By Wendy Lung
If you ask people what they see as challenges in the venture capital environment in Africa, you will hear a few common themes: the lack of seed and early stage capital, the need for mentoring and knowledge transfer, the need for greater global networking, and the lack of exit opportunities.
While these genuine challenges exist, there is much to be excited about in the growth of venture in Africa and how VCs are addressing these challenges.
I had the chance to catch up with Mbwana Alliy when he was visiting San Francisco last month. Mbwana is the Managing Director of Savannah Fund, a seed capital fund specializing in early stage high growth technology startups in sub-Saharan Africa. Based in Nairobi, Savannah Fund has a unique model of combining venture capital with mentor networks both in the region and from Silicon Valley via an accelerator program.
Their portfolio is comprised of sustainable, for-profit companies and I was intrigued by our discussion about one company in particular, Inforex. Inforex solves the problem of making foreign exchange more transparent and efficient through technology, particularly in environments with volatile currencies and high growth in tourism, import/export, and trade. It is essentially a networking system between foreign exchange bureaus, commercial businesses, and consumers to provide real-time local forex information and facilitate trades. By filling in the information gap between the parties, everyone wins. The forex bureaus gain new customers and increase revenue, businesses use the real time information to impact the millions of dollars they deal with in foreign exchange, and consumers gain money, time and convenience.
The business started in Uganda, is expanding to Kenya, and has plans to be in Rwanda and Tanzania. With implementation requiring strategic partnerships with the Forex Bureau Associations and Central Bank in each country, Inforex is clearly dealing successfully with an enterprise-level, complex issue. Another consumer mobile app, this is not.
As Mbwana evaluates investments, local knowledge is paramount. He focuses on entrepreneurs who know Africa and its unique environment (including the local language) and are solving local problems. There is promise in bringing together the best of both worlds, the global network and knowledge transfer, best practices around corporate governance, and local knowledge in solving real problems with technology as the enabler.
Our venture group sees similar trends as we work with other growth markets in the development of their venture ecosystems. Take for example, the Latin American venture landscape and how it has evolved over the past several years. The number of US VC firms with LatAm portfolio companies has increased. The number of IT deals in Latin America has grown faster than any other sector in the last 5 years, driven by early stage investments. (With one third of the deals in the B2B space…. and increasing) Globant, the Argentine software and IT services firm, is expected to IPO this year.
When IBM Venture Capital Group held its IBM Venture Capital Forum in Sao Paolo, Brazil in 2009, the discussion among government, entrepreneurs, and investors at that time was around limited venture capital, lack of mentors for knowledge transfer, and lack of exit opportunities. Sound familiar?
Statistics aside, my excitement and optimism for the venture environment in Africa stems from my interactions with the entrepreneurial community. Whether its experiencing the buzz and excitement at iHub or Nailab, or taking part in the Kenyan government’s award ceremony for entrepreneurs, the feeling is no different than walking into any entrepreneur gathering in Silicon Valley. It’s simply about passionate, dedicated entrepreneurs with great ideas and technologies that will change their community and the world.
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