Why is a new model needed to invest in African startups?

Traditional models of investing in start-up companies are not working in Africa and investors need to rethink their way of doing things when they support startups on the continent.

This is according to speakers discuss investing in African startups during the recent AHUB event dedicated to startups at the AfricaCom conference in Cape Town, which said investment models on the continent must be different from elsewhere in the world.

Zachariah George, co-founder and director of investments at Startupbootcamp AfriTech, said many investors who are new to Africa think from the point of view of private equity, which is irrelevant.

"There is a method in the madness of how you do early VC in Africa," he said. "You have to go out and meet people. You have to go everywhere and meet entrepreneurs and see what they do. This is a difficult industry. It is not Silicon Valley, it is not New York.

Sharron McPherson, co-founder of the Center for Disruptive Technologiesthe agreed models that worked in places like Silicon Valley were not suitable for Africa.

"Silicon Valley is a valley in the United States, all that is done is not right for Africa. We often look for unicorns and other entities do not have access to capital, "she said.

"We seek to take advantage of new approaches for what is right in Africa. I do not think we have the exact language or the business models. It's certainly not private equity, and VC needs to be fine-tuned here. "

Eric Osiakwan, managing partner of the company, also distracted the discussions around unicorns. Chanzo Capital, warned, saying that there were excellent entrepreneurs across the continent who were building an exciting business that, even though it is unlikely that they will become unicorns, should nevertheless be very attractive to investors.

"I am excited about the entrepreneur. There are entrepreneurs who can create extraordinary businesses. It's good to build unicorns, but there are entrepreneurs in Africa who do not have access to capital and who are capable of creating big businesses, "he said.

"The most successful companies in the world are building great products that people can use and pay for. If you invest in the long term, it must be your motivation. "

So, what should investors look for in terms of African startups? George said that it was very important to examine the pbadion of the founders and their path to the market, which is why startups grow or fail. He also urged African entrepreneurs to solve the real African problems.

"There are so many problems in the developing world that are not dealt with in the United States, Canada and Western Europe. Let's stop looking for vitamins, build "aspirins". Some people talk about the social impact and others of VC. It's the same conversation. Every company in Africa has a social impact, "he said.

Ben White, founder and CEO of VC4A, agree with that.

"We are talking about transformational entrepreneurs who use technology because of its transformational power. All of these companies have an impact on change in all aspects of society. It's about business and social change at the same time. It's a great opportunity, "he said.

To make the most of this great opportunity, it may be necessary to rethink business models. Emilian Popa is principal to DiGAME Investment Company, an investor from GetSmarter, a South African company specializing in education technology, recently acquired. He wants to see more outings in the African technological space, but believes that it will depend on the development of business models.

"We need to build business models that are not just technology. Let's call them technically. When I look at business models, I look for those who build technologies, but also infrastructure, distribution models. That's what I think works, "he said.

For Osiakwan, it is necessary to unlock more local capital, with the help of incentives, to encourage successful African entrepreneurs to invest themselves in startups.

"In the local ecosystem, the ratio of foreign capital to local capital is around 70:30. We need to unlock local capital because they bring value that foreign capital does not add. This will increase the value of the raw money that enters the ecosystem, "he said.