Angel investors looking to back African tech startups should “hunt in packs” in order to ensure they make successful investments and help build the ecosystem.
That is according to Tomi Davies, co-founder of the Lagos Angel Network (LAN) and president of the African Business Angel Network (ABAN), who was speaking at the African Angel Investor Summit in Cape Town last week.
He said there were now 63 local investor groups across Africa, with ABAN also set to introduce an accreditation process for investors next year. He said more investors should join such groups and invest alongside their peers if they are to see successful returns.
“Angel investing requires patience. It takes time,” he said. “Wolves hunt in packs. That is what angel investing is all about. We are more likely to succeed if we join a group and we invest in a portfolio. Find likeminded people and stick to the segment of the industry that you understand so you can add value.”
This was a view shared on a later panel by Audrey Mothupi from the South African Business Angel Network (SABAN).
“We see a lot of individuals that are busy doing things on their own, and losing money,” she said. “The starting point is not whether we invest or not, it is the reason why. The gaps between those that have and those that don’t have is real. I have only ever invested where I believe impact takes place and I can see the need.”
She said early-stage investment is difficult because sometimes all you have to go on when it comes to putting money into a startup is a gut feeling.
“You have to listen to that voice. And then you have to pick up the phone and get that one more reference point. And then you need to go back to the problem: does it solve a problem?” said Mothupi.
“We have to engage with the individual and see the passion. If they believe in the idea and they understand how to build it then you can’t fail.”
Davies was optimistic that Africans can develop Africa, and that it wouldn’t need to cost millions of dollars in funding.
“We don’t just throw money at entrepreneurs, there is a body of knowledge that these individuals would want to achieve to succeed. We recognise that this is Africa at the end of the day. We need to engage with policymakers to create an environment where these angel investors are being supported,” he said.