2015 report - venture finance in africa

VENTURE FINANCE IN AFRICA2015

VENTURE CAPITAL FOR AFRICAafrican venture finance starts here

the progress of early-stage high-potential growth companies

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2 VC4Africa 2015 VENTURE FINANCE IN AFRICA

INVESTMENTS

44% of the ventures are successful in securing external capital investment. The average capital secured per venture increased from USD 129,348 in 2013 to USD 205,374 in 2014, otherwise an increase of 59%. The largest investments are made in South Africa, the most investments are made in Nigeria, and Kenya secures the largest total amount of external capital.

INVESTORS

Of the 600 investors part of the community, 82% invested in an African venture. Angels represent one-third of the network, followed by Venture Capital firms and Social Impact Funds. Investors report management and team as being the most important factors they consider when investing. The country’s level of economic growth and size of market are the most important factors when deciding where to invest.

ECOSYSTEM

The ventures that participate in sector events, or join an incubator or accelerator, secure on average USD 126,090 in external investment. This is 23% more than their counterparts who do not participate in such programs. Ventures that have established a partnership with a multinational company secure 150% more capital on average, and are 57% more likely to break-even by their third year of operation.

December 2014

in annual revenue. The number of ventures with this kind of revenue potential has grown by 56% over the course of 2014. Moreover, almost one-third of the ventures turned profitable or at least reached their point of break-even.

EXECUTIVE SUMMARY

Innovative ventures yield high social and environmental impact and are a key driver for Africa’s development. It is the opportunity driven entrepreneurs that generate much of Africa’s employment, income and hope for a better future. But how are these companies progressing over time? This question is answered in the VC4Africa 2015 Venture Finance in Africa report.

Data sets on this emerging segment are limited and there are few compara-tive studies. The VC4Africa community of startup entrepreneurs and investors collects data to help explain trends and set the way forward. This report cap-tures the performance of ventures listed on the online platform and highlights the activity of investors part of the network. As the community continues to grow, it is expected this yearly report will lend insights into what is happening across the larger startup space. The report breaks down insights across 5 indicators: employment, performance, investments, investors and ecosystem.

EMPLOYMENT

Over the course of 2014, the average team size for a venture increased by 54%, resulting in 5.7 jobs per venture. The same ventures expect to quadruple their team size by the end of 2015. The data shows that new jobs are being created in almost all African countries. Agribusiness, health services and education related ventures are the most significant job creators.

PERFORMANCE

49% of the ventures start generating revenue in their first year of operation. By their fourth year, 34% of the ventures expect to book more than USD 100K


TABLE OF CONTENTS

2 EXECUTIVE SUMMARY4 FOREWORD5 ABOUT VC4AFRICA5 Graph 1 Venture applications5 Graph 2 Published ventures

6 RESEARCH

6 METHODOLOGY7 BREAKDOWN SAMPLE7 Graph 3 Distribution of venture stages7 Graph 4 Venture breakdown by top 20 sectors

8 EMPLOYMENT8 Graph 5 Total and average jobs created + expected9 Graph 6 Total jobs created per country9 Graph 7 Median and average team size across top 8 countries10 Graph 8 Distribution of jobs across top 8 sectors10 Graph 9 Median and average team size across top 8 sectors

11 PERFORMANCE11 Graph 10 First year of revenue generation11 Graph 11 Distribution of revenue generated per year11 Graph 12 Distribution of years of break-even

12 INVESTMENTS12 Graph 13 Distribution of capital secured12 Graph 14 Median and average external capital secured

13 Graph 15 Median and average external capital per venture stage13 Graph 16 Invested capital per funding source13 Graph 17 Capital secured across the top 20 sectors14 Graph 18 Capital secured per country14 Graph 19 Median and average external capital secured across top 8 countries

15 INVESTORS15 Graph 20 Investment activity15 Graph 21 Median investment size by investor category16 Graph 22 Allocation of investments per sector16 Graph 23 Venture decision making factors17 Graph 24 Country decision making factors

18 ECOSYSTEM18 Graph 25 Monetary benefit of accelerator programs19 Graph 26 Multinational impact on median and average invested capital 19 Graph 27 Multinational impact on revenue generation19 Graph 28 Multinational impact on break-even point

20 KEY TRENDS: 3 INVESTOR CASE STUDIES

24 CONCLUSION

24 AFTERWORD25 CLOSING REMARKS


The data in this report indicates these companies are maturing over time, and that their economic and social impact starts to increase in parallel. And despite the limited sample size, these companies are increasingly representa-tive of what is happening across the larger African startup ecosystem.

