VENTURE CAPITAL AS NEW LIFELINE FOR AFRICAN TECH STARTUPS

In the past 10 years, venture capital has played a major role in the development of the African tech ecosystem, breaking the age-long jinx of poor access to funding.

Access to capital has long been regarded as one of the most significant challenges facing entrepreneurs across Africa. The challenge is even more acute for tech startups, which are typically light on physical assets and cannot easily access capital from traditional sources like government grants and bank loans. However, tech businesses are also high-growth and can deliver significant upside when they succeed. As a result, early investors in tech startups can sometimes get mouth-watering returns on investment.

The combination of poor funding for African tech businesses and the risk appetite of venture capitalists have made the African tech ecosystem a near-perfect marriage for both. Venture capitalists, after all, pride themselves on backing early-stage businesses with high-growth potential despite the associated risks.

Speaking at Startup Grind’s Global Conference in February 2021, Maya Morgan Famodu and Blessing Abeng, two protagonists in the African Venture Capital and tech ecosystems, shed some light on how both ecosystems have shaped one another. In a sense, Famodu’s story is symbolic of the symbiotic growth between Africa’s tech and venture capital ecosystems. Born to a Nigerian father and an American mother, Famodu grew up in rural Minnesota, inspired by the grit of African entrepreneurs around her.

However, tech businesses are also high-growth and can deliver significant upside when they succeed. As a result, early investors in tech startups can sometimes get mouth-watering returns on investment.

Growing up, she realised the gap in funding for African entrepreneurs and set out to tackle it by pursuing a career in VC in 2014.

 

“When I had this idea to launch the fund, I started going door-to-door and reaching out to people, and VC Funds on LinkedIn, Twitter, in Silicon Valley, and across the US,” Famodu said during the conversation with Abeng.

By 2017 when Ingressive Capital launched with a $10 million fund, tech on the continent was just taking off. That year, venture capital investments on the continent totaled $560 million, according to Partech, with 124 startups participating in 128 funding rounds. Ingressive Capital went on to invest in some of the most successful companies out of that era, which exited to Stripe for $200 million in 2020.

However, since 2017, funding on the continent has increased by nearly 100 per cent year-on-year, resulting in a record total investment of $2.7 billion as of Q3 2021. Over that period of four years, Ingressive Capital has had a huge role in backing startups with over 30 plus investments so far.

Read more at: https://guardian.ng/business-services/venture-capital-as-new-lifeline-for-african-tech-startups/

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