Africa offers fertile ground for the success of innovative start-ups

An interview with Fadilah Tchoumba, Head of ABAN, conducted by Link to Leaders – original publication here.

What is the role of ABAN in the entrepreneurship that is done on the African continent?
African Business Angel Network (ABAN) is the largest pan-African organization of Angel investors in Africa. Established in 2015, ABAN represents the growing number of business angel groups in the African early-stage ecosystems’ future, providing vital human and financial capital to African startup companies creating jobs across the continent.

The African continent is home to a rapidly growing startup ecosystem, with an increasing number of entrepreneurs seeking funding for their innovative ideas. This need is being met in part by the growing number of local African business angels who are now investing professionally and consistently in these startups by providing mentorship, advice, funding, and business connections to entrepreneurs in the early stages of their startup development. Last year, startups on the continent raised a disclosed amount of $ 5 billion out of which $400,000 million was a direct contribution from local business angels. It is real and it is happening. African Business angels are playing an important role in the African startup ecosystem.

With the success stories such as Andela, Paystack, Flatterwave, Chipper, Wave, and more recent Tunisia-based AI InstaDeep exiting at $684million – the notion of business angel investing is becoming more popular among African professionals, successful entrepreneurs, and founders. This group of individuals – who have the means, skills, and risk appetite – are eager to support the next generation of entrepreneurs and invest in African start-ups to help accelerate Africa’s economic development.

Since 2015, the year ABAN was created, what are the network’s biggest wins so far?
To date, there are over 5,000 active business angels in Africa compared to a only few dozen in 2012. Along with the increase in individual business angels, we have also seen a sharp increase in the number of business angel groups and syndicates that are created to spread risk amongst members and improve investment performance, from just 5 pioneering angel network groups in 2012 to over 150 business angel groups across 54 African countries today.

The visibility and accessibility of angel investing in Africa have led to greater diversity in the profile of business angels on the continent. We have witnessed the emergence of female representation led by pioneering female business angel groups such as Rising Tide Africa, based in Nigeria, Dazzle Angels in South Africa, Female Future Angels in Mauritius, and DRC Impact Angels in the Democratic Republic of Congo. The growth in the number of business angel networks reflects the achievement of ABAN’s strategic goal of developing the Angel Investment ecosystem in Africa.

At ABAN we are committed to unlocking the participation of local investment in the African start-up ecosystem. In partnership with Afrilabs, we created and launched Catalytic Africa in 2021, an innovative investment model involving Business Angels and Innovation Hubs. By backing these African business angels with matching grants for each successful equity investment made in a participating start-up, Catalytic-Africa seeks to reduce the risk of investing and facilitate growth opportunities throughout the continent – kicking off projects that are powered by business angels’ funds and grant money alike! Through Catalytic Africa, start-ups have the chance to actualize their potential with innovative co-investment opportunities. If a venture passes an application review by the Programme Committee, it will receive matching funds from this unique instrument of investment in African ventures, offering powerful innovation and development for early-stage businesses on the continent.

How is Catalytic Africa positioned?
Catalytic Africa has been a groundbreaking platform for African entrepreneurs, connecting 520 hubs and 373 startups to 68 ABAN’s affiliated angel networks with over 1000 individual investors. We have concluded 18 investments made in 12 countries so far – covering Cameroon, Botswana, Nigeria, Tunisia, Kenya, South Africa, DRC, Mauritius, Zambia, Tanzania, Cote D’Ivoire and Senegal.

In our effort to continue to equip business angels with relevant investment toolkits and spread business angel impact, ABAN developed the first copy of investment legal documentation templates for start-ups in Lusophone African countries in Spanish and Portuguese and OHADA African countries, The aim is to support investment and deal-making processes for business and ensure that all transactions are compliant with prevailing local laws. Because of this achievement, 17 OHADA African countries are able to execute all start-up investments – just like their peers in English-speaking or Arabic-speaking Africa.

ABAN has launched its Thematic Angel networks aimed at facilitating investment into 4 key sectors we believe would be key in the coming decade. The launch of these thematic networks is supported by the European Union through its AEDIB NET project to drive investment into climate-smart agriculture, clean technology, smart cities, and Digital trade ventures on the continent.

In which markets is ABAN present, how many members do you have and how much has it invested?
To date, ABAN has a presence across all 54 African countries on the continent with established Angel groups in 33 of those countries. We are spread through 68-member networks with over 1400 individual Angel Investors.

