Afrigather This text was contributed to TechCabal by Dotun Olowoporoku.
Right here’s a thought experiment: What in case your elementary assumptions about investing in African startups had been unsuitable? What if the Large 4 markets—Nigeria, Egypt, Kenya, and South Africa—aren’t really the place the best alternatives lie?
Most VCs investing in Africa are making a traditional mistake: sample matching. They see success tales of startups like Paystack, Flutterwave, and Moniepoint in Nigeria, and suppose, “Aha! Nigeria is the place it’s at.” However that is lazy considering. Related logic underlies the signal-seeking funding theses for headline markets akin to Kenya, Egypt, and South Africa. It’s the equal of deciding in 1995 that the one place to spend money on tech was Silicon Valley.
The reality is, Africa isn’t one market. It’s not even 4 markets. It’s a posh tapestry of interconnected economies, every with its personal distinctive challenges and alternatives. Whereas the Large 4 are undoubtedly necessary and confirmed markets, by focusing solely on them, we’re doubtlessly lacking out on the following large issues.
The sample matching lure
Sample matching is a helpful heuristic and cognitive shortcut that traders usually use to make fast selections. It entails recognising acquainted patterns and making use of earlier experiences to new conditions. Within the context of African investments, this may result in each constructive and destructive outcomes.
On the constructive facet, sample matching might help traders rapidly establish promising startups that share traits with earlier successes. It will probably streamline due diligence processes and assist allocate assets effectively. For instance, recognising similarities between the alternatives introduced by a brand new fintech concept and Paystack would possibly result in funding choice.
Nonetheless, the identical thought sample can doubtlessly result in a focus of capital in a handful of markets, founder sorts, and verticals whereas leaving huge swathes of the continent untapped. This slim focus creates a self-fulfilling prophecy: extra funding in sure markets results in extra success tales, which in flip attracts much more funding, making a suggestions loop that additional marginalises different areas.
This isn’t simply dangerous for the ignored markets—it’s doubtlessly detrimental for traders too. We’re competing for a similar offers in the identical overcrowded markets, driving up valuations and doubtlessly lacking out on hidden gems elsewhere. The extraordinary competitors in these markets can result in inflated buyer acquisition prices, workforce compensation, and diminished returns on funding.
Furthermore, sample matching can result in missed alternatives. By focusing solely on what has labored earlier than, we would overlook modern options that don’t match the established patterns. That is notably dangerous in a various continent like Africa, the place distinctive native challenges usually require novel approaches.
However right here’s the factor: the very best alternatives usually lie the place others aren’t wanting. And in Africa, meaning wanting past the Large 4. It requires a willingness to problem assumptions, dig deeper into unfamiliar markets, and recognise that the following large success would possibly come from an sudden place or in an sudden kind.
To really capitalise on Africa’s potential, traders must stability sample recognition with openness to new concepts and markets. This would possibly contain growing new frameworks for evaluating alternatives, constructing networks in underserved areas, or collaborating with native companions who’ve a deep understanding of those markets.
Lakes and Oceans: A brand new psychological mannequin for African markets
As a substitute of considering by way of nations, we have to begin considering by way of what I name “Lakes” and “Oceans.” This isn’t only a cute metaphor—it’s a elementary shift in how we should always strategy African markets.
Ocean markets are the behemoths. Nigeria, Egypt, Kenya, South Africa—these are your Atlantics and Pacifics. They’re huge, with enormous populations and GDPs to match. On paper, they appear irresistible. However right here’s the catch: they’re additionally shark-infested waters. Everybody’s preventing for a bit of the motion, from native gamers to multinational companies. The competitors is fierce, and the regulatory surroundings might be as unpredictable as a rogue wave.
Lake markets, however, are your Victorias and Tanganyikas. Nations like Senegal, Côte d’Ivoire, Morocco, or Cameroon. They’re smaller, positive, however don’t let that idiot you. These markets are deep, they usually’re related. A startup that may navigate one in every of these lakes effectively can usually simply slip into neighbouring waters.
The actual magic of Lake markets is of their interconnectedness. Many share widespread currencies (just like the West African CFA franc), have related regulatory environments, or are a part of regional financial communities. Which means when you’ve cracked one market, increasing to others might be comparatively easy crusing.
Right here’s the place it will get actually attention-grabbing: Lake markets usually have room for just one or two dominant gamers. Should you can again the suitable horse early, you would possibly simply find yourself proudly owning the entire lake. And if that participant can then navigate from lake to lake? You’re taking a look at doubtlessly geo-diverse dominance.
Take the instance of Wave. They didn’t simply dip their toes in Senegal’s waters. They dove headfirst, grew to become the massive fish in that pond, after which swam over to Côte d’Ivoire. Earlier than anybody knew it, they had been valued at $1.7 billion. That’s not simply spectacular; it’s a blueprint for how one can strategy these markets.
The Ocean technique is about preventing for market share in crowded waters. The Lake technique is about changing into the massive fish in a small pond, after which increasing your territory pond by pond. It’s not about making a splash; it’s about creating ripples that flip into waves (pun unintended!).
Charting a brand new course
This shift has profoundly influenced our strategy at Ventures Platform. We’ve begun to view African markets by means of a brand new lens, wanting past the apparent decisions. Our technique now entails exploring calculated dangers in much less acquainted territories, in search of out hidden alternatives that others would possibly overlook.
For founders, this paradigm shift opens up a world of alternatives. By specializing in dominating a Lake market after which strategically increasing throughout interconnected areas, you’ve the potential to construct one thing actually transformative. The subsequent African unicorn won’t emerge from Lagos or Nairobi, however from Dakar or Abidjan.
The way forward for African tech isn’t going to be constructed by following the well-trodden path, however by these daring sufficient to enterprise past the acquainted. It belongs to the visionaries who can spot potential the place others see limitations, who can flip perceived weaknesses into strengths. These are the entrepreneurs who will write the following chapter of Africa’s tech story.
At Ventures Platform, we’re dedicated to this new imaginative and prescient. We’re not simply wanting on the huge Oceans; we’re diving deep into the Lakes. We’re trying to find these hidden gems—the agile startups that may navigate the intricate waterways connecting these markets, creating ripples that can finally turn out to be waves of change throughout the continent. That’s the place the following large African success story would possibly come from.
In enterprise investing, probably the most vital returns usually come from seeing what others overlook. The largest alternatives in Africa will not be within the Oceans the place everyone seems to be competing. They’re within the Lakes that others are ignoring.
So, let’s rethink our assumptions about African markets. As a result of in these ignored Lakes, we would simply discover the important thing to unlocking Africa’s true potential. The way forward for African tech isn’t simply brilliant—it’s huge, various, and ready to be explored.
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Dotun Olowoporoku is the Managing Companion at Ventures Platform, Africa’s main seed-stage enterprise capital agency, which invests in modern startups centered on market-creating improvements, managing a $46 million portfolio. He beforehand served as Chief Industrial Officer at Moniepoint, a high-growth fintech startup, and as Principal at Novastar Ventures, the place he led post-Collection A investments.
