How Do You Make Money When You Invest In African Tech Companies

Read time: 3 minutes.

Welcome to The Eunice Ajim Newsletter, a weekly newsletter that provides actionable ideas to help you invest in Africa, scale your startup, and live a prosperous life.

I want to warmly greet the 16 new members who joined us last week! If you still need to, please sign up to join our community of over 8,000 African funders, founders, and friends.

Everyone talks about investing in tech startups, but no one tells you how you actually make money.

Here are 5 exit strategies to make money when backing the next tech unicorn:

1. IPO

This is when a company goes public and sells shares on the stock market. An IPO can take years. Be patient.

• If you invested early, you can sell shares for a large profit.

• If the company is successful, you could earn a 10x, 100x, or 1000x return on your investment.

2. Acquisition by a larger company

Big companies like Facebook, Google, or Amazon will often acquire smaller startups.

• When that happens, early investors can sell their shares for a profit.

• This is a quicker way to make money, but the return won't be as high as an IPO.

3. Secondary markets

If you invested in a startup but need to sell your stake, secondary markets are a way to cash out early.

• They’re private exchanges that provide liquidity to investors.

• The downside is that these exchanges tend to have a limited number of buyers.

4. Buyback

Sometimes, a startup will buy back shares from early investors.

• They do this to regain ownership and control of their company.

• The price they offer for your shares will vary, but it could still be a profitable exit strategy.

5. Dividends

Dividends are payments made by a company to its shareholders from its profits.

• Not all companies pay dividends.

• However, if a company is profitable enough to pay dividends, it can be a reliable way to make money over time.

Investing in tech startups is a high-risk, high-reward game. But with the right strategy, patience, and luck, you could potentially make life-changing returns.

I obviously made a video on how to make money when investing in startups specifically for the African context.

Let’s take a look at the podcast episodes:

How Do You Make Money When You Invest In African Tech Companies

Investing in tech startups in Africa is a long-term game, with returns typically expected within seven to ten years. There are three main ways to make money when investing in tech startups: through secondary sales, mergers and acquisitions, and initial public offerings (IPOs). Secondary sales involve selling equity to a bigger investor at a higher valuation. Mergers and acquisitions allow bigger organizations to acquire smaller companies to gain market presence. IPOs can be challenging, especially without a strong customer base and when hedge fund traders bet against the stock. Despite not yet seeing returns, the African tech startup market shows promising growth.

Highlights

• Investing in Startups: A Long-Term Game

• Ways to Make Money When Investing in Tech Startups

• Secondary Sales: Cashing Out on Increased Valuations

• Mergers and Acquisitions: Easier Market Entry

• IPOs: Challenges and Considerations

• Returns on Investment: Current Portfolio Status

• Promising Growth in African Tech Startups

If you enjoy the podcast episode, please consider subscribing, liking, and sharing them with your network. You never know who might find this information helpful. 

That’s it!

See you next Wednesday.

I'd love to hear from you:

What are your thoughts on the podcast episode?

Tweet at me @euniceajim or reply to this email and I'll do my best to get back to everyone.

Whenever you're ready, there are 3 ways I can help you:

1. Join the Fund: Ajim Capital is a pre-seed/seed fund investing in high-growth tech companies in Africa.

2. Book a Call: I offer 1-on-1 consulting for entrepreneurs and investors seeking business advice.

3. Sponsorship: Promote your brand to 8,000+ subscribers by sponsoring this newsletter.