Looking at the African continent as a whole, what do you think is the emerging country in terms of entrepreneurship? The one who has the conditions to surprise the world with his innovation?
Nigeria, South Africa, Egypt, and Kenya have been at the forefront of the African startup ecosystem, particularly in the fintech and health tech sectors. Nigeria’s tech scene in cities like Lagos is especially vibrant, driven by a large, youthful population and a growing middle class. South Africa, Kenya, and Egypt also have strong tech hubs in Johannesburg, Cape Town, Nairobi, and Cairo.

However, smaller countries like Rwanda and Ghana are also gaining traction. Rwanda, for instance, has made significant strides in creating a business-friendly environment and has focused on sectors like technology and healthcare.

In terms of financial capital, Africa has seen growing interest from both local and international investors. The African tech ecosystem raised billions in investment in recent years, with fintech usually leading the charge.

Human capital is abundant, with a large and growing youth population that is increasingly well-educated and tech-savvy. Initiatives like the African Institute for Mathematical Sciences (AIMS), Semicolon, and Andela are contributing to talent development in tech and other sectors. So, while challenges remain, including infrastructural and regulatory hurdles, Africa’s potential for innovation and entrepreneurship is significant.

There is financial capital in Africa? And human capital? Talent people?
Ideas born in Africa increasingly have the means to develop and scale within the continent, although challenges remain. Various countries are fostering supportive ecosystems for startups, including access to venture capital, business incubators, and accelerators. Moreover, policies are being crafted to facilitate entrepreneurship, such as more straightforward business registration processes and tax incentives.

However, there are still hurdles like limited access to funding, infrastructure issues, and sometimes, regulatory constraints. As a result, some African startups do seek foreign investment or even relocate to countries with more mature startup ecosystems, which can result in a “brain drain” of talent and ideas.

Additionally, while foreign investment can provide much-needed capital, it can also lead to a form of economic colonization where local interests are not adequately represented. There’s an ongoing debate on how to balance foreign involvement with local ownership and control.

Nevertheless, the potential for ideas to be developed and scaled in Africa is increasing. As the local investment landscape matures and governments implement more startup-friendly policies, the need to look outside the continent for growth opportunities may lessen.

What is it like to be a woman investor in Africa? What are the main challenges for you and for your activity?
Being a woman investor in Africa, like in any part of the world, can come with unique opportunities and challenges. In Africa specifically, women investors may face cultural and societal barriers that can affect their access to capital, networks, and resources. However, it is also important to note that there are many successful women investors in Africa who are making significant contributions to the continent’s economic growth. It is important to support and empower these women to create a more inclusive and diverse landscape. At ABAN, we understand the importance of gender diversity in the early-stage investment ecosystem and understand that women investors bring unique perspectives and insights to the table. That is why we have been very deliberate in supporting women investors. With the growing number of female angel investors on the continent, we have no doubt that their unparalleled commitment to financing female founders will greatly contribute to closing the $42 billion financing gap for African women.

Fadilah studied in the US and the UK, and now works in Africa. What unites and separates the entrepreneurship that is done in these geographies?
It has been a great and unique privilege to live and engage with the US, the UK and many African countries. Entrepreneurship is an exciting and dynamic field, and while there are certainly similarities across geographies, there are also some distinct differences between the US, the UK, and countries in Africa.

One of the key factors that unites entrepreneurship across these geographies is the drive for innovation and the pursuit of opportunities. Entrepreneurs in all countries and regions are constantly seeking new ideas, products, and services that can meet the needs of the market and create value. The desire to solve problems, take risks, and bring about positive change is a shared characteristic among entrepreneurs worldwide.

However, there are also some notable differences. In the US, there is a strong emphasis on venture capital and a robust startup ecosystem that supports high-growth, technology-driven ventures. Silicon Valley, for instance, is renowned as a hub for innovation and entrepreneurship. The UK also has a thriving startup scene, with a focus on sectors like fintech, creative industries, and advanced manufacturing.

In Africa, entrepreneurship often takes a different form due to unique socio-economic and cultural factors. Many entrepreneurs in Africa are driven by the need to address social and economic challenges, such as access to healthcare, education, and basic necessities. There is a growing recognition of the potential for entrepreneurship to drive inclusive growth and create jobs in Africa. As a result, there has been a rise in social entrepreneurship and impact-driven ventures that aim to make a positive difference in local communities.

Another important distinction is the availability of resources and support systems for entrepreneurs. While the US and the UK have well-established networks of investors, mentors, and incubators, access to funding and support can be more challenging in Africa. However, there are efforts underway to bridge this gap, with the rise of angel investor networks, impact funds, and entrepreneurship support organizations across the continent.