The companies registered on the platform are securing increasing amounts of investment, and both revenue and team size increase significantly from when this same study was conducted in 2013. As these enterprises formalize their operations they contribute to the tax base of their local governments, which in turn increases their ability to invest in infrastructure and social services. More importantly, the entrepreneurs represented in this report do create meaningful employment opportunities for their fellow citizens. This is a critical economic contribution when taking into account that 43.3% of the Sub-Saharan African population is under the age of 141. In many ways, the future of the continent will be shaped by the continued success of its entrepreneurs.

The emergence of local investors is a key change and contributor to the ecosystem. We recognize three key trends that have considerable influence on the African startup funding landscape: a growing interest from African diaspora to invest in startups in their country of origin, the increasing number of business professionals turning angel investor locally and a growing appe-tite for cross-border investing across Africa generally.

We would like to thank the entrepreneurs and investors that participated in this study. They continue to inspire all of us at VC4Africa. Our hope is that entrepreneurs and investors use this data to benchmark their own progress. We also hope the report captures the progress these entrepreneurs are making and offers hard data that shows these companies are i) successfully growing their operations over time and ii) adding much needed jobs to the African marketplace. - VC4Africa research team

FOREWORDThe VC4Africa community is a global peer-to-peer network where entrepreneurs and investors come together to build great African success stories. A growing number of ventures are active on our platform but do they make a difference? Do the companies we engage as a community add to the tax base of African economies and are they indeed a source of employment for the continent’s burgeoning population of youth?

1 Source: World Bank, 2013


1. VENTURE APPLICATIONS

cumulative applications

ABOUT VC4AFRICAThe vision is to enable African entrepreneurs and investors to find each other online. We aspire to become the preeminent social network for entrepreneurs and investors focused specifically on innovative business opportunities across the African continent. Learn more about the community by checking out our welcome page. • The ventures are early stage, post-seed and pre-late stage, and require investments less than USD 1 million;• The primary sectors include mobile, web, renewable energy, healthcare, education and agriculture, amongst others;• Each venture is scalable, makes smart use of technology, or is disruptive in their application of a business model;• Thirty percent of the registered ventures have an explicit social mission and could be qualified as a social enterprise.

350

900

1700

2600

2011 2012 2013 2014

2. PUBLISHED VENTURES

breakdown by country

PERCENTAGE

Other countries repesented in the study:Algeria, Angola, Benin, Burkina Faso, Burundi, Cape Verde, CAR, Chad, DRC, Gambia, Guinea, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Morocco, Namibia, Sierra Leone, Somalia, Sudan, Swaziland, Togo, Tunisia and Zanzibar

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Every year VC4Africa reaches out to entrepreneurs who are part of the community to find out more about their progress. Specifically, this report looks at their organizational advancement as measured by growth in revenue and the number of new jobs created over time. This feedback underpins an annual benchmark for the companies listed on the platform, and offers tangible evidence of their impact.

The report breaks down insights across 5 parameters: employment, per-formance, investments, investors and ecosystem. If you would like to have more specific insights on certain regions or other findings please contact the research team:

e-mail: [email protected], tel: +31 20 779 55 74

RESEARCH METHODOLOGY

The research team is in constant communication with members and conducts a regular series of surveys, interviews, focus groups, design sessions and brainstorms. For this report, the data is pulled from two main sources i) an annual survey conducted with the ventures registered on the platform and ii) the investors who are part of the community.

VENTURESEntrepreneurs with a venture profile were asked to participate in an online survey. The survey was sent to 1300 entrepreneurs and 257 entrepreneurs responded, a 20% response rate. Entrepreneurs were asked to report on their revenue, profit, and change in team size over time. They were also asked to report on their capital requirements and progress fundraising. In recognition of their positive contribution to society, participants received the ‘Entrepreneurs Rule’ badge.

