Venture Capital Trends Shaping The African Investment Landscape

As the second half of 2021 approaches and Covid-19 vaccinations roll out across the globe, albeit at varying rates, Ian Lessem, Managing Partner at HAVAÍC, investors in early-stage, high-growth technology businesses, considers the trends making an impact on the African Venture Capital (VC) landscape.

Homegrown solutions take on the world 

At HAVAÍC, our investment thesis is centred around investing in businesses that solve real-world challenges. With the world having adjusted to new ways of shopping, learning, and doing business as a result of the Covid-19 pandemic, the appetite for solutions that solve real, tangible problems are without a doubt the best opportunities for growth.

Solutions that offer people and organisations better ways of living and working with less friction will reign supreme. In the African context, logistics, financial services, agri-businesses and food security, health, as well as education are sectors benefitting most from rapid transformation.

Funding flows

With global interest rates at an all-time low and African tech hubs in Cape Town, Nairobi, Lagos and Cairo maturing to levels needed for a startup ecosystem to thrive, there is an ever-increasing demand from international investors to invest in African startups.

In the past this funding has often been skewed to non-Africans starting African businesses. From an international experience point of view, this is can be quite valuable, however as the biggest investment opportunities on the continent revolve around creating solutions for local challenges, it would be imprudent to ignore the importance in investing in the right local teams.

Pleasingly, more and more African founders with international experience are returning home and starting businesses. The achievements of Paystack and Flutterwave are excellent examples how this mix of local knowledge coupled with international experience can result in great local success stories that help build the ecosystem. Further to this, prestigious international accelerator programmes backed by global tech giants such as Google encourage locals to innovate and find solutions to local issues, while creating significant opportunities for these entrepreneurs to learn from the very best internationally. As result of this, local entrepreneurs with the right mix of local and international experience are increasingly driving the success of African startups and attracting local and international investment.

Ian Lessem, Managing Partner at HAVAÍC

Fintech as the great enabler

In the African context, fintech remains a massive area of growth and opportunity. The relatively low uptake of traditional bricks and mortar banking, combined with a young and tech savvy population and high mobile penetration rates, make fintech in Africa one of the most exciting and promising sectors. The digital banking revolution as seen in Europe and Asia has hit Africa with a bang, and fintechs who focus on providing access to digital services through smart phones in an inexpensive and scalable manner are well-placed to take advantage of this trend.

However, in the African context, where cash still accounts for the bulk of trade related payments, fintech opportunities on the continent need to include solutions that address the need for both virtual and physical payments and “banking” distribution. By way of an example, in Kenya, with 80% of retail trade being cash based, and with bricks and mortar banks and ATM’s in short supply, creating physical distribution is still key. One of our investments, Tanda, does just that. Through their tech integrations with thousands of informal and local retailers, customers are able to pay and access financial services using virtual currencies or cash, and can withdraw and deposit cash at “checkout”. With less than 3,000 ATM’s in Kenya, and Tanda’s access to 10,000 dukkas or informal retailers, their technology platform literally trebled the number of ATM’s in Kenya over-night.

The intersection of non-physical financial services and cash, coupled with scalable distribution, is emerging as the space to watch.

The Future is African

Perhaps the most exciting and gratifying trend to see in action is the ability of African founders to pave the way when it comes to creating commercially innovative solutions that can scale seamlessly and compete across the globe on the back of proprietary technology. Looking at another one of our portfolio companies, hearX, using African grown AI powered audiology technology, their Lexie hearing aid is being rolled out in close to 10,000 stores across the US. On the back of this success and ability to compete internationally, hearX is attracting international interest, investment and partners, and most pleasing of all is that this example, which may have once been the exception, is fast becoming the rule.

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