Sherpa Ventures
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Sherpa Ventures

Stories from Sherpa LPs: Alex Scholz

In this series, we sit down with Sherpa LPs to learn more about their background, interest in African tech, and lessons learned from their career.

⛰️ Sherpa: Hey, Alex. It’s great to speak with you. Thanks so much for taking the time to chat with us. Maybe we can start with the first question: what inspires you? Very broadly, what things get you excited to wake up in the morning? What motivates you to do the work that you do?

AS: There are a lot of things that inspire me, including when I know that there are teams and people around me able to get things done. I love it when you can work a little more on that big dream, on that big task, or whatever you have, and get together with people to make sure that everybody can support each other, bring the best, and learn every day. And with this approach, there’s so much opportunity to see new things and work with new people — especially today, all around the world (literally from your desk), which was not possible 20 years ago unless you had very deep pockets.

So, when I’m not diaper changing, my days are typically full of a lot of calls. I currently work for a public company, and we have teams everywhere. So, it’s no longer the case where you’re confined to something small. I think COVID helped us to be comfortable with having a screen on and still being global to a certain extent. In sum, to cut it short, I think I draw motivation from people collaborating with others, getting stuff done, and seeing how everyone can get a little better and grow a little more each day.

⛰️ Sherpa: Yeah, I relate to all of that, and understand how COVID has made it so much easier to work with people across borders and become more comfortable with this Zoom arrangement we find ourselves in.

For the next question, could you tell us more about your background and what led to your interest in business in emerging markets, and Africa, in particular?

AS: My background is the following. So, my dad is German, and my mom is Russian, which already raised me with a little bit of a multicultural tone to it. I spent time growing up in Germany and Russia, and it was there that I started dabbling in music at an early age. I was a DJ in the beginning, and we interacted with a lot of artists/DJs from the US, the UK and France, so I became friends with some while I was 15, 16 and 17. It was the first time I really got out of my comfort zone. Later, I studied music production and music management, but ended up working in IT more accidentally when I moved back to Berlin. There, I worked with our investors growing the business in the US, in Russia and elsewhere, which again exposed me to very different ways of working.

I studied marketing and finance during that time too, and when I was at the end of my studies, I realized that I wanted to do something different but had no idea what to do. And suddenly, a friend of mine was like, “Hey, so you know I work for a company down in Africa and they’re looking for somebody to take over their e-commerce. Don’t you want to do that?” My first reaction was, “Are you crazy?” But then I thought a little bit about it, and literally within a couple of weeks I flipped and thought, “Well, when else would you get the chance to actually work in Africa and get out of your comfort zone.” Basically, I told my family, “Look, I’m leaving in a couple of weeks to go and work there.”

Moving to Africa ended up being the most amazing experience for me. I worked at Ringier for almost two years in Nairobi. Looking back, I’ve had the pleasure to work with different people all around the world, and I think that’s helped me a lot and is basically what drives me today.

Alex in Namibia’s “Death Valley”

Right now, I work for a company with a lot of teams based in India. For me, although it’s a different set up, emerging markets like in India and Africa are in a very similar stage when it comes to companies, when it comes to startups, and when it comes to investment. There is a lot of positive momentum, a lot of great founders, and a lot of great minds tackling very similar problems. Plus — and I think this is where Sherpa comes in — there is also an extended source of financial support for startups right now that didn’t exist 10 years ago, on top of ever-developing infrastructure that makes the whole market very interesting with a lot of velocity that we haven’t seen in the last couple of years.

⛰️ Sherpa: Wonderful. You have such a cool background, and it’s special to hear the story of how your career path wound up in East Africa and led you to where you’re at today. So how did you then get started as an investor in Africa, and what have you learned thus far?

AS: I think that how you get started as an investor always depends a little bit on where you’re coming from, right? If you’re based in the markets there, I think there’s a lot of opportunities to get in touch with founders, meet different companies, and understand a little bit more about your own risk profile. Regardless, though, you could invest in the companies yourself, become an LP, or invest through AngelList into funds where you can de-risk the process a bit and tap into the market without having to be very active.

Investing in emerging market startups is still quite a new thing. You have a lot of young founders who are starting companies for the first time, and as an investor you need to be ready to get involved and help those founders to do whatever you can. I think it’s about more than just a ‘take my money and go run with it’ approach — I think that would not be the smartest approach or the most beneficial for both parties. Instead, you should find where you can help, where you can build together, and support and mentor them to make sure that the time and money you put in is actually valuable.

⛰️ Sherpa: On this topic, too, I would be curious to know how you got involved with Sherpa. What was the backstory of how you joined us as an LP?

