Regular readers of the annual African Tech Startups Funding Report released by Disrupt Africa will not have spotted many mentions of Angola, Cape Verde, Guinea-Bissau, Mozambique, São Tomé and Príncipe, or Equatorial Guinea.
Portuguese-speaking African countries like these are funding starved. Mozambican e-commerce startup Izyshop was the only fundraiser from any of these countries in 2018, while two Angolan startups secured small amounts in 2017.
Compare this with ever-increasing amounts raised by startups in Anglophone markets like Kenya, South Africa and Nigeria, and even the relatively under-funded Francophone regions, and it is clear Lusophone African startups really are the last thing on investors’ minds.
This is not, however, because of any lack of quality. Countries like Angola and Mozambique are home to some standout startup success stories. For example, recruitment startup Jobartis has acquired 500,000 users in Angola, and recently expanded to Cameroon, the DRC and Zambia. It has even launched a spin-off ed-tech venture in Kenya. Yet as it attempts to raise between US$750,000 and US$1 million in funding for further growth, it has faced challenges.
Where is the money?
Luis Verdeja, Jobartis’ chief executive officer (CEO) and co-founder, puts this down to the fact it is Angolan, and highlights several key reasons why he believes investors ignore markets like his.
“More developed investors are mostly English-speaking, UK-based or US-based. Their economic and cultural ties to non-English speaking Africa are weaker, which reduces their knowledge of the market and hence their interest. The funding space in Portugal, which could be more naturally inclined to invest, is still developing,” he said.
There is, he said, also a technological lag in Lusophone Africa, while though Angola is a large market by African standards, Lusophone countries combined are smaller than the English or French speaking communities.
“The macroeconomic context has also not helped Angola and Mozambique over the last four years,” he said.
Another flagship Angolan startup is food delivery platform Tupuca, which, like Jobartis, has been a local winner of the global Seedstars World competition and is aiming for regional expansion, but which, like Jobartis, has faced major challenges when it comes to accessing funding. Founder and CEO Erickson Mvezi says the startup is still on the hunt for its perfect investor, but echoes Verdeja’s view that Lusophone African startups are up against several barriers.
“The language barrier plays a vital role in this, because it puts investors out of their comfort zone, thus this puts lots of dependency on the local players or startups. Secondly, market size plays another major role in the funding gap for Lusophone African startups,” he said, adding that it is “almost guaranteed” any potential investor in the region will question founders on whether they are planning on expanding to Nigeria, Kenya or South Africa.
Where are the support networks?
Are the necessary funds, incubators and other supportive organisations in place in Lusophone markets to encourage development, however? Not according to Verdeja.
“Definitely not. There are a number of incubators, but there is very little funding available to them,” he said.
Pedro Beirão runs Angolan e-heath startup Appy Saúde, which is one of the few Lusophone companies that has been lucky enough to access seed funding and took part in the Pitch Live session at the recent Africa Startup Summit in Kigali, Rwanda. He bemoans a lack of reliable information on things like market trends in countries such as Angola as a barrier to investment, and says though some incubators – such as the KiandaHub in Luanda – have sprung up, there are not enough of them.
“It would be definitely more attractive to have incubators with internationally recognised mentors, with proven experience in other growing startups. This is still not the case in Lusophone countries, unfortunately,” he said.
“But I think it will head in this direction, if African incubators exchange more experiences between Anglophone, Francophone and Lusophone countries.”
Mvezi too has some optimism for the future in this regard.
“Particularly in Angola, we are seeing the banking and telecommunications sectors attempting to set up an environment that fosters the growth of the startup ecosystem,” he said.
How supportive are governments?
Debate rages about the pros and cons of governments intervening in local startup spaces, but there is a clear trend across the continent towards lawmakers working to at least provide conducive environments for tech innovation. Francophone nations are ahead of the game here, with the likes of Tunisia, Senegal and Mali all having passed – or being on the verge of passing – so-called “Startup Acts”, but governments in Portuguese-speaking countries have been slower to catch on.
“Governments want to support but they struggle on how to do it. Legislation, red tape and taxation are not conducive and it takes ages to make changes. The will is there but the actual impact is very limited,” Verdeja said.
Beirão agrees that, in Angola at least, the government is willing to cooperate, but yet hasn’t been able to implement practical support for startups.
“For example, there is no reduction for taxes, there aren’t any subsidies that allow for paying space rent, which is very high in Angola, and so on. So, I would say that the Government wants to support, but lacks the proper tools to do it properly, for now,” he said.
Mvezi again spots a movement in the right direction, however slow.
“The government is becoming more supportive. The policies are beginning to make sense for investors to venture into these countries. There is still a lot that needs to be done, but the barriers of entry are coming down. The phrase “diversified economy” is becoming a common one amongst policymakers,” he said.
Are we seeing positive signs of progress?
All three of these entrepreneurs, in fact, share the view that baby steps of progress are being made in Lusophone markets. Beirão said he sees good developments from an awareness perspective.
“People now know what is a startup – at least they understand the term – and associate it with progress and innovation. Which is a good thing. Now, we need investors to trust that those companies have real products, that solve real problems, and that are led by talented managers. Some of those companies will become the future big companies of the country, and the continent. The progress is slow, but surely exists,” he said.
Verdeja feels the improvements in the economic situation are leading to increased interest, while what he called a “more pro-business, transparent” government in Angola was also helping. Mvezi said success stories like Tupuca, Jobartis and Appy Saúde could only help drive development.
There are good reasons why more investors should look at markets like Angola, moreover. Ley amongst them is the higher likelihood of securing a first mover advantage, now almost unheard of in more saturated markets like Nigeria and South Africa, but there are others. Verdeja says the lack of competition means the cost of entering these markets is lower, and businesses can be developed over slightly longer time periods. In and of themselves, some Lusophone markets are also very large – Angola has the third largest economy in Sub-Saharan Africa, much larger than Kenya’s, and about the same size as Morocco’s.
For Beirão, there are many reasons to invest in a country like Angola, especially as the economy continues to grow, the country opens up, and investments become easier to make.
“There is a growing and very talented startup ecosystem in these markets, already with some success stories,” he said. “The market is not so “crowded” as in South Africa or Kenya for investors, which makes it easier to spot talented startups with less competition.
He also noted that due to shared language and cultural proximity, markets like Angola and Mozambique could be a great bridge to bigger Lusophone markets globally, such as Brazil or Portugal.
“Lusophone African countries are very close to those realities and understand those markets needs,” he said.
All that is needed is for more investors to take the plunge, Beirão said.
“Lusophone markets have a high potential and will grow very fast. Now is the time to look at those markets.”