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5 Things I’ve Learned about “Investing in Africa”

Updated: Apr 6, 2023


I’ve been asked a lot of questions about investing in Africa over the years by international investors. One basic question: where do you even start?

While I’ve been investing on the continent for about 5 years and have a portfolio of ~15 companies, I’d consider myself a beginner. One thing I’ve learned is that the right mindset is more important than any particular skill set. Here are 5 things I’ve started learning to frame the right mindset.

1. Africa is the most diverse continent on the planet It’s true — ethnically, culturally, and linguistically (and scientists say, genetically). And the diversity isn’t just between countries. It is within countries. The 20 most diverse countries in the world are all in Africa. 1/3 of the world’s languages are in Africa. The local nuance, heritage, language, richness, tradition, and culture deserve more of our attention. In the three years we lived in Kenya, I only began to scratch the surface of Kenyan culture and the many sub-cultures within.

So while there may be general themes that cut across many African markets, starting with the idea of “investing in Africa” is actually somewhat problematic based on the drastic variance from one place to the next in terms of ecosystem stage, talent pipeline, cultural strengths/baggage, foreign involvement, governance, and development. Even “just investing in Kenya” has multiple nuances. Context is key.

2. Africa needs the West. But also: the West needs Africa. Africa can learn from the West — both from the successes as well as the failures. American capitalism has wonderful (and terrifying) lessons for all of us. However, we non-Africans can learn from Africa. One thing I fell in love with in Kenya was the value of community, relationships, and authenticity, building trust over time. While I love rugged American independence and the innovation it enables, I loved our Kenyan life living in a communal, interdependent culture. I also learned the value of asking the extra question; truth ain’t always linear, it’s often layered.

As investors from the West, sometimes our drive for efficiency, our need for speed, our desire for blitzscaling prevents us from understanding what is going on under the surface and how trust is built.

The best investors will take the best learnings from both worlds and blend them together in unique, unexpected ways. It won’t be simple copy/paste strategies sprinkled with some local flair. And in order for real blending to happen, investors will have to go beyond just being able to say a few catch-phrases in the local dialect or slang.

3. The Silicon Valley VC model is largely a mismatch to African markets. We’ve just completed one of the most comprehensive qualitative research studies on early-stage investing in Africa. When we peeled back the underlying assumptions for VC to work, we saw clearly that none of those assumptions held true in most ventures anywhere (not just Africa). VC assumes huge markets, high lifetime value of customers, low customer acquisition costs, and readily available capital at every stage. None of that is true in most places in Africa.

I’m not bashing VC, it’s a fantastic tool for a specific situation. It gets blindly applied too broadly. VC is a like a race car. If all we talk about is race cars, pit crews, high-performance polymer wheels, then we’ll miss the other vehicles — the off-roaders, bodas, mini-cars — which are better suited and more resilient in a context not short of potholes and traffic.

4. Most investors working in Africa overestimate what can be done in 5 years, but underestimate what can be done in 15. Okay, we need to have a serious conversation about time horizon. Investors in Africa need to have a long-term view:

(1) Things just take longer. There are more shocks, uncertainties, roadblocks, and regulatory complexity to navigate. I’ve lived through an election cycle, a surprise new regulation, a currency devaluation, and a destroyed crop from extreme weather. And yet, these entrepreneurs are resilient, going to work every day to keep building. The best ones reach the top while so many others have faltered. I’d be honored to go to battle with them any day.

(2) There is research indicating that significant value creation in emerging economies happens in the 2nd decade (when most VC funds have already gone).

(3) I especially think this is true for these next 15 years in Kenya, where the ingredients for a vibrant startup ecosystems are brewing nicely. As Osarumen Osamuyi so aptly stated, “ecosystems develop very slowly, and then all at once.” I think the “all at once” won’t be in 5 years, but also won’t take 15.

5. Invest in Africa*, understanding that many common stereotypes are harmful stereotypes. On the darker side, some dismiss Africa as merely conmen, child soldiers, slums, corruption, and endless poverty. Not the complete picture. On the butterflies-everywhere side, some hype Africa as the land of endless opportunity with countless youth, leapfrogged mobile infrastructure, and a catapulting middle class. Also not complete. The truth incorporates both of those half-truths, leading us to this:

The opportunities for financial return AND human flourishing are abundant in Africa. As we found in our research, Tayo Akinyemi wrote, “A more measured perspective is that significant, profitable opportunities exist despite, and arguably because, of the challenges.”

But it requires looking underneath the surface. Local insight. Deep trust. The hard work of getting to know people and culture. Fresh models. The long-term view.


Originally published at https://kinyungu.com on January 25, 2021.

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