5 weeks in the past, we rebooted our Ask an Investor column, and in that point, we spoke to the heads of funding at Oui Capital, Antler Nigeria, Capria Africa, HoaQ, and Launch Africa. Scattered from Nairobi to Lagos, these fund managers advised TechCabal how they discover startups, information founders, and, extra importantly, how they land or take into consideration exits in Africa.
This week, we’re publishing a recap that highlights the three greatest questions which have come up in our conversations to date: How do you ship profitable exits in Africa? What sort of help can startups anticipate? Which sectors are most certainly to provide massive wins?
Exits and how you can ship them
Secondaries are the sensible path to liquidity
In our first episode again, Oui Capital’s Olu Oyinsan advised TechCabal that secondaries—the place an investor or founder sells some or all of their stake in an organization to different buyers—will not be the gold customary for buyers, however “liquidity is healthier than no liquidity.”
In 2021, Oui Capital invested $150,000 for a 1.2% stake in Nigerian fintech Moniepoint, and three years later, when it turned a unicorn, Oui Capital partially exited its $150,000 funding to different buyers and returned $8 million—sufficient to return its first fund twice to buyers.
All 5 buyers we spoke to echoed Oyinsan’s ideas: Africa’s exit panorama continues to be evolving as full acquisitions and IPOs stay comparatively uncommon. Consequently, secondary gross sales have emerged because the “path of least resistance for liquidity,” in response to Launch Africa’s Uwemakpan.
His agency has noticed vital demand from later-stage VCs or strategic buyers who wish to purchase out early buyers in profitable startups. Given the relative shortage of large-scale M&A or IPOs, secondaries are a sensible exit lever for seed-stage funds like theirs.
HoaQ skilled this firsthand when it used the secondary technique to safe a 6x return on Raenest on the Sequence A stage. Regardless of being a small cheque, the partial exit was sufficient to ship substantial good points to their angel syndicate members.
Persistence and self-discipline deliver exits
Throughout the board, the VCs warning that the very best exits in Africa require persistence. Additionally they emphasised that one of the simplest ways to attain exit—whether or not through acquisition, secondaries, and even an IPO—begins with robust governance and rigorous reporting from day one.
At Capria, startup founders are advised that the significance is on staying targeted on good governance, robust monetary controls, and native resilience from the earliest phases. Good fundamentals, Mobola da Silva argued, will all the time be an exit magnet.
Nevertheless, the self-discipline cuts each methods. Oyinsan advised TechCabal that buyers additionally want to grasp the significance of “portfolio development self-discipline” and “serious about the exit math” as early because the seed spherical. Of their Moniepoint deal, they intentionally sized their cheque in order that if (and when) the startup reached a lofty valuation, their stake could be massive sufficient to return the fund.
Antler’s Anil Atmaramani, who invests extraordinarily early in Nigerian startups, defined that “inception-stage” bets take time to mature. His method is to assist founders pivot quick if wanted, construct disciplined habits early, and hold them on a pathway in the direction of eventual acquisition or sturdy follow-on rounds.
Generally, buyers should create their exits
Exits are laborious, and buyers usually should be proactive in securing exits in Africa. Oui Capital helped Moniepoint arrange “an information room and your entire due diligence course of,” particularly to make the corporate extra legible to future growth-stage VCs. Additionally they facilitated partial buyouts of an early stakeholder who opposed the startups’ pivot to retail prospects. All of those steps smoothed the street for larger rounds—and, in flip, a profitable partial exit.
Launch Africa designs their follow-on technique and consistently coaches founders to fulfill the diligence expectations of Sequence A and B buyers. They’ve additionally repeatedly teed up secondaries that usher in new buyers and grant Launch Africa partial liquidity.
The kind of help startups get from VCs
Deep operational help and networks
Whereas cash is essential, all 5 buyers confused that African founders want sturdy operational help.
Launch Africa, a VC agency with over 140 startups in its portfolio, recognized two important help areas for founders: strategic help and operational help. The agency makes use of what it calls a “protection mannequin,” the place every companion oversees a handful of startups deeply. Additionally they run weekly workplace hours and “actively coach founders on pitch preparation, deck refinement, cap-table administration, and investor focusing on” whereas additionally leveraging their community of company companions. The last word aim is to make every startup “Sequence A–prepared” as quickly because the metrics enable.
HoaQ confused giving founders “hands-on, founder-first” steering on the whole lot from recruiting to forging company partnerships. As a result of it operates each a syndicate and a fund, it has constructed a big group of angels, founders, and micro-VCs. Startups that take their cheques get launched to this crowd for co-investments, pilot prospects, or future hires. It’s a distinctly community-driven type of help, with a giant emphasis on curated introductions.
Antler offers a structured “day zero” method and offers “pre-company” help. They recruit aspiring founders—usually with area experience—and match them with co-founders, present a month-to-month stipend to allow them to concentrate on constructing, and host them in a structured residency program. They proceed with board-level steering by way of future rounds, principally “staying within the trenches” till Sequence C.
Capria maintains an in-house AI crew that may companion with portfolio corporations on product improvement. This providing is optionally available but extremely valued by founders seeking to implement superior applied sciences with out hiring complete engineering groups. Additionally they make use of an area companion mannequin, investing in native VCs with on-the-ground insights. This twin mannequin ensures that startups obtain not only a world vantage level but additionally hyper-local, each day operational steering.
The perfect-performing sectors to spend money on
Fintech stays the star
Unsurprisingly, the consensus throughout nearly each article is that fintech continues to guide, producing the most important raises and most rewarding exits in Africa. Launch Africa allocates 30–40% of its portfolio to fintech and fintech-adjacent options, whereas Capria devotes half of its Africa portfolio to fintech.
However B2B fashions are more and more sizzling
The buyers all cited a shift towards business-to-business options that deliver steadier income streams and clearer paths to profitability. Launch Africa invests closely in B2B and B2B2C as a result of they discover “extra sustainable development and decrease acquisition prices” in comparison with purely consumer-facing fashions.
Rising curiosity in agtech, healthtech, and “tech-enabled”
Capria actively invests in agtech, healthtech, and jobtech. Their view is that these “transformative, large-scale options” will not be simply worthwhile but additionally important, given Africa’s infrastructural gaps.
Antler is sector-agnostic however retains an eye fixed on missed or “non-traditional” segments which are “ripe for disruption” with the fitting founder groups, significantly if built-in with fintech-like income mechanics. Their instance: a skincare model (Uncover) that thrived in East Africa with modest however well-targeted tech enablement.
AI and information
Whereas pure AI infrastructure performs are much less widespread, many funds see AI as the subsequent layer of innovation. Capria invests in “utilized AI,” that means startups that combine AI into core workflows (like job matching or automated lending selections). They imagine “utilized AI will be transformative in rising markets” and have arrange a whole AI crew that portfolio founders can faucet for integration initiatives.
Launch Africa expects AI/information startups to grow to be a key theme, presumably as B2B options get extra subtle about analysing client or enterprise information, and HoaQ invests in “tech-enabled” companies throughout the board, and noticed an AI-based developer device (Baseline) exit to Cloudflare.
