Venture capital investment in Africa remains in its infancy, with most firms yet to surpass a decade of operation-a milestone crucial for evaluating portfolio outcomes and returns to limited partners. Given the nascent stage of this sector, definitive principles are still emerging.
However, after five installments of this series, distinct insights have crystallized. Investment capital in Africa truly flourishes only when paired with three critical elements: robust operational capabilities, profound local market understanding, and a strategic approach to liquidity. Absent these, even the most well-meaning investments often fail to generate enduring impact.
This summary draws from conversations with diverse players: GB Ventures, the corporate venture arm of one of Egypt’s largest conglomerates; Mstudio, a venture studio adapting Anglophone African business models for Francophone West Africa; Accion Ventures, a global early-stage fintech investor focused on financial inclusion; Ventures Platform, a decade-old pan-African seed fund reflecting on exits and indigenous capital; and Consonance, a research-driven firm blending equity, venture building, and debt financing.
Insight 1: Combining capital with operational expertise outperforms capital alone
All featured investors emphasize the importance of coupling funding with hands-on operational support. GB Ventures embeds startups within its extensive mobility and financial services ecosystem, securing board representation and facilitating three-month pilot programs within its business units. This approach grants startups access to distribution channels, revenue opportunities, and credibility that would otherwise be unattainable.
Mstudio takes this further by investing €500,000 (approximately $588,000) in services alongside €250,000 ($294,000) in cash, supported by a dedicated 14-person team that guides startups through a comprehensive 100-step venture-building framework, continuously refining their knowledge base.
Accion Ventures deploys seasoned operators to assist portfolio companies with pricing strategies, credit policies, customer segmentation, and market entry tactics. Ventures Platform prioritizes hiring former operators to provide founders with direct mentorship on strategy, sales, partnerships, and organizational culture. Meanwhile, Consonance institutionalizes post-investment support and complements equity with debt instruments, enabling companies to fund working capital without diluting ownership.
These varied methodologies underscore a shared reality: the risk of poor execution is so significant that capital alone rarely suffices. Without active involvement in building startups, many early-stage African VCs risk their investments faltering. While funding is essential, the accompanying operational support is often the decisive factor.
Insight 2: Replicating models without adaptation often fails; localization is key to success
Mstudio’s most instructive experience involves a failed venture, Tuzo, which was modeled after Nigeria’s Bumpa. Although it delivered the right features to the target audience, its revenue model collapsed. The subscription billing system relied on card payments and automated debits, which are neither culturally accepted nor technically viable in Francophone West Africa, where mobile money dominates. The challenge was not user acquisition but monetization. This failure now informs Mstudio’s rigorous process, which mandates paid traction during a three-month Entrepreneur-in-Residence phase before proceeding.
Similarly, GB Ventures concentrates its investments within Egypt, leveraging a familiar legal and commercial environment to develop a corporate venture capital blueprint. It then conducts small pilot investments in other countries to gather insights before scaling operations.
Ventures Platform applies a fundamental analysis to Francophone West Africa, assessing currency stability, regional integration (conceptualized as “lakes and oceans”), and the ecosystem’s capacity to generate venture returns. Accion maintains local teams in each key market to ensure its global investment thesis remains grounded in regional realities.
Insight 3: Plan the exit strategy before making the investment
For all these firms, liquidity considerations are integral from the outset. Ventures Platform regards secondary sales as vital to returning capital and has successfully utilized them alongside strategic acquisitions-such as Paystack and CrowdForce-to exit four of its six investment cohorts. Accion also prioritizes exit planning at the time of investment, with recent exits like Apollo Agriculture, Lula, and Pula achieved through secondaries and acquisitions rather than public offerings.
Combining these approaches yields a pragmatic liquidity framework for Africa: design multiple exit routes, anticipate that secondary transactions will play a significant role, and align investment instruments with business models to realize returns well before the elusive IPO window opens.
Insight 4: Corporate venture capital is evolving from a luxury to a necessity
Nada Shaheen presents a compelling case: African corporates that overlook startups risk obsolescence. GB Ventures exemplifies this shift by investing in sectors where it can leverage the parent company’s strengths-logistics, fintech, mobility-and integrating portfolio companies as vendors, partners, or brand ambassadors. For instance, a failed internal e-commerce initiative for spare parts was replaced by an investment in a portfolio company that now manages GB Corp’s online sales channel, supported by group financing to scale operations.
Across other cases, corporations are not only fallback acquirers but also key customers, distribution partners, and increasingly, sources of capital. Ventures Platform anticipates a rise in local acquisitions as market valuations stabilize, while Consonance advocates for policies encouraging corporate investment in startups.
Insight 5: Geographic diversification is a strategic tool, not a status symbol
GB Ventures begins by building expertise and board cohesion in Egypt before making smaller investments in other countries to validate assumptions. Mstudio exists precisely because Francophone West Africa is underserved yet sufficiently integrated to enable cross-border scaling once a foothold is established.
Ventures Platform formalizes this perspective by viewing individual Francophone markets as “lakes” that collectively form a regional “ocean” due to shared language, currency (CFA franc), and regulatory frameworks. The relative currency stability in this region also offers a counterbalance to the volatility of the Nigerian naira. Accion maintains a broad global footprint-including Africa, Latin America, South and Southeast Asia, and the US-to mitigate risks from single markets and facilitate the transfer of insights across regions.
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