Savant is currently the only deep tech and hardware incubator and investor in Africa. Last year, we made the strategic decision to own that position and adopt a pan-African focus. This meant that everything we were planning for the future would now align and incorporate a pan-African element or focus going forward. This includes all of our funds under management, our incubation and acceleration programs, and our corporate programs. In real terms this means that the companies could have pan-African founders, operate in a pan-African context or have the intention of addressing the aforementioned.
This active repositioning is now underway and we are currently in the process of reviewing investment into a Namibian company, after incubating and accelerating the company. We are also finalising contracting for a recently offshored Netherlands-based company with key customers and operations in South Africa and Egypt.
Scouring the African continent
In support of these efforts, the Savant team has been travelling across Africa to learn more about the regional ecosystems, including Northern, Western, Eastern and Southern Africa. Savant Venture Fund Partners Nick Allen, Francois Malan and Thaheer Mullins kicked off our pan-African roadshow in the first half of the year. Historically focused on South Africa, the journey has been a critically immersive series of learning expeditions. This year, the team has spent significant time in Egypt, Senegal, Morocco and Mauritius. We are planning stops for the second half of the year in Zambia, Kenya and Tunisia.
These are some of the lessons learned from the journey thus far:
1. Government intervention in support of early-stage startups
All of the regions visited thus far represent growing and/or successful ecosystems. They all have something in common: significant government intervention in support of early-stage startups. Government consistently plays a crucial role in increasing the ease of regulation and facilitating early-stage development programs, whether through capacity building, grants, supporting shared workspaces or a range of other interventions.
2. Cross-border collaboration unlocks value
It may be obvious, but witnessing cross-border collaboration is quite inspiring. Many startups are teaming up to offer cross-border collaboration. For instance, we saw startups in Senegal that started initiating partnerships with complementary startups in other West African territories. The similarities in language and legislation made it easier to find those partners. However, the startups were servicing the same target market with different but complementary offerings. By adopting each other’s value propositions, they are able to unlock more value in their respective territories.
3. Expansion into other regions is key for building traction
We also encountered a number of founders realising the limitations of their market sizes very early on. So, once they achieved product-market-fit, they actively sought out co-entrepreneurs from other regions to assist with internationalisation in new territories. They either joined the holding companies, launched joint-ventures or spun out subsidiaries. With this open mindset, the startups were able to expand geographically and build traction from the bottom up while also considering the augmented value propositions and cultural nuances for doing business in new environments.
4. More international funding
There seemed to be quite a bit more international (outside of Africa) capital in the other territories, than in South Africa. Global funders and fund managers based in Africa, but from outside of the continent, seemed in abundance in other territories. South Africa has its fair share, but the anecdotal feeling was that there’s more international capital in other regions. At the same time, it was interesting to note how many DFIs are doing direct investments into very early-stage companies.
5. Proximity to Europe is a huge advantage in North Africa
The proximity (2-hour flight) of Europe and North Africa has greatly impacted the view of startups in those territories. With the Eurozone largely acting as a singular block and sub-Saharan Africa being fragmented, yet contiguous, many of the startups have ambitions to expand to Europe after capturing key territories in North Africa. Some of them test locally and go straight to Europe. This also bodes well for exits. A great example of this is Tunisian founded AI startups; Instadeep. Many startups operating in Egypt, have actually incorporated their HQs in Europe, giving them easier access to capital on both sides of the Mediterranean.
Not only are the pathways from venture capital to trade-based mergers-and-acquisitions more accessible in regions with greater proximity to Europe, many of the fund managers that we engaged with have also done a few secondary exits to private equity players at healthy multiples on capital invested. It seems that location is crucially important to developing value-adding relationships.
6. Outcomes driven incubators and accelerators can make a big impact
Cultures of high-performing incubators and accelerators are very pervasive throughout the continent. There are many incubators and accelerators that are not impactful through their programs, but we’ve seen more than a few that are outcomes driven. The goal-oriented operators tend to have more longevity, but their key performance metrics, in terms of startups survival rates, funding raised and revenue generated, demonstrate their impact.
These are just a few of the insights that we’ve gained on our journey so far and we look forward to many more learnings as we continue our pan-African travels.