“Wide misalignment” between traditional VC models and African market


East African venture advisory firm Kinyungu Ventures has published a white paper detailing what it says is a “misalignment” between traditional venture capital models and the African market.

The white paper, entitled “Chasing Outliers: Why Context Matters for Early Stage Investing in Africa”, finds there are “multiple mismatches” between key characteristics of Silicon Valley venture capital and African markets, which influence how startups and funds function as well as what results they expect and produce.

The paper includes feedback from 100 pan-African founders, investors, and LPs across 15 African countries, and recommends investment structures and approaches tailored to African operating conditions, and a broadening of approaches to institutional investment on the continent. 

Findings show that African markets are large, but also fragmented, and its consumers have limited purchasing power. Furthermore, consumers on the continent are difficult to acquire and retain, yet the sheer size of the African market also presents a real opportunity for profit once the environment is clearly understood. 

The paper’s key recommendations for funds include adopting more focused investment strategies, such as investing in b2b companies or cross-subsidising a portfolio with less risky, steady return assets; considering non-unicorn investing models geared at more resilient companies, with returns distributed more widely across the portfolio; using flexible structures such as debt or PCVs to accommodate market-level changes, where feasible; and allowing a longer time horizon for returns, understanding that growth could be slow and difficult to achieve for many companies.

“Capital in Africa is scarce and pursuing a “growth at all costs” strategy where capital pools are shallow presents huge risks for companies. We’ve also found that many great businesses don’t fit the typical VC profile, but have tremendous unfulfilled potential,” said Tony Chen, managing director of Kinyungu Ventures and co-publisher of the report.

Tayo Akinyemi, lead researcher and writer of the report, said it was clear from conversations with numerous investors and founders that nuances in variables such as consumer behaviour, cultural norms, and business practices impact startups significantly, and that being on the ground is crucial for success.  

“While African markets aren’t always able to provide the outsized returns that Silicon Valley typically looks for in high-growth companies, a more focused strategy here could unlock real gems, as has been proven by some of the startup successes the continent has seen over the years,” she said.


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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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