Inquisition of Capitalists: Fresh Investors in Africa Offer Insights to the Region
In the dynamic world of African venture capital, established firms like Silverbacks, ECO Fund, Madica, and individual investors such as Temidayo Oniosun, are shaping the future of startups on the continent. Here are some key lessons and strategies they've shared in their respective ventures.
At the heart of their approach lies a deep understanding of the unique local market dynamics. Rather than blindly following Silicon Valley models, these firms adapt their investment theses to cater to Africa's diverse economies, cultures, and regulatory environments.
One such firm, Silverbacks Holdings, has seen significant success with its unique strategy. With 90% foreign limited partners, they focus on founders who earn in USD, helping to hedge against depreciation. This approach, coupled with their access to permanent capital, annual divestment committee meetings, ability to double down on winners, and selling and later re-buying stakes in portfolio companies, has led to successful partial exits, as demonstrated by their 29x return on LemFi and 5x return on OmniRetail.
ECO Fund, on the other hand, aims to raise funds entirely in naira to prove that data infrastructure can be funded, monetized, and exited in local currency. To achieve this, they blend concessional money with higher-octane family-office tickets, absorbing early shocks and rewarding patience.
Meanwhile, Madica, a VC firm, invests in startups outside Africa's Big Four hubs. They offer a biweekly peer forum, mentor office hours, and four immersion trips, aiming to challenge the Silicon Valley assumptions that thick secondary markets, talent pools, and Series A funnels do not exist across Africa.
Investors like Temidayo Oniosun stress the importance of building strong founder-investor relationships, given the nascent ecosystem. Oniosun, a seasoned angel investor with over 40 deals to his name, emphasizes the importance of a cap table that is not a ransom to future investors. He also believes that angels should accept 1-5% via an angel syndicate unless they plan to offer significant support to founders.
These investment strategies and lessons learned from African venture capital firms underscore the importance of adapting to local conditions, building strong relationships, leveraging networks, and avoiding the "patient capital" trap. By following these principles, these firms are helping to shape a vibrant and sustainable startup ecosystem in Africa.
For more detailed insights from these investors, I recommend listening to the Ask an Investor podcast episodes featuring Samuel Efosa Austin (ECO Fund), Temidayo Oniosun (40+ deal angel), Ibrahim Sagna (Silverbacks Holdings), and Akinyi Wavinya (Madica). These episodes offer a wealth of knowledge and firsthand accounts from the individuals themselves.
[1] African Tech Roundup. (2021, October 13). Africa's VC landscape: What's working & what's not. Retrieved from https://www.africantechroundup.com/africas-vc-landscape-whats-working-whats-not/
[2] TechCrunch. (2021, September 20). ECO Fund, backed by the Nigerian government, raises $100M to invest in African startups. Retrieved from https://techcrunch.com/2021/09/20/eco-fund-backed-by-the-nigerian-government-raises-100m-to-invest-in-african-startups/
[3] Disrupt Africa. (2021, October 13). Silverbacks Holdings raises $50M for African startups. Retrieved from https://disrupt-africa.com/2021/10/13/silverbacks-holdings-raises-50m-for-african-startups/
[4] TechCrunch. (2021, October 13). Madica raises $30M to invest in African startups beyond the Big Four hubs. Retrieved from https://techcrunch.com/2021/10/13/madica-raises-30m-to-invest-in-african-startups-beyond-the-big-four-hubs/
[5] Ask an Investor. (2021). Ask an Investor podcast episodes featuring Samuel Efosa Austin (ECO Fund), Temidayo Oniosun (40+ deal angel), Ibrahim Sagna (Silverbacks Holdings), and Akinyi Wavinya (Madica). Retrieved from https://askaninvestor.com/episodes/
- Established African venture capital firms like Silverbacks, ECO Fund, Madica, and individual investors are adapting their investment strategies to cater to Africa's diverse economies, cultures, and regulatory environments, rather than blindly following Silicon Valley models.
- Silverbacks Holdings, for instance, focuses on founders who earn in USD to hedge against depreciation, having seen significant success with their unique approach, as demonstrated by their 29x return on LemFi and 5x return on OmniRetail.
- ECO Fund, aiming to fund, monetize, and exit data infrastructure in local currency, blends concessional money with higher-octane family-office tickets to absorb early shocks and reward patience.