INVESTORS600 investors part of the community were asked to participate in an online survey. 71 responded, a 12% response rate. Investors were asked to provide feedback on their level of activity, the amount of capital available, their inten-tions to invest, and the considerations they make when allocating.

LIMITATIONSThe data sets are limited and by no means do they represent the African investment space. At the same time, there is little information available on this emerging segment and there are few comparative studies. Any conclusions should take the limited amount of data into consideration while recognizing that as the community continues to grow these insights will improve over time.


3. DISTRIBUTION OF VENTURE STAGESbase N = 257

57% of the ventures are in a startup phase where 43% are in a growth stage. Startups focus on solution validation, product market fit and survival, whereas growth ventures focus on expanding product line, growing revenue and growing team.

43% 57%

4. VENTURE BREAKDOWN BY TOP 20 SECTORS computer software, internet and e-commerce are the three sectors best represented in this report.

Computer Software

Internet

E-Commerce

Agribusiness

Education

Media

Professional / Diversified Services

Health Services

Clean Technology

Financial Services

Food & Beverages

Renewable Energy

Telecommunications

Computer Hardware

Leisure

Transportation

Import/Export

Retail

Construction

Real Estate

24 %

21 %

17 %

15 %

14 %

12 %

11 %

9 %

7 %

7 %

7 %

7 %

7 %

5 %

4 %

4 %

3 %

3 %

3 %

3 %

BREAKDOWN SAMPLE


EMPLOYMENT

This section of the report looks at the job performance of the companies. The graphs show job creation over time and job growth by country and sector.

Total amount of jobs created is highly dependent on the sample size. That said, with over 1,000 people hired up to 2013 and another 4,176 jobs expected to be created by the end of 2015, the figures in this section show that ven-tures active on the VC4Africa platform are creating a significant number of new jobs.

A deeper analysis indicates that in almost all African countries new jobs are being created. Significant outliers include Nigeria (18%) and Kenya (17%) where the most ventures are located. For the sector analysis only segments with a subsample size of 20 or higher have been taken into account. Agribusiness, health services and education related ventures are the most capital intensive. The average team size for e-commerce companies is highly influenced by a few outliers.

5. TOTAL JOBS CREATEDrealized up to 2013 and expected by the end of 2015

= 100 jobscreated: 1011 jobs, average = 5,7expected: 4176 jobs, average = 21,3


COUNTRY

NigeriaKenyaSouth AfricaTanzaniaUgandaGhanaCameroonEgypt

NUMBER OF VENTURESCREATING JOBS38361712121199

X medianO average

7. TEAM SIZEmedian and average values of top 8 countries

0 to 5051 to 100101 and more

6. TOTAL JOBS CREATED per country

X realizedO percentage

5,56,2


Agribusiness N 40

Health Services N 24

Education N 37

E-Commerce N 45

Computer Software N 63

Professional/Diversified Services N 29

Media N 30

Internet N 53

MEDIAN AVERAGE

9. TEAM SIZE median and average employees per venture.

Top 8 sectors:

8. JOB CREATION distribution of top 8 sectors

Computer Software N 63 Agribusiness N 40Internet N 53E-Commerce N 45Education N 37Media N 30Professional/Diversified Services N 29Health Services N 24 27%

20%

17%17%

13%

10%9%

8%BASE N = 257% = PERCENTAGE OF TOTAL


Year 1Year 2Year 3Year 4Year 5Not break-even yet

USD +100KUSD 50 - 100KUSD 10 - 50Kless than USD 10Kno revenue

11. REVENUE GENERATION distribution per year

year 1 year 2 year 3 year 4

12. BREAK-EVEN POINTdistribution of years when ventures reached point of break-even

10. REVENUE GROWTHdistribution of years when ventures generate their first revenue

PERFORMANCE

This section of the report looks at the revenue performance of the companies. Especially how revenue of the companies improves year on year and a comparison to their break-even points.

With over 70% of all ventures generating revenue, it is clear that the African market is full of opportunities. Looking at the distribution of revenue genera-tion per year, the majority of ventures are making less than USD 10K in their first year of business. On the other hand, the positively changing distribution of revenue generation over time indicates their increasing market potential. Moreover, almost one-third of the ventures turned profitable or at least reached their point of break-even.


