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Capitalists/Impact Investors may not be taking enough risk because they don’t know the
technology domain, region or start-up team characteristics. On the other side- start-ups may
not be ready to absorb large amounts of capital and exposure for multiple reasons
(talent/skills being one and focus being another).
The African start-up ecosystem is still developing. African founders need to focus on getting
stuff built and building skills along the way and focus- a do or die scenario, not half
attempting a start-up when someone has betted their savings on you.
Investors/Grantees need take some risk but learn from their mistakes but not flood the
market with money. Back to those grants and impact investing. Even they are aware that
their involvement might lead to a risk to the ecosystem they are trying to help. So yes, even
grants can be bad for the ecosystem- look up Crowding out effect as a cautionary example
to NGOs, AID givers and Governments.
Ultimately when we have more bigger technology start-up successes, it will begin to wake
up both the investor and founder side and the market will become more efficient and
maybe Africa may enter into a boom and bust business cycle we see even in Silicon Valley
and across the globe where one period founders have all the power and awash with cash
and another time there is little funding available as investors got burnt and have showed
poor returns.
I leave you with a concluding comment from Ernst and Young on Africa business
confidence which captures the tension that exists in the stories I tell:
“Despite this growth, there remain lingering negative perceptions of the continent —
but only among those who are not yet doing business in Africa.”