How digital acceleration in Africa can improve investor-readiness?
In October 2020, Advantage Austria hosted “Silicon Savannah Immersion”, a great digital event bringing together Austrian and African start-ups, accelerators, and investors. The 68 participants could attend inspiring presentations and productive sessions and also hold goal-oriented 1:1 meetings to make new business contacts.
Among more than 20 sessions, the conference program had one special part: experts talked about several opportunities to support start-ups on their scaling path and getting funded.
Key2investors with Petra Wolkenstein participated in the lively discussions on acceleration and investor readiness during the “Silicon Savannah Fireside Chat”.
The discussion was moderated by Eric Wainaina, Senior Startup & Innovation Manager at Aussenwirtscheft Austria, who did an excellent moderation for Petra Wolkenstein and Jason Musyoka Manager of Viktoria Business Angels Network (Viktoria Ventures).
We summarize here the main take-aways of the fire-side chat.
Investors see a thriving African startup scene with some challenges
“Since 2011, the ViKtoria team has been actively supporting the growth of entrepreneurial ecosystems in various sectors in East Africa. Viktoria Ventures manages the recently launched Viktoria Business Angels Network (VBAN) which is focused on investments into the tech sector in East Africa.” – Linkedin.
Although the African start-up scene is affected by the COVID-19 crisis, Jason explains, it is still expanding. He provided an excellent overview of the African investment landscape. Fintech, E-commerce, Helth, and Biotech are the strongest sectors with Energy and Logistics sector emerging. He used several great illustrations from Briter Bridges, whose innovation maps are worth following.
What are the challenges, investors have with start-ups in Africa?
- Investors mourn the low quality of their deal-flow. There are many startups and it is a real challenge to analyze them and find the ones that are really attractive and ready for investment.
- Realistic valuations are another important pain-point. Startups and also investors have unrealistic expectations on valuations and a lot of data is missing to make good calculations.
- In some countries, difficult economic and political environments reduce investment activities.
- A balanced team is another very important topic for investors, that is not always in place.
- Among all startups and young companies in African countries, just a minority has a truly scalable business model and moreover a team of founders who is capable of scaling and achieving growth.
Accelerators can support African entrepreneurs in multiple ways
So co-founders find support in running through good-quality accelerators and incubators/hubs. These offer various types of professional support. The hub-system in African is growing strongly.
What accelerators can deliver in terms of product-market fit
According to Jason, team dynamics are particularly important, as are the founder’s skills and abilities, background, and experience, but these are difficult to measure. The fit of the product to the market is also crucial.
“We look for customer-oriented teams, not product-oriented teams.”
If you have a great team but not a good product-market fit, then accelerator programs are the support system that can deliver progress. During the program, these gaps have to be filled. Some start-ups are high-flyers that investors deem to be ready for investment. Others are not making such great progress. Coaching in the accelerator programs helps. Then the top performers are presented to the investment community. Because of acceleration programs, investors can look at startups over a longer period of time and build confidence that they are the high flyers. In addition, some entrepreneurs struggle with selling their services on the market. This is where investors can also help.
Jason believes that a great team is essential. But if the product needs to be changed, then an accelerator program and coaching can bring it to that ideal level. The excellent of an entrepreneur depends on how well he or she can adapt to new situations.
The next step after product-market fit: Challenges in scaling a startup
Jason points out, that startups tend to be more cautious on their potential speed of scaling achieving goals. Investors need to help startups to discover their scaling potential in Africa. However, there needs to be more data on scaling benchmarking and different markets. This would help a lot, especially in the form of a benchmark KPI database. This could provide the basis to plan well, to define the right target segments and discuss new market launch strategies. This is what investors wish for.
Digital accelerator-platforms on the rise
Petra introduced the digital-accelerator platform by key2investors and the training module on investor-readiness. “We support startups with self-service online training to get ready for investors.” She spoke about the future of acceleration: in-presence accelerator programs are transferred to virtual accelerator programs in such challenging times as the COVID-19 year 2020. Suddenly digital acceleration provides the opportunity to innovation hubs, governments, universities and incubators, to support a lot more entrepreneurs at the same time and across several locations. But the future will bring a mix of both, digital and in-presence acceleration in the form of hybrid programs.
Petra presented the results of a study on investor readiness, which provides recommendations on how to fill gaps and help start-ups with financing. According to the study, more than 50% of start-ups need to be better prepared to face investors and strike a good deal.
“We have licensed the platform to accelerators to bring their programs digital. For example, with our collaboration partner in Ghana, we have provided a digital investor-readiness program to about 100 startups in 2019.”
Key2investors is a unique platform to bring coaches, hosts, and startups together and provide them with their digital home.
About the Silicon Savannah Immersion
“Since the introduction of the mobile payment system M-Pesa 2007, a strong innovation & start-up scene has developed in Nairobi, which offers special opportunities for Austrian companies. New business models and solutions for the East African market are being sought. This digital event offers innovative Austrian companies the chance to get to know the local tech- and startup-ecosystem in Nairobi and build bridges to catalyze opportunities. The digital event will tackle two key emergent areas of the technology ecosystem in Payments and Logistics while giving insight into the business culture.” – Aussenwirtschaft Austria
Fintech & Payments, logistics, and culture were the main topics.