13. INVESTMENTSdistribution of capital secured

Only founder capital N 17Internal + external capital N 114No capital N 126

INVESTMENTS

This section of the report looks at the capital raised by the companies participating in this study. The sources of capital being deployed, the stage the capital is being invested, and how the capital is invested across sectors and countries are also researched.

Total invested capital more than doubled compared to last year’s research: from USD 12 million to USD 26,9 million. This can be explained partly by the growing sample size. However, looking at the average amount invested per venture the numbers increase from USD 130K last year to over USD 200K this year. The invested capital has been split into founder’s capital and external capital. Results show a substantial amount invested by the entrepreneurs themselves (46%).

The most capital is invested in Kenya, followed by South Africa, Uganda and Nigeria. Where Kenya is 33%, South Africa is 19%, Uganda is 10% and Nigeria is 9%. From the median and average values it can be concluded that invest-ments in South Africa are larger than investments made in Kenya. This might be due to the more mature state of the South African startup space. In the case of Uganda the average value is 15 times above the median value, the result of one outlier.

26,903,943

14. EXTERNAL CAPITAL median and average investment secured from external investors

N = 114TOTAL = USD 14,534,126.20

USD 30,000.00 USD 127,492.34

MEDIAN AVERAGE


FounderUSD 12,670,067 N 112

Friend/FamilyUSD 2,228,301 N 65

Grant/Competition USD 3,348,025 N 52

Angel InvestorUSD 3,297,047 N 37

VC/Impact FundUSD 2,589,331 N 22

Bank LoanUSD 1,018,722 N 26

Not specifiedUSD 1,752,450

26,903,943

16. INVESTED CAPITAL per funding source

E-Commerce

Agribusiness

Clean Technology

Health Services

Financial Services

Media

Computer Software

Renewable Energy

Wholesale

Transportation

Education

Food & Beverages

Internet

Automotive

Telecommunications

Computer Hardware

Professional/Diversified Services

Retail

Import/Export

Real Estate

29%

17%

14%

14%

13%

12%

12%

11%

11%

10%

9%

8%

8%

6%

5%

5%

4%

4%

4%

4%

17. INVESTED CAPITAL by top 20 sectors

GROWTH N 111

STARTUP N 146

15. EXTERNAL CAPITAL median and average investment secured from external investors

MEDIAN AVERAGE

USD 65,350.00 USD 177,442.08

USD 20,000.00 USD 61,298.27


X % of investmentsO number of investments

COUNTRYNigeriaKenya

TanzaniaSouth Africa

GhanaUganda

CameroonEgypt

INVESTMENTS24 19 12 11 10 10 9 9

18. CAPITAL SECUREDper country

19. EXTERNAL CAPITALmedian and average external

capital of top 8 countries

X medianO average

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INVESTORS

This section of the report looks at the investors part of the community. It investigates their activity level, average size of investments and their allocation. Also insights on the venture and country factors that influence their investment decisions are analyzed.

The investors are actively investing with 82% indicating investments have already been concluded. The difference in investment sizes varies between the different types of investors. Angels are investing between USD 25K and USD 100K, whereas VC’s and social impact funds are investing over USD 100K. The ICT sector is the most attractive for investors securing 61% of all investments.

Entrepreneurs should focus on the quality of their management and team to attract investors. This point was identified as the most important factor for investors deciding in which ventures to invest. Team was followed by finan-cial performance and market size. On a country level the economic growth, combined with investment protection and political stability, are seen as the most important factors for investors. At the same time, affinity with the market is seen as less important when compared on average. This could indicate an increasing opportunity for cross-border investing and appetite for syndication.

Invested in African companies N 58Not yet invested in African companies N 12No answer N 1

20. INVESTORSinvestment activity

Venture Capital firm N 16

Social impact fund N 10

Other N 11

SME lender N 6

Angel investor N 22

Accelerator N 6

Total sample N 71

0 100K 200K 300K 400K 500K

21. MEDIAN INVESTMENT SIZEby investors category in USD


18%

6%

13%

21%

25%25%

25%

38%

38%

61%

ICT N 34Agriculture N 27Finance & Banking N 27Real Estate N 18Healthcare N 18Education N 18Transportation N 15Wholesale & Retail N 9Sanitation & Waste Management N 4Other N 13

BASE N = 71

22. ALLOCATION OF INVESTMENTSper sector

23. DECISION MAKING FACTORSon a venture level indicated by investors


24. DECISION MAKING FACTORSon a country level indicated by investors


ECOSYSTEM

This section of the report looks at some of the external influencing factors, for example how the invested amount of capital changes when there is a relationship to a multinational company. This section also looks at the ability of ventures to raise capital as per their membership to a hub and/or participation in pitch events.

