Why investing in African startups really pay off?

Africa has real problems that need real solutions. Startups reflect this reality and set out to solve everyday issues with brilliant ideas. In Africa there is a growing movement of young entrepreneurs looking for a way to make life better and are doing just this with some of the solutions they have come up with. It’s no surprise that many investors around the world are looking to Africa as the place to put their money. But, despite all of this let’s explore more in detail why it’s worth investing in Africa and looking to these young entrepreneurs as the next big thing.

Potential to grow

In Africa, the lack of resources, energy and basic essentials in some places around the continent sets the scene for a plethora of opportunities for those willing to find solutions amidst so much adversity. But the up and coming generation has proven to be innovative, creative and full of potential, in such a way that they are solving their own problems in very effective ways.

Since there is room to grow and invest Africa has become a haven for venture capitalists, incubators, accelerators, angel investors, private equities and an array of events and conferences geared towards startups. So, quickly before moving on just to clarify what the difference is between all of the previously mentioned investors:

  • Venture capitalist (VC): Looks to invest in early-stage startups that usually represent as much high potential as it does high risk. Usually, the VCs in Africa are a group of local firms or international non-profit fund.
  • Incubator: Usually keep the majority of the shares, by developing an idea with an outside team that will be in charge of managing it.
  • Accelerator: By supporting the idea or project for about six months they help to accelerate the growth of the business.
  • Angel investor: This is usually a wealthy investor who believes in paying forward and supporting new talent.
  • Private equity: As opposed to VC they take on a business later on when it’s developed. They usually restructure to optimize financial performance.

Through events, conferences and events all of the key players in startups are able to network and create communities, contacts and at the of the day opportunities. Of course, we can’t leave the media, which plays an essential part in creating the narrative of the growth in Africa for the world to see.

Growth in past years

Revisiting what the experience has been for Africa to grow their startup ecosystem exponentially in such a relatively short amount of time. African startups started invading the financial news back in 2011, and it seems that this was just the start. Everyday, more and more Africans are getting an education either locally or abroad, and coming back to Africa to open up their own business. The amount of startups in the last years has surpassed expectations, reason why it has become a referent for the young entrepreneur startup movement. There is still a long way to go in some areas to truly create a sustainable ecosystem, but the different fields are building strong foundations for the future.

Some examples

African startups stand out due to the nature of their ideas. They are not just creating apps that can be stored away on your phone, or generating business ideas for your leisure time. Instead, they are investing in those ideas that help improve Africans lives and deal with everyday issues such as loss of energy, addressing or lack of clean water.

  • BRCK: This startup is attempting to make a backup Internet generator that will allow you to use the Internet even if you are located in a remote location with no electricity.
  • OkHi: In Africa, many houses don’t have a proper address, which makes it quite difficult for people to get correspondence or to be found for that matter. This app is tracking people so that it guides people to where they are with no need of an address.
  • M-Kopa Solar: In search of finding ways to solve Africa’s problem to reach so many isolated villages with electricity, but with the evident lack of power grids and possibility to build them, this startup has designed a pay-as-you-go solar power that can reach those destinations that before had no possibility of having energy in their homes.

    CLICK TO VIEW M-KOPA SOLAR VIDEO

What’s next?

In 2016, the number of startups emerging from Africa is only expected to rise. The tech startups are the ones to look out for, which isn’t to say that others like: commerce, education, and health are not doing their part as well. Africa will continue to grow and with international investors willing to support the business ideas from this growing population of entrepreneurs. We are likely to see growth from many countries, but the ones that are expected to lead the pack are South Africa, Nigeria and Kenya.

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