The African Business Angels Network (ABAN) announced recently that a new angel investing network is set to launch in Tanzania in May, with a view to supporting to emergence and growth of a local angel investor community in the country. The new network will be the first community for angel investors in Tanzania. Disrupt Africa chatted to chief executive officer (CEO) of local financial management firm SSC Capital – which is spearheading the project – Salum Awadh on the plans for the Tanzania Angel Investors Network (TAIN).
Disrupt Africa: What’s the idea behind the new angel investing network?
Awadh: The idea of TAIN is to support and unlock the potential of game-changing startups that have transformative business ideas that can disrupt and change the way we live.
The network also seeks to provide an organised platform for Tanzanian successful entrepreneurs, executives and those in the diaspora to support these startups as angel investors.
Why is a Tanzanian network needed? Are localised networks the best way forward?
The only and best way to support an emerging startup that is characterised as risky by a foreign investor, who looks at Africa as one market, is to get those on the ground who understand the market and at times even the founder as well, to invest in them. And probably prepare them for a next round of investing.
Angel investors, unlike VCs, are hands-on investors who need to allocate time to mentor and coach these founders. It makes more sense if these networks are localised and make it easier for an angel investor even to pay a physical visit and meet the investee company easily and cost-effectively just across the street.
How would you characterise the angel investing landscape in Tanzania currently?
The landscape is still nascent, but starting to take a formal shape now. People have been investing informally in people they know or have worked with before, family or friends. But most of these investments have been too risky with high failure rate, no due diligence is done, and paperwork is not done properly or not done at all, with the diaspora taking the biggest hit.
What needs to change?
Apart from a traditional look of attacking legal and regulatory framework to make investing in startups more attractive, a lot needs to be done on education and awareness now, potential investors need to be trained on how to become early stage investors, so do startups to understand this form of investing.
We also need to share success stories of good startups emerging from angel investing, and showing the progress of other networks across the continent as case studies.
The mindsets of many successful African millionaires and successful entrepreneurs need to start looking at angel investing as an alternative asset class. Don’t miss the bus.
What activities do you envisage the new organisation conducting?
As a manager-managed network, it will focus most of its activities on training, awareness, organising pitch sessions and deal days, supporting angel investors on the investment process, support investors on post-investment activities, supporting follow-on financing, policy advocacy, doing paperwork and administrative support, and publish data on industry progress.
What is your view on local vs. international / foreign angel investing?
I believe we need a mix of both, local investors bring in massive local knowledge and experience, while international investors bring in international experience, and at times more capital.
But I see local angel investors making more impact given the level of commitment of time and mentoring required in the success of these investments, and the massive knowledge they have on the local challenging landscape.
To what extent is it desirable to foster increased collaboration between African investor networks?
Despite the differences in investment landscape across the continent, investor networks need to collaborate and work together to push the agenda forward. As angel investing is still at its early stage in many African countries, sharing of experiences will be critical to learn from each other, and in providing a wider investor network to do syndication in some deals. And this is where the role of ABAN is critical in supporting the emergence and strengthening of these networks across the continent
How do you see the future of angel investing in Tanzania and Africa?
The future is bright and even exciting, with many African countries expected to see faster economic growth above six per cent. Having various socio-economic challenges that need disruptive thinking, the role of startups – especially in technology – creating innovative solutions to address challenges such as weather unpredictabilities in agriculture, drones doing medical drugs delivery in rural Africa, improving learning experience and online content in education sector, mobile technology increasing financial inclusion, etc – all these provide interesting opportunities for angel investing on the continent.
On another note, Africans in the diaspora almost gave up sending money back home to relatives for starting a business, these networks are set to help these guys now allocate and channel their investments more properly and relatively safer.
Tanzania alone receives about TZS1 trillion (US$440 million) worth of remittances a year, imagine if we can tap 20 per cent of this to support our game-changing startups. Imagine that in Nigeria, Kenya, Egypt or Somalia where their countrymen send millions of dollars every year back home.