AS: With Sherpa, I met a couple of times with Aaron during my time in Africa. Back then it was more like, “Let’s have a coffee and see what we can do.” He was working at Nest back then, so you can see how many years we have known each other. For years we had been in touch, discussed a couple of projects, and thought about how we could invest in the African market. And then he started Sherpa, and I thought that this was the right point to jump in.

Funny enough, Ringier and Uber started to work together in East Africa when Alastair was at Uber back then. So, kind of in parallel, I started to get in touch with both. Then when Aaron told me that he’s starting Sherpa, I was already familiar with them and thought, “Okay, those guys are onto something, they have been in the market, and built businesses down there.” I think that’s what helped me to make a confident decision to support Sherpa.

⛰️ Sherpa: Thanks! It’s cool to hear about how the power of networks have led you to your path to involvement with Sherpa. I think that’s the case for many of our LPs.

AS: Yeah.

⛰️ Sherpa: There are two other related questions that I’d love to pick your brain on. One is: what have you seen in terms of how the world’s perception of opportunities in African tech has changed over the years? From the beginning of when you got involved in East Africa until now: how do you think the global perception of African tech has changed?

AS: I think it’s an interesting and very wide topic. Basically, if you look at where the market was almost 10 years ago now, there were a lot of great ideas but there wasn’t a lot of money. Some of the infrastructure was also missing too. And with infrastructure, I don’t necessarily mean the roads, but more so the understanding of people and how to adapt certain business models. I’ll give you an example. When Rupu [e-commerce brand owned by Ringier] was already years into operations, people would still come to our office just to see if we were actually legit and real before they bought something online. People would remark, “Oh yeah, they’re real people, they have a warehouse, and it’s not just all fake,” and then later customers started to purchase items. So, you need to build that customer trust for tech to flourish. And I think that was in a very rudimentary state before.

Years later, I think we’re at the point where the market has shown that it’s ready for more advanced business models. Number one, there are a lot of hungry people that can deliver within a very difficult environment. I think it’s difficult because when people look at Africa, they see such a big continent, but they don’t realize that it’s over 50 countries with very different cultures and states of development, which makes the market very fractured. Just recently I was talking to a friend that started a company in Tanzania who I’ve known for years, and he said, “Well, I didn’t imagine that even Tanzania and Kenya could be so different because they’re so close.” And I think that’s what a lot of people underestimate.

However, I think people see the big opportunities in the market now that we have also seen more startups from Africa getting bigger exits, which obviously puts the continent on everyone’s radar globally. It makes the news when companies like PayPal and Square invest somewhere in Africa with big tickets, and as a result I think people are getting more excited and want to see how they can get involved.

Alex and his wife in Uganda at the Equator Line

⛰️ Sherpa: That’s very true. Maybe a provocative question stemming from that would be whether you think the hype within the African startup space is too high right now, or if you think it’s not enough?

AS: I think there isn’t enough hype because the opportunities are huge. Unfortunately, I also think that there are pockets in the market where there is a little bit too much hype. Allow me to put the torch on that and highlight it a little bit more.

Generally, in the venture market right now, I feel that we see a lot of inflationary effects. There are a lot of really big tickets, even in Pre-Seed, Seed, Series A, B, and I think that is not necessarily good. This is because — especially with young companies — it’s important that they have the financial support. However, I also think about what is essential in terms of product, in terms of teams, and how they can be more effective with what they have. If you get to raise a $45 million round, great, but then you are not thinking about how to be resourceful with that $45 million — because also, that’s not what your investors want to see, since they want you to spend the money. Yet, at the same time, it also means that you can suddenly hire developers because you have deep pockets — and even there you have inflationary effects on salaries and everything else.

I don’t think that’s necessarily healthy for a young market like Africa. That said, I’m happy that there is money. I really think that there will be business models in Africa, let it be in finance, in health, in the educational sphere, that take models from developed markets, strip them down, make them more useful and easier to consume — because, you know, not everybody has 5G at home in Africa — and that are overall more effective in how they approach and deliver products to people. Ultimately, that will not only help Africa, but other emerging markets as well. Tala, Koa, and many other marketplaces in those three pillars are great examples of business models that probably wouldn’t have worked in developed markets, but now work here and can be used somewhere else. There are a lot of other pockets where African business models can probably excel and be much better than their European counterparts.

⛰️ Sherpa: I think that leads well into my next question. As we’ve seen some companies launch in Africa but then expand their business model outside of the continent more commonly than we had in the past — one example being Andela, but of course there are plenty of others — I’m curious to hear your take on what the opportunity looks like to build in Africa for the world vs. building in the rest of the world for Africa?

