Invested Investor Thoughts: The true scale of investing in Africa

This month, I spent a few days in Cape Town at the annual angel and early stage investor conference in Cape Town, and this newsletter is about what my co-founder, Alan, and I found. A special thanks to VC4A and ABAN for staging such a great investor summit. Let us know your thoughts by emailing us at

Those who know Africa, may wonder why choose one of the most developed cities on the continent, and that is due to a combination of the availability of flight interconnections and visas.  Despite that, one of the finalists for the startup competition could not leave Ghana in time.  In many cases, attendees travelled from their own capitals via Europe or the Middle East to Cape Town. Over 30 countries were represented, including about half the 57 countries in Africa.

I mention this, as the mismatch between the location of capital and the entrepreneurs is much worse than Europe. 

And although it is clear that there is extensive passion and enthusiasm for building businesses, it is very early days when early stage capital is required.

The first keynote talked not about investment readiness, but investor readiness, that is educating those with capital that buying equity in startups is an option, and the process is finding and helping them.

Simply getting deals done is tough, research by ABAN has found that it often takes over a year for a first deal to get done. Whereas this should reduce to around 3.8 months once an angel group is active. 

Admitting failure is a big taboo, so, of those with external capital, less than 30% fail within the first 5 years, as the founders ensure the companies survive by taking other jobs to provide income (the American “fail fast” is a mantra that will take more than a decade to be adopted, if at all).

I also noticed that a much greater level of product-market fit (ie customers paying and generating profit) happens before equity is sought. Not surprising, as FFF money is scarce and investors require more proof of the entrepreneurs’ ability to execute.

As one would expect from an ecosystem (startups with external equity) that is estimated to be less than 10 years old, exits are few and far between. Dividends are often paid - something I am against, as with a scaling company, cash should be kept in the business to fund growth. I have no evidence, but one would expect that retained cash will scale a business in the same way as equity.

We saw lots of support from the EU, World Bank and Dutch government, which is being used for capacity building and not provide startup equity, which is the correct priority at this point.

Although the founders seem to focus more on creating wealth than solving a problem, many startups have a social outcome.  But there was evidence that founders believe they can scale like Silicon Valley startups, which probably leads to the wrong behaviour.

To conclude, we were incredibly humbled by the friendliness of those we met, the talent pool of investors and entrepreneurs is growing quickly, and some of the companies we heard about will make waves, albeit how global is unknown. 

We will continue to support through the Invested Investor, although not with equity (due to my 90-minute from home rule).

Peter Cowley