Championing African tech: Investment lead
@AccionVLab
. Writer of Startup Definition Sunday. Follow for daily tips and insights for Africa’s next-gen founders.
Today is my 30th birthday.
So, I built a small gift for founders.
But first, a bit of context
(skip to the second-to-last tweet, if you're in a hurry):
Two weeks ago,
@McKinsey
released their Fintech in Africa report.
If you are an early stage fintech founder, you don't have to read it - I already did that for you
All you need to know are these 6 deadsimple characteristics to stay ahead of the pack:
Cold email to VC template:
“Hi [name], I noticed you invest in [industry] with your recent stake in [company]. What is the best way to pitch [name of VC firm] and get on your radar? We are launching our [fundraise stage] round.
I appreciate the support.
Best,"
Two
@Ashesi
engineering graduates (both Ghanaian women) were laid off from Goldman Sachs London in the recent layoffs.
According to UK visa rules, they have 60 days to get a new job.
A long shot but anyone have leads on jobs in the UK?
It’d be much appreciated 🙏🏿
I am very glad we’ve come together as a people to remind
@paulg
he can’t mold the world into his image because his vocabulary is limited.
The world is not Silicon Valley.
Mr. AI Tech investor and writer of words - do better. Maybe read more non-American writers?
Africa is the world’s only continent where women entrepreneurs outnumber men
But
Of the $5.2 billion which went into African startups in 2021, about 93% went to male-founded startups.
DM me if:
• you are building a woman-led / co-founded African startup: I write small personal checks
• you are building an inclusive fintech startup in Africa: the solution can't be solving rich people problems
• you just have a question: I never have too many friends
A decade ago, VCs used to be white guys sitting in a room in Sand Hill Road.
Today, a VC looks like me sitting in my apartment in Accra.
This phenomenon is known as VC unbundling.
If you are a founder, this is a good thing for you. Here's why.
@paulg
😂😂😂
I don’t need to be at the peak of intelligence to know you & your ilk are what’s wrong with the world.
Loud, wrong & white.
Enjoy the view from the peak of wit.
May you not fall & hit your head next time you see the word “delve”
Calculating the funding your startup needs is both a science & an art.
For first-time founders, it can be difficult to reach the right number.
But, there's a calculator that can make it easier ↓
I am bullish on the future of Africa.
But, here's the truth:
African consumers & MSMEs' purchasing power is a lot less than we think.
GDP per capita in Africa is less than Europe & N. America (23x & 43x)
How can founders build businesses investors want to back? ↓
New week, new job, new bio update.
Four years ago I was unemployed and couldn't afford my rent in NYC, today I start
@AccionVLab
as the Africa Investment Lead.
As the old hymn goes, "To God be the glory, great things he has done".
I keep saying that African founders & investors need to write & publish more.
If we don’t publish our thoughts, we’re at the mercy of a world shaped by others' ideas.
Even if you use AI to refine your writing.
Even if you use “delve”.
Our words matter.
Publish.
I am bullish on the future of Africa.
But, we cannot ignore the elephant in the room:
The African consumer's purchasing power is a lot less than we think.
GDP per capita in Africa is 23x less than Europe & 42x less than North America.
Why will your customer be loyal to you?
Investing in Africa is a paradox.
Yes, the population is young & innovation leapfrogs here.
But also yes, the purchasing power isn't high & unemployment is high.
So what will the African consumer pay for?
solution that increases revenue AND increases employment potential.
Many founders are in the dark about milestones for early stage funding.
If you're one of them, fear not.
Here's what you need to know:
1. Pre-seed: Strong team, clear GTM, MVP, & early traction
2. Seed: Traction & PMF
3. Post-seed: Scale, customer acquisition & retention
Angel investors are the invisible middle between launching a startup & raising your first institutional round.
But, many founders skip angel investors in favor of VC funds.
If you don't know where to start to find them, begin here ↓
4 years ago, I was unemployed, depressed in NYC and moving to a new country where I knew no one.
Today, I get to back some of the best founders building the future of Africa AND
use my writing to interact with new & old friends on this app.
Grateful for every founder & friend
The quiet part of Africa tech investing no one talks about is how many people are building exactly the same thing.
As VC money competes with high treasury rates, marginal differences in differentiation won't cut it anymore.
We need more founders building unique solutions.
I am in Lagos this week for
@StartupLagos
.
