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In My View

November 16, 2015

Why Africa is mostly still a market for venture capital

Africa is an early stage market, more suited to venture capital rather than private equity or lending. Early stage investment is essentially financing provided by a venture capital firm to a startup after it has received initial or seed funding. In an early stage market, a company has a product or service that it is testing or still developing, but that isn’t necessarily ready to go to market, or their products and services might already be in the market but are not yet generating revenue. Typically, a company that receives early stage financing has been in business for less than three years. Africans are innovating at a greater pace than any other market in the world, with incredible new innovations especially across agriculture, livestock, healthcare and banking sectors. Most however are in early stages, no more than a few years old. Instead of aiming to get private equity or lending as tends to happened in Africa, these young startups ought to be looking at venture capital. Take a listen to an explanation I gave on this topic at a recent informal workshop.