AS: I think there is an environmental constraint that will make a lot of companies in Africa be more creative in how they approach certain issues. To give one example, 10 years ago when M-PESA launched in Kenya it was one of the most amazing technological products that I’ve ever seen. I still don’t understand why this product isn’t more widely used beyond East Africa.

⛰️ Sherpa: Yeah, I completely agree.

AS: With that in mind, I think there are products that, as I said earlier, wouldn’t have been created in other markets because there is no need to be that resourceful and creative because of constraints. Let’s take health or finance as another example. In Germany, everybody can get a bank account, but that’s still a huge problem in Africa, India, South America, and in certain areas in the Middle East, such as Afghanistan or Pakistan which are huge markets. I think this is therefore where African founders can leapfrog ahead compared to other companies in developed markets.

Now, I think where developed markets can come in is on the tech stack, the experience, and probably the monetary resources that Africa doesn’t have yet. It’s amazing to see that there are big financial players who are focusing more on Africa. Africa is a very young market, so where can that startup expertise actually be a resource? I think this is where there’s a lot of things that can be done within developed markets to better support African founders.

⛰️ Sherpa: I’m curious to know what sectors you’re most bullish on within the early-stage space on the continent?

AS: While there are probably a lot of fun business models, there are still very basic areas where problems need to be solved. Again, I think it remains finance, health, and education. And I think with education, on the one hand it’s about how we can educate people in areas that don’t necessarily have access to schools and high speed internet. Yet, at the same time, how do we continue to develop adults who 10–15 years ago couldn’t get real education, couldn’t go to school, etc. Right now, I think there’s a lot of focus on children, but there is a much bigger group of adults that ultimately needs to be supported as well. I’m keen to see what will be coming up within that sector.

Alex at Table Mountain in Cape Town, South Africa

I think that goes hand in hand with health and access to finance, too. And I’m not talking about access to finance to build that next billion-dollar startup, but just access to finance to support your family and your farm, your shop or whatever. So, this is where I think we’ll continue to see a lot of interesting products, be it from bigger solar stations to power your house, easier access to the internet, or just more options to have access to money. This is where I think we will still see a lot of progress and developments in the web3 space look very promising.

⛰️ Sherpa: Yeah, I completely agree. I think there’s so much opportunity, especially in those other sectors. I see the fintech space serving as the base infrastructural layer, like what you mentioned. I think it’s kind of a linchpin to enable a lot of other sectors to grow and develop on their own. Every business model — regardless of the sector — will require payments and other features, and therefore nearly every startup in Africa will need to be a fintech to operate successfully.

AS: Yep, you’re right. I think that’s a very valid point. When I was in Africa, e-commerce was handling cash all the time, right? It was basically about building your own logistics because there was nothing that you could rely on. Now by giving people access to finance to grow their business, you are ultimately growing your total addressable market for other business models on top of that.

If you look at the numbers from 2014 to 2016 compared to today, there are many more people who can now afford to shop online because they have the money, the education, technological access. This is partially because they were able to grow their business and buy that new phone — which, back then, was maybe a larger fraction of their earnings. So, if we can fix these problems and get more people onto a different economic level then we can build other business models on top of that. Let’s make sure that we spend the resources wisely.

⛰️ Sherpa: Absolutely, I appreciate all the insight. For those looking to start investing in Africa, what kind of advice would you have for someone who doesn’t have as much familiarity?

AS: To be honest, the best way to be involved is to actually be in the market. There’s only so much you can read when you’re not there. Even if it means spending a couple of months in whatever target country you want to work in, it will give you a much better experience than reading any books or articles on Quartz, New York Times, or Bloomberg would give you. That’s number one. Number two — and this is something that I value with every founder or operator who wants to run a business rather than just invest — build a product, think about what you want to solve, go down, and figure out if the problem statement that you had is true, and if not try to tweak it. Don’t stick to what you had in mind and be able to say instead, “Okay good, I was wrong with A, B, and C, but maybe D, E, F, and G were right, so let’s tweak A, B and C.”

Number three is to build the things that are essential. There are a lot of companies who want to do fancy stuff that maybe just half the people actually need. To mitigate that, be very close to the market, cut everything that you don’t need, and build something that is truly useful and easy to use. Later, you can add all the bells and whistles to make it nice and shiny. It’s something that will save you a lot of time down the road.

⛰️ Sherpa: Awesome, thank you so much Alex. I’m very glad we got the chance to speak. I think there’s a lot of interesting insights that we captured in this conversation that people would love to read.

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Jordan Wolken

Jordan Wolken

Sherpa Ventures | Bridges for Enterprise | Empowering startups in emerging markets