Investors in Africa must be in it for the long-term

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Investors interested in backing African tech startups must take a long view and make efforts to understand local dynamics if they are to be a success.

That is according to panellists at last week’s Africa Tech Summit London, who were discussing the investment landscape across Africa.

Wale Ayeni, senior investment officer at the International Finance Corporation (IFC), said investors in African startups needed to be aware from the outset that they were playing a long game.

“When you are investing you need to have a long view and understand that it is a cyclical business,” he said.

“Our goal is to understand the macro and understand where the opportunity is. We spend time finding out what the macro is then figuring out how to invest.”

Ido Sum, investment director at TLcom Capital Partners and a panellist alongside Ayeni at the event, agreed, saying the African tech startup scene was a young ecosystem that would need time to grow.

“It is our job to create enough traction. We need some more success stories to persuade more people to put their money in,” he said.

Sum said the opportunity in Africa was in the wide reach of the ubiquitous mobile phone.

“If you can serve a mobile market and solve big issues you will create very successful solutions and very successful companies,” he said.

Both investors used e-commerce as an example of the pitfalls anyone interested in backing African startups needed to avoid, saying anyone investing in e-commerce startups had to be aware the long-term nature of such a play and the need to adapt to the African landscape.

“To build an Amazon is not a cheap thing. They are big efforts that take a long time,” Sum said.

“If you look at India, e-commerce accounts for a big chunk of investment and there is a lot of consolidation of these players, which I think will happen in Africa.”

Ayeni warned that startups could not copy and paste business models from elsewhere in the world and apply them to frontier markets.

“In Africa you need to know what the supply chain looks like, and you need to look at the African consumer, who is either on a mobile phone or offline,” he said.

“E-commerce is more than a website. It is a supply chain problem and you need to solve that. E-commerce in Africa will happen, but it won’t look like e-commerce anywhere else. It won’t look like Amazon, it won’t look like Alibaba.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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