If you are a fintech founder from pre-seed to pre-A, I would love to meet on Friday.
Reply with a one-liner of what you are building & a website, if you have one already.
I will DM founders to schedule a meet up - coffee on me.
Everything I learned about empathy for the founder journey, I learned watching my dad be a serial entrepreneur.
Spending the morning as a witness for my dad receiving a Covid response grant for his molecular lab is the best way to start the week.
90% of transactions in Africa are in cash.
Most POS solutions are not actually solving this problem.
Who is building the next real differentiated payment solution in Africa?
An average investor call lasts just 30 mins.
Don't waste precious time reading through your pitch.
Instead, use the TTM framework:
• Today: Paint a picture of the current world
• Tomorrow: Show how we can change it
• Metrics: Our undeniable proof
Startups are great.
I talk about them all the time.
But, we all know the truth:
the African economy is powered by SMEs.
You don't have to build a VC-backed business in order to be a founder.
🇺🇸 GDP per capita: $70K
🇬🇧 GDP per capita: $70K
🇳🇬 GDP per capita: $2.1K
🇰🇪 GDP per capita: $2.1K
🇪🇬 GDP per capita: $3.7K
🇿🇦 GDP per capita: $7.1K
Show this tweet to the next investor that says your Africa startup should be $100M in ARR in 5 years.
The point of a startup was never to raise funds.
The point is to create cash flows from innovation.
2023 will (once again) be the year for the founders focused on positive unit economics from the start.
Tomorrow is Day 1 of Africa Tech Summit in Nairobi.
For first-time founders who couldn't afford tickets, here's a tip:
people hang out in the food court outside.
Put on your startup shirt & come meet people.
PS if you see a bald guy in a hoop earring & Kaftan, come say hi.
African startups forget this one lever to scale:
Storytelling.
The story that team members, customers & investors buy into can be one of the most productive levers to scale.
Andela did this well in the early days.
Which African startups today are telling a compelling story?
I wish more African founders focused on other distribution channels beyond content creation & paid ads.
Yes, going viral is cool.
But, building a VC-backable business in Africa requires more.
Content creation & paid ads alone aren't enough for 3 reasons:
Only 5 years ago, I was broke in NYC, unable to pay rent, & dog-sitting for $100 a week after graduating NYU with my masters.
Now I live in a great African city doing work I love & writing about it online to 10k+ people.
This wasn’t the 5 year plan.
I should write about this.
Innovation in Africa can’t succeed without solving for the low trust environment we live in.
Pick any successful African startup,
they HAD to solve this problem
Entrepreneurship is difficult.
Don't get fooled by Twitter hype.
Finding a truly compelling problem, with customers ready to pay, is no cakewalk.
To drive Africa's tech industry forward, founders must grasp the reality of the entrepreneurial journey.
Convincing investors that backing women-led / co-founded startups is an uphill battle.
The biggest reason: VC has a lagging indicator for success.
This is why I am angel investing in only women-led / co-founded startups with my own money.
My bet: the returns will speak clearer
There has been a lot of conversation recently
about investors questioning all-male / male-only
founding teams about the lack of gender diversity.
But, everyone is missing one critical point.
I wish more African founders focused on distribution.
Yes, the product is cool.
But, how will you get it into the hands of paying customers?
Content creation & paid ads are popular but won't be enough to build a VC-backable business in Africa.
I am bullish on African founders.
Infrastructural & systemic challenges that exist in Africa is a significant portion of obstacles that face startups.
The World Bank estimates that 16% of annual sales in Nigeria were lost due to power outages.
Yet, African founders still build
90% of transactions in Africa are in cash.
Although, fintech continues to be the most funded sector in African tech,
there is still a world of opportunities for founders to disrupt.
I am still excited about backing these opportunities.
The team
@afropitchprep
has put together a list of 100+ angels / funds that invest pre-seed and seed in Africa.
Founders looking to raise in 2023, grab it below for $0:
Gentle reminder to investors:
Don’t take founders through a DD process when you don’t have money to invest.
Fundraising is tough all around for founders AND investors.
Let’s not make it harder.
(If they are fintech founders, you can send them to me)
Many investors in Africa are excited about B2B startups.
But, selling B2B is hard.
Most B2B startups will have to expand their sales & marketing team & strategy as they scale.
We need more sales & marketing talent in Africa.
One of my portfolio companies
found a lead investor in 3 months -
they had been searching for a year.
