How do you find the entrepreneurs and innovators in Africa who need investment funding to scale?
Agosta Liko - web entrepreneur in Kenya
That’s the question I was most intrigued by on my panel today at SoCap with Emeka Okafor, Nii Simmonds and Ashifi Gogo about identifying opportunities for innovation in Africa.
There are really two big issues at stake. First, how to find the right people. Second, what funding level is needed.
Boots on the groundYou’re not going to find the compelling African entrepreneurs while sitting in an office in the US or Europe. It’s only by spending significant time on the ground in the countries you’re wanting to invest in that you find the people you need to know. It’s there that you get past the first-level of non-expert opportunity profiteers and attention seekers and find the people who actually do the work.
Two examples:
- AfriGadget is a blog about finding interesting stories of African innovation. It’s not always easy to come up with the stories though. You have to look hard, teach yourself to see things, in order to find these extraordinary individuals. Without the great blogging team and the people sending in stories from the ground, we wouldn’t have anything.
- I grew up in Nairobi, yet it took me a solid two years of meeting people and networking within the city to get beneath the surface and find the people with the talent and drive to create actual businesses.
It’s generally not cost-effective for every funding source to have their own person canvassing the continent. The question then becomes, how do you find the trusted intermediaries who know the real story on the ground, know the players and can spot the talent?
The seed (angel) funding gapMost of the individuals with the skills to create their own businesses in the high-tech space are working for large NGOs and multinationals. Why? They got to a place in their life where they had to make the choice of going out on their own, armed with a good idea and no hope of funding, or putting food on the table. This is similar to entrepreneurs worldwide, however in Africa the gap between success and failure is a lot less forgiving and the choices are a lot fewer.
Most of the funding available for companies in Africa comes through loans, debt financing. It’s mostly used in SMEs at the medium-sized level. There’s a gap, and that is seed funding. There are very few opportunities to get equity-based funding, especially at the levels where most entrepreneurs starting off need it. This is the $10-300k range.
Who funds them? There are a few organizations internationally who run business plan competitions with money prizes, others that fund a few startups each year (TechnoServe, Kuv and Acumen come to mind). There are also some local people and organizations that do some of the funding (as was the case for Agosta Liko pictured above), but it’s very hard to come by even within Africa’s most advanced tech/finance cities (Nairobi, Johannesburg and Accra).
Who else is out there?
How can we bridge this gap?
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