Overall, while there are similarities in the entrepreneurial mindset and the pursuit of opportunities, the specific contexts and challenges in each geography shape the nature of entrepreneurship. It’s an exciting and evolving field that can benefit from cross-cultural learning and collaboration.

How does Catalytic Africa’s work interconnect with ABAN?
Catalytic Africa is a co-investment solution by ABAN in conjunction with AfriLabs that raises funds from various institutional partners to add to a pool focused on early-stage startups in Africa. It is the first African matching fund and it aims to de-risk investment into innovative startups on the continent with 4 key objectives.

Increase the investment made by angel investors in African startups Strengthen African angel networks and innovation hubs Fund African startups with innovative digital solutions & measurable impact Present reliable ecosystem data, insights, and impact reporting for all stakeholders Catalytic Africa Fund is exclusive to ABAN network members as we believe they have the right capacity to further support the development of African startups.

To date, € 1,155,794 has been invested by local angel investors affiliated with ABAN and this has unlocked €973,968 from the Catalytic Africa fund as qualified matching grants, leading to a cumulative amount of over € 2.1 Million invested in African startups across 12 countries.

Do ideas born in Africa have the means to develop and scale in Africa or are they absorbed by others?
Ideas born in Africa certainly have the potential to develop and scale within and outside the continent. In fact, there has been a growing recognition of the importance of homegrown innovation and entrepreneurship in Africa, and efforts are being made to provide the necessary support and resources for African entrepreneurs to thrive within and beyond the continent. Flutterwave, a Nigerian-born fintech company now operates in various African countries, the UK, America, and Europe. mPharma, a Ghana-born health-tech firm, now operates in Nigeria, Zambian, and Zimbabwe.

One of the challenges in the past has been the limited access to funding and investment opportunities for African startups. However, this situation is gradually changing. There has been an increase in the number of angel investors, venture capital firms, and impact funds that are specifically focused on supporting African entrepreneurs. Additionally, governments, development organizations, and corporate entities are also recognizing the potential of African startups and are providing funding and support through various programs and initiatives.

Moreover, there is a growing ecosystem of incubators, accelerators, and entrepreneurship support organizations in Africa that provide mentorship, training, and networking opportunities to help entrepreneurs develop and scale their ideas. These organizations play a crucial role in nurturing and supporting African startups throughout their journey.

Furthermore, the rise of technology and digital platforms has opened up new possibilities for African entrepreneurs to reach a wider audience and scale their businesses. Mobile technology, in particular, has been a game-changer in Africa, enabling innovative solutions to be delivered to previously underserved communities.

While there may still be some instances where African ideas are absorbed or replicated by others, there is a strong push to ensure that African entrepreneurs have the means to develop and scale their own ideas within the continent. This is not only important for economic growth and job creation but also for addressing the unique challenges and opportunities that exist in Africa.

Ultimately, the development and scaling of ideas in Africa depend on a combination of factors such as access to funding, supportive ecosystems, mentorship, and market demand. With the right support and resources, African entrepreneurs have the potential to create impactful and successful ventures within and beyond the African continent.

What future do you foresee for the start-up and investor market in Africa?
The future is very bright, for lack of a better word. Startups and investors in Africa are poised for a massive startup and investor ecosystem revolution, and these angel investors are at the forefront of this transformative journey in propelling this revolution, even further. With a growing middle class, increased access to technology, and a dynamic angel investment and entrepreneurial spirit, Africa offers a fertile ground for innovative startups to thrive. Africa is blessed to have both local and international angel investors. Both local and international angel investors recognize the immense potential our continent has and are playing a pivotal role in fueling innovation in the continent. From my standpoint, startups and angel investors are shaping the future of Africa’s economy, driving job creation, and addressing other critical challenges befalling the continent.

Now is the time to invest in Africa?
Yes, as we speak, Africa has an immense untapped investment potential. Our continent is a continent of vast opportunities in the process of being harnessed. Look at the youthful population, abundant natural resources, and ever-growing consumer and entrepreneurial markets. Matching funds like Catalytic Africa play a pivotal role in catalyzing investment in Africa and has helped uplift so many startups all over the continent through strategic partnerships with governments, development agencies, and private investors, amplifying the impact of investments in key sectors such as EdTech, Climate Smart Agriculture, Clean Technology, Digital Trade, and Smart Cities, which are the key thematic areas of investment in ABAN. They not only provide a financial boost but also attract additional capital for budding entrepreneurs and startups, fostering innovation and sustainable development. They are actually driving positive change in Africa’s investment landscape. Whether it’s in sectors like technology, agriculture, infrastructure, or energy, Africa offers a promising landscape for angel investors seeking high growth and impactful ventures and ABAN is glad to be part of this transformative journey.