If you will need a to find a lead investor in 2023, read this:
In Africa's tech investing scene, there's a silent reality nobody mentions:
many founders are building the exact same thing.
I see the same companies, with the same decks, with MAYBE different brand colors.
My guess: building unique solutions is harrder than the podcasts say.
VC is not the right funding for most businesses.
Here are 4 other funding options to explore:
• Revenue-based financing
• Factoring
• Term loans
• Asset-backed lending
• Grants
Figure out which option might be better for your business & pursue that instead.
5. Cash is still king in Africa
90% of transactions in Africa are still cash based.
You need to have a strategy for reaching your customers offline.
That is just the reality.
Behind every YC cohort are several startups that got rejected but are still building.
YC is a great badge (I'm told) but your startup's validation should come from paying users.
Paying users trump cool accelerator swag any day.
International expansion is the holy grail for any venture backed company.
That holy grail is difficult to find in Africa because:
1. Market types are different & fragmented
2. Cross-border regulations are uncoordinated
3. High income markets are limited
h/t
@AfridigestHQ
↓
People say there's over $200B of VC money waiting to be invested.
But it still takes pre-seed founders close to 6 months to raise VC funding in 2023.
What can a founder do differently?
One or all of these five things:
VCs are shifting towards metrics-based investing.
As a group, we are increasingly seeking startups that can back their investment stories with operational metrics.
Here are 5 key questions to ask when setting operational metrics for the first time:
Writing about investing in Africa is cool.
I enjoy it.
But, where are the people writing about funding infrastructure in Africa?
Tech investing won’t change much if physical and digital infrastructure remain limited.
Welcome to the 30+ new people who followed me after Paul Graham called me a midwit.
Not to disappoint you but I don’t normally write to hurt white men’s frail egos.
I write about Africa tech, startups & gender-lens investing.
Check out my newsletter for emerging founders ↓
As an institutional investor, I initially focused on US, UK & APAC startups.
When I began investing in African startups,
I noticed a peculiar common thread:
equating smartphone adoption with digital literacy.
Let me explain:
Reminder: top African investors get 1000s of decks yearly.
Best bet: identify investors focused on the market or sector you are building in.
Here's my focus to start you off:
6 ways African startups can differentiate from competitors (the last one is my favorite):
• Cost
• Quality
• Convenience
• Networks
• Ecosystem
• Customer experience
My brother got promoted today.
2 years ago, he graduated from
@Ashesi
& started as a national service personnel at a Big 4 consulting firm.
Today, he's a Senior Associate at the firm.
The kids are alright.
(Also, yes we are pro-Ashesi in this house 🤷🏿♂️)
Most cold emails I receive from founders are not compelling.
Here's what a compelling cold email should have:
• Brief company description (1-2 lines)
• What makes this special?
• Why this investor would be a fit (1-3 lines)
• A clear CTA and a deck
Seeing way to many founders with 20% - 40% of their companies given away at pre-seed stage.
A good starting place is to give away 10-20% for pre-seed rounds.
Any higher and you are hamstringing your startup in future raises.
Between January & February, African startups raised $1B in disclosed funding.
That's a new record.
But, we take it for granted all founders know the path to raising funds.
If you're a first-time founder planning to raise your first round, start here:
I made an accidental controversial statement:
Pre-seed companies must have early traction to raise funding.
It seems unfair to ask a pre-seed company to show traction - surely, that's a seed metric.
But, that's not true.
Here are 3 ways a pre-seed company can show traction:
I get this request from African founders a lot but I don’t know the answer to it:
Are there any freelance pitch deck designers that work with early stage African startups?
Globally, women drive over 80% of spending (both buying power and influence on consumption) on behalf of themselves and others.
Backing women-led / co-founded business is a smart way for investors to keep their fingers on the pulse of what is moving the needle.
I have gotten at least 3 similar emails from journalists about Paul Graham & Delve.
I won’t be responding because:
The fact that he went from “Delve is AI” to “Nigerians are verbose” is evidence of the disingenuity of y’all favorite “essayist”.
You don’t need me to know this.
60% of SMEs close shop every 18 months.
90% of payment transactions in Africa are in cash.
40%+ of African adults can't read or write.
Any startups solving for pain points of SMEs can't ignore these facts.
I am not a cool Fintech VC.
I care about the boring stuff:
• Revenue & take rate (your GMV doesn’t matter to me)
• Healthy Margins (Gross & CM)
• Domain expertise (why is this the right team?)
