The AfricArena Unconference is a creative event where Venture Capitalist (VCs), Limited Partners (LPs) and ecosystem stakeholders come together to creatively try to improve the funding landscape across Africa; from pre-seed to later-stage investments.
The Savant team really enjoyed our time at the event. Below is some of our key findings and learnings from the event:
A key take-away for us is that while some emerging start-up-friendly nations such as Tunisia; already have a Start-up Act, they still face many of the same challenges that South Africa, which doesn’t have a Start-up Act yet, does. The African ecosystems appear to be very similar in that, in the same way that South Africa has the SA SME Fund catalysing the early-stage investment landscape, Tunisia, for example has the Smart Capital fund ensuring that there’s more early-stage VC capital available in the country.
Investment opportunities from developed ecosystems
An additional learning was that developed nations such as Japan and South Korea, are actively looking at Africa for growth opportunities and we saw, through the Unconference, that they are willing to co-invest and partner with local entities to give funding to both mature and earlier-stage companies.
Some late-stage public markets are seeing resistance from buyers as the go-to opportunity for capital preservation and growth. Their managers are actively exploring VC as an asset class for private placements of capital. As a result, they are also exploring Africa for growth opportunities.
We need to demonstrate outsized returns
A major challenge seen is that due to the history of Private Equity in Africa, VCs have to demonstrate outsized returns to continue raising and deploying capital from markets outside of the continent. VC capital in Africa therefore needs to be on par with or exceed the return expectations of other asset classes for it to flourish.
We need to educate our entrepreneurs
Africa is slow to respond to the downturn in public markets. This is due to a combination of bullish investors with limited experience from outside of the continent, flooding capital in combined with the slower pace of adjustment of African VCs. At the same time, as VCs collectively reduce their appetite for oversubscribed rounds and high valuations, entrepreneurs are still aiming for unrealistically high valuations. Overall education is required across the continent.
Opportunities abound for South Africa
There is a clear perception of more corporate VC opportunities in South Africa. This could be the result of a more mature corporate market with access to large pools of capital as well as a sign that our later stage ecosystem is maturing. Corporates could be actively trying to ensure ongoing longevity and see innovation as a means to enter new growth curves.
South Africa and the DFI conundrum
South Africa is in a position where we’re seen by most Development Finance Institutions (DFIs) as a developed and robust market, which can sometimes be an exclusionary criteria. We have pockets of excellence such as our financial markets and our urban areas are relatively developed. However, outside of those, we still have the same challenges that many other African nations face. VCs are actively educating multinational funders of this aspect. We are also educating them on VC as a growing asset class in South Africa that has a lot of growth and impactful opportunities to offer.