The importance of participating in an acceleration program, or being selected for a pitch event, results in an increased amount of capital raised. Ventures participating in acceleration programs or events secure higher median and average amounts of capital compared to ventures that do not.

Multinational collaboration, defined as a strategic business relationship, is an important factor in the performance of startups. Analyzing the results, collaboration with multinationals increases both median and average amounts of invested capital and shortens the time to break-even. Also the percentage of ventures generating revenue is higher for the sample collaborating with multinationals when compared to ventures that do not.

25. BENEFIT OF ACCELERATOR PROGRAMSwith or without participation in acceleration program or event

MEDIAN

YES USD 45,000.00 USD 126,090.20

NO USD 25,000.00 USD 102,576.17

AVERAGE


YES NO

Year 5Year 4Year 3Year 2Year 1No break-even yet

28. MULTINATIONAL COLLABORATIONdistribution of multinational impact on break-even point

26. MULTINATIONAL COLLABORATIONmedian and average investment size with or without impact of multinationals

27. MULTINATIONAL COLLABORATIONpercentage of ventures generating revenue with or without impact of multinationals

YES NO

MEDIAN AVERAGE

INVESTMENT RATENo multinational collaboration N 172 - 49%Multinational collaboration N 85 - 55%

NO USD 16,875.00 USD 72,309.36

YES USD 90,000.00 USD 180,002.98


KEY TRENDS

The entrepreneurial base on the African continent is growing over time. More importantly the quality of the ventures is improving. As a result, we recognize three key trends that have considerable influence on the African startup funding landscape:

1. A growing interest from African diaspora to invest in startups in their country of origin, 2. The emergence and increasing number of business professionals turning angel investor locally,3. A growing appetite for cross-border investing across Africa generally.

At VC4Africa we see that these trends highlight a change in mindset and a growing recognition of the opportunities and entrepreneurial talent coming from Africa. These stories also capture the value, importance, and relevance of such a community and platform. They show that by connecting a global network of business professionals we are better able to unlock resources across the African startup ecosystem.


CASE STUDY

The World Bank estimates there are approximately 169 million Africans living outside the continent in North America, Latin America, the Caribbean and Europe, not including Asia. In 2012 it was calculated remittances were USD 31 billion. The World Bank forecast expects the numbers to increase to USD 33 billion in 2013, USD 36 billion for 2014, and USD 39 billion in 2015.2 These remittance flows are an important source of funding for African based ventures.

Rodrigue Fouafou is a member of the VC4Africa community since 2013. He is a Cameroonian born Canadian entrepreneur and angel investor who originally moved to Ottawa, Canada to pursue his studies. Rodrigue now lives there permanently and manages his own group of companies.

In the last 10 years his business endeavors have proved successful and he has been able to build up personal savings over time. During the last two years, Rodrigue has been thinking a lot about Cameroon and to what extent entrepreneurs might be innovating in his home country. Eager to find out more about these entrepreneurs, and to engage them in conversation, he joined VC4Africa.

It was through VC4Africa’s Mentorship Marketplace that Rodrigue ended up engaging the founders of two companies, Njorku and Kiro’o Games. The former is a job listing service and the latter seeks to become the first digital gaming company in central Africa. It is through these mentorship-based inter-actions that Rodrigue got to know each founder and better understand the

Cameroon

investors from the African diaspora

business they were building. Being a Cameroonian, Rodrigue can appreciate the business climate and has an easier time assessing the market risks. As a result, Rodrigue made investments into both companies and is now working with the teams to see how he can help them grow and develop their visions.

The VC4Africa community welcomes a growing number of members like Rodrigue who join the network and are interested to engage with entrepre-neurs. It is expected this trend will only grow in the years to come.

