers access cooking gas conveniently and affordably.
The Medical Concierge Group (Uganda)— TMCG through its consumer brand name, Rocket Health (RH), delivers Telemedicine and last mile health services in East Africa.
TIBU Health (Kenya) — Leverages healthtech logistics platform to facilitate access to a curated set of healthcare services at a time and location of a patient’s choosing.
Interact (Egypt) — Produces Tact, adevice that transforms any huge monitor into a fast and accurate interactive surface for collaboration.
Foodlocker Limited (Nigeria) — Supplies farm produce and consumer goods to large buyers by using data science and demand-matching technologies to optimize the yields of smallholder farmers and to prevent side-selling.
Akiba Digital (South Africa) — Helps businesses monetise their data through the power of predictive insights and alternative scoring.
Hypernova Space Technologies (South Africa) — Building a breakthrough propulsion system for small satellites.
Appruve (Ghana) — Financial services use Appruve API to verify data they collect from their customers across their lifecycle
Utiva (Nigeria) — Its product, “Nucleus” is an encrypted device that comes pre-installed with more than 40 premium digital tech skills training program contents, designed to help Africans learn tech skills with less or zero reliance on the internet
LetMeIn.to (South Africa) — Meets people on the chat apps they use most, effortlessly walking them though any pre-access onboarding or compliance processes, and finally delivering them a digital and encrypted QR enabled access badge.
Follow the #AESIS2020 Hashtag For More
The above is just a summary of a few of the sessions. There were several other fascinating sessions, including strategies for conducting remote due diligence, discussing startup infrastructure from an investor perspective, and a beautiful wrap-up from the hosts of The Flip podcast.
If you are looking for additional highlights, be sure to follow @LailaMacharia (angel investor), @CatherineHYoung (entrepreneur) on Twitter, as well as the co-hosts (@ABANAngels and @VC4Africa) for excellent play by play quotes/summaries from throughout the day:
Written by:
Peter Egziabher — Innovation — Enterprise — Africa. X-Googler, Harvard grad, Thinker, Builder. I work to disrupt and change.
Ajani Husbands — Founder — Blacklight Africa | former diplomat, currently full-time lawyer | passionate about investing in African startups.
