Amplifying the Returns of Your Early Stage Investment in Africa.

Read time: 5 minutes

Let me share something really important with you.

Have you heard the saying that opportunities exist where challenges abound?

We live in a time of great opportunities and one of the biggest opportunities available to mankind today is investing in emerging markets like Africa.

Money flows where opportunities are and Africa is proving to be the next big thing. Investors who seize this chance will undoubtedly reap the rewards.

Gone are the days of operating blindly. Today, I will be sharing with you three secrets to amplify the returns of your early stage investment in Africa.

Secret #1: The Power of Proven

Investing in emerging markets offers several advantages especially due to the fact that most of the technological and infrastructural challenges have already been addressed in developed markets.

Success in these emerging markets requires recognizing the right timing, understanding macroeconomic factors, considering cultural differences, and replicating these successful models.

This trend is evident in US and European startups' successful expansion into markets such as China, India, and Latin America, with a similar trend already happening in Africa.

Why is the concept of “Power of proven” all that important?

You will find that a large proportion of the most successful/most funded startups in India are mirror versions of their western counterparts.

Today in India, we have the likes of Byjus which can be likened to Coursera in the US, Paytm which is similar to Paypal and Ola which is the Uber equivalent in India. Interestingly, Byjus, Paytm and Ola are all billion dollar companies like their counterparts in the US.

What about China?

Long considered a global copycat, China is now home to many of the fastest startups to reach a $1 billion valuation globally.

Meituan is China's $100B e-commerce and delivery giant similar to Yelp in the US. Alibaba is China's $800B e-commerce powerhouse similar to Amazon in the US. PinDuoDuo is China's Groupon and also valued at a billion dollars.

Latin America is, most of the time, not a first mover. Compared to tech powerhouses such as the US and China, LatAms innovation pathway has most of the time come from adapting startups that previously worked elsewhere.

Latam’s Nubank (an equivalent of Revolut in Europe) has become one of the world’s largest neobanks. Rappi is Colombia's $10B delivery company similar to Postmates. CornerShop is LatAm's $1B Instacart Counterpart.

Following this playbook, China, India and LatAm have produced several startups and Unicorns that have attracted billions of dollars in funding.

This shows that looking at what has worked before can be a great strategy for success. And Africa is not left behind.

African startups have built million and billion dollar businesses by leveraging similar patterns.

How did we get here and what makes Africa uniquely positioned to succeed?

Secret #2: The African Advantage

Africa offers the last great opportunity for exciting innovation in the world today. There are four pieces of evidence to back it up.

One, Africa has the youngest population in the world, with 70% of sub-Saharan Africa under the age of 30. Such a high number of young people is an opportunity for the continent’s growth – but only if these new generations are fully empowered to realize their best potential.

Two, Africa’s underdeveloped and fast growing markets present important opportunities for business in an environment of slowing global growth.

Three, The African continent has extensive natural resources, a young and increasingly educated workforce, more stability in terms of governance, and more prospects for economic growth than in years past.

Four, Africa has been making steady progress in its digital maturity. Whereas other more established economic areas have been slower to adopt technology such as mobile money, Africa's progress towards adopting these technologies have been so remarkable, in the process leapfrogging several developmental stages.

Noteworthy …

In the last 10 years, Africa has produced remarkable successes emulating successful stories in developed markets. So it is no longer a question of can Africa replicate similar levels of growth and successes that have been recorded in other emerging markets. Africa is already doing it and at a faster pace than witnessed in other emerging markets.

A decade ago, no African startup had attained unicorn status, making Africa's emergence on the spotlight even more intriguing.

And what do these startups have in common with those we have seen in other emerging markets - India, China, LatAm?

They are products of proven business models that have worked in developed markets.

Flutterwave is the Stripe of Africa

Interswitch is the Square of Africa

Jumia is Africa’s Amazon

Opay is Africa’s Revolut

Again, this shows that looking at what has worked before can be a powerful strategy for success.

Investors who are looking for the next big thing after China, India or want to diversify away from the highly competitive and already saturated Silicon Valley, can begin to turn their attention to Africa.

Secret #3 - The Rise of Exits and M&As

I get this question a lot “Are there even exits in Africa?”

How do investors generate returns for their investment in African startups since they are not publicly traded entities?

Just like every other startup ecosystem, African founders understand how important it is to generate returns on investment for their investors. In Africa, we see a lot of these exits happening as acquisitions, while IPOs occur less frequently.

Another reason driving the many acquisitions in Africa is that global companies who have an interest in Africa see acquisition as a way to enter these new markets, or gain access to new talents.

Here are some multi million dollar Exits and M&A deals that have happened in Africa.

• Paystack was acquired by Stripe for 200 million dollars

• Jumia IPOed and raised $196 million

• Visa purchased a minority stake in Interswitch for $200 million,

• Ethomed was acquired by Excellence Health Inc. for $175 million,

• Experian acquired Compuscan and Scoresharp for $263 million,

• Fawry was acquired for $100 million (Fawry later IPOed and raised $22.3 million)

• 2U acquired GetSmarter for $103 million

• Worldremit acquired Sendwave for $500 million

• BioNtech acquired InstaDeep for $600 million

These acquisitions and exits should serve as a wake up call for more investors to consider startup equity as an asset class.

You too can be a part of the next success story in Africa so you do not look back five years from today and say “Oops... I should have invested in these African startups in 2023."

I hope you found this useful!

Cheers,

Eunice Ajim

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