2 Source: World Bank, 2013


The timing for local African angels to rise couldn’t be more critical. Indeed, foreign capital can only engage when there are local investors willing and able to lead the way. At the same time, African companies increasingly look outside their country for expansion or follow on capital. They seek access points to these networks. At VC4Africa we see a growing number of high net-worth individuals starting to invest locally. This is the single most significant development seen over the course of 2014.

CASE STUDY

Over the past two years various angel networks have emerged across Africa, including the Lagos Angels Network (LAN), Cameroon Angels Network (CAN), Cairo Angels, Ghana Angel Investment Network (GAIN), Silicon Cape and many others. VC4Africa expects the number of networks to increase the coming period, and as a result a growing number of high net-worth individuals will become active as angel investors.

Nigerian-Finnish mobile payment startup IroFit raised USD 600K in seed funding from a group of investors including a leading Nordic early-stage VC firm, a major Finnish payments industry software development company, and a Nigeria based industry expert and angel investor. IroFit’s founder and CEO explains: “The angel investor from Nigeria found us through our VC4Africa venture profile and then reached out to us”.

The funds raised will be used to finalize IroFit’s proprietary platform and pay for the rollout of the service in Nigeria. In addition to the funding round, IroFit simultaneously signed a major agreement that guarantees a hundred thou-sand payment devices will be available to the Nigerian market upon launch.

The critical point in this story is to recognize that African born innovations, and the entrepreneurs that drive them, won’t receive the support they need until local investors vouch for them first. In this case, the Nigerian angel investor added a unique perspective to the market. The commitment from the investor put the wheels in motion needed to get other investors involved.

Nigeria

emergence of the local angel investor


CASE STUDY

Historically investors hesitated to invest in a company more than a one-hour drive away. But with the emergence of technology, and increasing access to real-time data and analytics, distance becomes less of a factor.

This also builds on the realization that innovation can come from anywhere in the world. With over 20,000 angel investors in Europe alone, and an increas-ing number of investors who consider opportunities in Africa worldwide, there is a growing appetite for cross-border investing.3

Meet Dr. Stefan Shaw, a manager based in Munich, Germany, who invested in Kenyan startups Karibu Solar & Soko. As he explains in an interview we conducted: “My wife and I have decided to dedicate a percentage of our income to social impact in Africa. Instead of supporting aid projects, we want to support businesses that are sustainable and yield both a social impact and financial performance”.

Kenya

increasing interest for cross-border investing

The motivations for investors vary greatly. In this case, Stefan explains, “Invest-ing comes with risk, but my wife Rose and I are getting a lot in return: Direct access to the founding team, becoming part of their business story and of course the chance to become a contributor to a business that eventually will change the life of a lot of people for the better. Isn’t that worth risking some-thing?”

When asked about what he looks for in the companies he supports he talks about the quality of the founders and team. Specifically he explains: “We are looking at the people who run the businesses and try to understand their val-ues. If they correspond with ours this is a major step towards getting involved. Above all, I find honesty regarding the things that haven’t worked especially important. This helps me understand both how the business works and also how the team deals with failure.”

VC4Africa sees a growing number of foreign-based angels looking at early stage African opportunities. And where distance at one point might have been an issue, increasingly angel investors look to the team and their proven track record to overcome the distance. Cross-border investing is growing in popu-larity and is a trend expected to grow the coming years.

3 Source: EBAN (European Business Angel Network), 2010


CONCLUSIONThe report shows an increasing number of businesses successfully growing their operations over time. They generate an increasing amount of revenue and add new jobs to the African marketplace. Indeed, supporting Africa’s opportunity driven entrepreneurs generates a meaningful return.

Despite considerable gains, the ‘missing middle’ problem persists, although narrower than when VC4Africa started in 2007. From this report, we know that entrepreneurs have been able to secure venture funding In 26 African countries. Especially in leading markets like Kenya and Nigeria, founders increasingly succeed in raising the first USD 100,000 from external investors. The challenge now is to reach entrepreneurs across markets. At the same time help these companies grow to a size they become viable prospects for the larger venture capital funds, impact investors and SME financiers.

