Kinyungu Ventures, a venture advisory firm based in Kenya releases a white paper dubbed, Chasing Outliers: Why Context Matters for Early Stage Investing in Africa, which reveals that there continues to be a wide misalignment between conventional venture capital models vis-à-vis the African market.
The report calls for a widening of approaches to institutional investment on the African continent. Having interacted with 100 Pan-African founders, investors and LPs across 15 African countries, their findings seek to suggest that investors need to prioritize investing structures and practices that reflect the realities of how Africa is unique and operates. One change in approach for them is to adopt more flexible investing structures with longer term outlooks.
Per the paper published, there are incredible mismatches between key characteristics of Silicon Valley VC and African markets, which go to influence how startups and funds manoeuver and what results they expect and in the process, produce.
The fact here is that African markets are large but also fragmented, and its consumers have limited purchasing power. Again, the consumers on the continent are difficult to acquire and keep hold of, yet the sheer size of the African market also presents a real opportunity for profit once the environment is clearly understood.
The key recommendations for funds in the ‘Chasing Outliers: Why Context Matters for Early Stage Investing in Africa’ publication include the following:
- The adoption of more focused investment strategies, like investments in B2B companies or cross-subsidizing a portfolio with little risk and stable return assets
- The need to consider non-unicorn investing models geared at more resilient companies, with returns distributed more widely across the portfolio
- The use of flexible structures like debt or Permanent Capital Vehicles (PCVs) to accommodate market-level changes, where possible.
- Foreign VCs must allow for a longer time horizon to recoup their investments, by understanding that growth could be slow and hard to attain for many startup companies here in Africa.
Kinyungu Ventures is an East African-centric investor which focuses on entrepreneurship in East Africa, especially in angel investing, debt financing, seed funding, impact investing and startups companies.
For his take on the research, MD for Kinyungu Ventures, Tony Chen, who also doubles as co-publisher, mentions that,
“Capital in Africa is scarce and pursuing a ‘growth at all costs’ strategy where capital pools are shallow presents huge risks for companies. We’ve also found that many great businesses don’t fit the typical VC profile, but have tremendous unfulfilled potential.”
The writer and lead researcher of the report, ‘Chasing Outliers; Why Context Matters for Early Stage Investing in Africa’, Tayo Akinyemi reveals that in their numerous conversations with investors and startup founders, it was pretty clear that nuances in variables such as consumer behavior, cultural norms, and business practices impacted startup operations significantly.
She continued that, for VCs to be on the ground with these companies is crucial for success. While the markets available are not always able to provide the expected returns that Silicon Valley typically looks for in high-growth companies, she believes, a more focused strategy could unlock real gems, as has been exhibited by some of the startup successes the continent has seen over the period.
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9 Startups Accepted into the First Next Health Accelerator with $15K Seed Funding
Intrepid Entrepreneurs, a non-profit designed to catalyze the power and promise of young people and women to fundamentally advance their societies, recruited nine startups for the inaugural cohort of the Next Health Accelerator.
Female, African entrepreneurs with a minimum viable product (MVP) from 26 countries applied to the program. After a rigorous review process, nine startups from seven countries were selected to begin the program in March 2021. The investor readiness accelerator is six months long and includes $15,000 seed funding, international mentors and partners, business support services, and value chain access.
The Next Health Accelerator’s focus on sexual and reproductive health is founded on the premise that unmet needs for sexual education, menstrual hygiene management, family planning, medication abortion, and STI diagnosis and treatment will be most sustainably delivered by local African enterprises.
Sexual and Reproductive Health issues directly affect 300 million women and girls on the continent and the productivity of the entire continent. For the continent to prosper and support its burgeoning youth population, it must harness the demographic dividend with access to equitable healthcare and economic opportunities. Next Health Accelerator addresses both.
The 2021 cohort includes:
- Rocket Health: Provides telemedicine and pharmacy services for SRH needs including convenient lab test retrieval and medication delivery in Uganda
- Verifie: Delivers STI self-tests and treatment products via doorstep delivery in Ghana
- Pharmaserve: Specializes in delivering high-quality pharmaceuticals in Nigeria through a fully integrated inventory monitoring system
- Girls Pride: Provides menstrual hygiene management education and skills training to create reusable pads in The Gambia
- Pad-Up Creations: Employs over 100 people in Nigeria to produce single-use, chemical-free pads sold in 16 countries
- Valorigo: Manufacturers single-use sanitary eco-friendly pads made from locally grown bamboo in the Congo
- The Grace Cup: Delivers SRH education and reusable menstrual cups in Kenya
- Kosmotive: Provides SRH information and access to SRH self-care products in Rwanda
- Massira: Delivers SRH information interactively as well as access to SRH services and products through an online community in Ghana
Lindsey Simmonds, the Co-founder of Intrepid Entrepreneurs in a press statement said,
She continued that, development policies made in Washington, D.C. or London need to make room for the power and promise of the youth and women on the African continent. And on this premises, their Next Health Accelerator catalyzes African startups to investor readiness to make scalable, sustainable impact imbued with the commitment and determination that only comes from homegrown ideas.
Visit the intrepidentrepreneurs.org to learn more about the Next Health Accelerator 2021.
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