I’ve seen 300+ Fintech pitch decks in 2023, still waiting to find one I’ll back.
Many African startups don't have access to the right networks of investors when fundraising.
Yet, too few African startups leverage one of the best artifacts of fundraising: the forwardable blurb.
Structure your forwardable blurb this way to get potential investors' attention:
How do we back more ideas that are not venture scalable to become sustainable in Africa?
People pitch me bold ideas for Africa's future.
Most won't be a 100x success in 10 years to be a fit for venture capital.
But, it doesn’t mean these ideas don’t deserve funding.
Most investors in Africa invest via warm introductions.
Founders without the right access end up having a hard time knowing where to start in building those networks.
That's why I built this inbound pipeline forms for founders.
130+ founders have already shared their decks ↓
The best part of this Paul Graham nonsense is he’s convinced people that the word “delve” is not simple writing.
Brothers & sisters in Christ, this man is not infallible.
The word “delve” has never been complicated writing.
But, what do I know?
I’m just a midwit 🤷🏿♂️
Male-only founders raised 85% of funding.
Female-only founders raised 2.4% of funding.
Companies with female CEOs raised 4% of funding.
I don’t know who needs to hear it but the gender gap in VC funding is a real problem.
2022 broke the record in terms of amount of funding raised by startups in Africa, but also in number of deals and number of investors ‼️
Full insight👉
Dataset👉
The one open secret investors don't tell founders:
Your startup idea is likely not venture-scalable.
But, that is okay.
Before you put together a list of VCs to target, first determine if your idea is venture-scalable.
Here are 3 simple tests you can do:
The untapped opportunity in Francophone Africa is exciting.
With a combined population of 281 million people, Francophone Africa represents close to 22% of Africa’s population of 1.3 billion people.
The best founders I worked with did not spend $1000s on their CRM in the early stages.
The best CRM should be easy to use and cost effective.
Founders, what are the best CRMs for early-stage startups?
My least favorite word in Africa tech investing:
Leapfrogging.
Yes, we “leapfrogged” cards to go to mobile money.
But, we won’t leapfrog nonexistent infrastructure investment, poor leadership & unequal access to opportunities.
Sub-Saharan Africa has 44M MSMEs.
That is, 44M MSMEs that are largely offline, cash-based and disconnected from the digital revolution we all tout regularly.
The purpose of investing in women-led / co-founded startups isn't to pat myself on the back.
It's to make smart investment decisions - mixed-gender teams return more investor capital than male-only teams
Gentle reminder for African founders:
The middle class's purchasing power may not be as large as your deck says.
The AfDB's criteria for middle class: $4 - $20 per person daily (compared to $183 in America), 70%+ goes to utilities & 80% are unprepared for unplanned expenses.
I am very glad we’ve come together as a people to remind
@paulg
he can’t mold the world into his image because his vocabulary is limited.
The world is not Silicon Valley.
Mr. AI Tech investor and writer of words - do better. Maybe read more non-American writers?
Congrats to the 3 African startups that made it into the latest Ycombinator cohort.
But YC's lowered appetite for African startups means other great startups didn't get through.
Many YC rejects go on to build great businesses.
Just keep building what people want to pay for.
What would happen if instead of "break into VC" programs that charge $1000 and more for aspiring investors,
we try something different:
1. Put all the content on "teaching VC" online for $0
2. Democratize access to VC jobs
3. Push new VCs to prioritize data-backed decisions?
YC accepts 2% of companies that apply.
They rejected 147,000 companies.
Founders, if you don't make it into YC in 2023 that shouldn't be the validation of your startup.
Your startup's validation should come from paying users acquired at increasingly lower CAC
Accelerator opportunity for African founders:
The Morgan Stanley Inclusive Ventures Lab accelerator is accepting applications till March 31st.
More details ↓
(h/t
@AfridigestHQ
for posting about this):
One day we’ll talk about how Africa tech is full of people who have built fiefdoms because of social capital.
That day is not today.
Today, we’ll just remind founders:
Just because someone is popular doesn’t mean they are competent.
Do your own diligence on everyone.
Startups founded & co-founded by women:
• return 78 cents to the dollar versus 31 cents for male-founded startups.
• generated 10% more in revenue despite receiving less than 50% the amount raised by male founders
But don't take my word for it 👇🏿