AFTERWORD - BY JASPER GROSSKURTH

These are exciting times for those who invest in Africa. We observe a strong increase of interest ranging from small scale investors to global multi-billion dollar funds. Their money meets an increasing number and diversity of businesses. New ways to match funds with businesses, such as VC4Africa, are catalysts for this growth of activity.

This report clearly shows the momentum. The number of venture applications on VC4Africa has grown by 640% in just 3 years. That growth in volume reflects a larger and more vibrant SME ecosystem in Africa: more ideas put into action, more encouragement, more risk taking entrepreneurs, more networks, more visibility. While many of the companies might still be in a stage of pure ambition or mentor dependency, a quickly increasing number are investor ready with attractive offers.


• It will be interesting to see what trends emerge given larger data sets showing how ventures mature over longer periods of time;

• The average and median values of invested capital per venture differ considerably. This implies a significant impact due to a few outliers. Therefore these outcomes have to be treated carefully;

• The top investment categories are related to the Technology sectors, and then followed by Agriculture, Health, Finance and Energy;

• This is the second time VC4Africa has endeavored to create such an index, an activity we look to build on in the future;

• You can see which companies participated in the index and interact with the participants on VC4Africa.biz.

My own favourite set of indicators in the VC4Africa survey covers the team size. Just a year ago, the survey yielded an average team size per company of 3.7. The 2015 survey reports a rise to 5.7. Better even, the participating com-panies expect to quadruple their team size within the next two years. Many might fall short of that target, but the positive momentum is significant.

Larger teams reflect the fact that the idea owner is able to convince others of the benefit of the idea and has more shoulders to stand on. And in a large, yet committed group an investor is more likely to find promising people to work with. Given that team is probably the single most important decision criterion for investors, the growing team size is a very positive signal.

When we look at revenues, we see another set of hopeful signals. The share of companies participating in the survey that have reported to already have revenue stands at 72%. And for those that have revenue, the average reve-nue ranges from less than USD 10K per year for fresh startups to a median of USD 50K and more for mature businesses. Investors love businesses with a proven business model and there is no better proof than revenues.

The money follows these positive developments. In last year’s survey the average investment into a company was USD 130K, including external funding and owner’s funding. This year’s survey puts the average investment at USD 205K, almost 60% growth. The average external funding alone has now grown to USD 127K.

This heightened level of activity will bring stories of success and of failure, stories of big wins and total losses. Both, bulls and bears of Africa will find evidence confirming their view. In that way, Africa is growing into a regular investment market where professional businesses meet professional inves-tors. 2015 might well be a major positive tipping point on this journey. I am very bullish and find my evidence in the VC4Africa fresh business survey.

- Jasper Grosskurth is Managing Director at Research Solutions Africa Ltd.

CLOSING REMARKS

https://vc4africa.biz


If you would like to have more specific insights on certain regions or other findings please contact the VC4Africa research team:

e-mail: [email protected], tel: +31 20 779 55 74

RESEARCH TEAMLead Research, Thomas van HalenData Analyst, Vivek BadgamiaAuthor, Ben WhiteAuthor, Bill ZimmermanEditor, Hendrik AdmiraalEditor, Miguel HeilbronEditor, Bertil van Vugt

RESEARCH PARTNERSResearch Solutions Africa, Jasper GrosskurthNyenrode Business Universiteit, Andre Nijhof

NETWORK PARTNERSAfriLabsDEMO AfricaEAVCA

IN PARTNERSHIP WITHDOEN FoundationHumanistic Institute for Development (Hivos)Argidius Foundation

GRAPHIC DESIGN40rovers

All photos in this report are used under Creative Commons license 4.0.Photo credits: TEDx Accra, Oluniyi Ajao, page 6; Nile vista real estate, David Evers, page 17; Guy talking, Michael Pollak, page 20; Patrick Bukoma, DFAT photo library, page 21; Mobile affair, Yenkassa, page 22; Tetteh Quashie, Accra, Ghana, George Appiah, page 24.

VC4Africa’s vision is to enable African entrepreneurs and investors to find each other online. We aspire to become the preeminent social network for entrepreneurs and investors focused specifically on innovative business opportunities across the African continent. Learn more about the community by checking out our welcome page. Get involved and join the community today!

VENTURE CAPITAL FOR AFRICA

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2015 report - venture finance in africa

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