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Opinion & Analysis

Africa venture capital scene ripe with potential

The future of African enterprises depends on governments and private sector players developing as many entrepreneurs as possible. file photo | nmg
The future of African enterprises depends on governments and private sector players developing as many entrepreneurs as possible. file photo | nmg 

Although we sometimes dismiss the notion of Africa rising, there are emerging innovative ideas that make Africa look great.

One such event is the recent announcement that pan-African venture capital firm CRE Venture Capital, had led a $40 million (Sh4.1 billion) Series C funding of Andela, an Africa-based tech nology company with offices in Nairobi, Kampala, Lagos and New York.

Andela’s Nairobi office is managed by Joshua Mwaniki and currently employs nearly 300 people.

CRE Venture Capital joined hands with DBL Partners, Amplo, Salesforce Ventures, and TLcom Capital in the $40 million Series C round, and now have managed to increase Andela’s cumulative funding to over $80 million (Sh8.2 billion).

This was the first time an African venture fund has been able to lead in one of the largest investments into an African technology company.

Pule Taukobong and Pardon Makumbe founded CRE Venture Capital in 2015. Taukobong had previously founded Africa Angels Network, the first angel investment group to focus on technology opportunities across sub-Saharan Africa.

He has wide investment experience having worked at Investec in Johannesburg, Cape Town and New York. He graduated from Durban University of Technology and is a Kauffman Fellow. Makumbe had previously been a principal at EL Rothschild, where he led and oversaw various global investments and holdings, including The Economist Group, Impala Energy and IHS Towers.

Earlier, he held positions at Bain & Company in New York, Emerging Capital Partners in Johannesburg, and Temasek Holdings in Singapore. Makumbe holds an MBA from Wharton School of Business and a BSE from Princeton University.

CRE Venture Capital is fast becoming a household name in Kenya where many start-ups are looking up to the VC to make early stage investment. When I recently caught up with Makumbe at the Capital Club, he was meeting with some of the most promising Kenyan start-ups.

CRE’s portfolio includes: Flutterwave and Yoco in fintech, Rensource in energy, SweepSouth in on-demand domestic services, among many others.

Makumbe intimated that CRE is currently concluding investments into an East African start-up that is digitising informal retail, and another focused on ride-hailing.

Finding early stage funding for start-ups is never an easy task simply because those who have the money make the rules.

While VCs expect the entrepreneur to precisely explain the growth trajectory, understand growth metrics and perhaps the return on investment, these prospects are often unclear during the formative stages of the enterprise.

It is for this reason that Africa needs a culture of local investments either by governments or organisations that better understand the local business and investment terrain. Local investments are a critical cog to the transition of start-ups into investable enterprises.

Leveraging the knowledge of the growing list of African experts, we should structure many of the existing enterprise funds into VCs.

In Kenya, the Youth and Women Funds should be channelled through a national venture capital that supports start-ups with potential to scale. This indeed will help create more employment.

Kenya and other African countries could stand to benefit from studying and mimicking the success of certain Asian government-led entrepreneurship initiatives such as StartUp SG in Singapore and the Cyberport Incubation Programme in Hong Kong.

Africa perhaps has the greatest number of problems, which, in entrepreneurship, are the sources of entrepreneurial opportunity. The continent also can mobilise venture capital as demonstrated by CRE Venture Capital.

What is required is entrepreneurialism to put together the opportunity and capital to create wealth and employment.

Philosopher John Stuart Mills argued that in addition to the three factors of production, that is, land, labour and capital, you need what he called the fourth factor of production, an entrepreneur, to organise the resources.

While many, including academics, thought that entrepreneurs were born, new research reveals that entrepreneurship can be learned. Several universities today have entrepreneurship as a core course in all disciplines.

The future of African enterprises depends on governments and private sector players developing as many entrepreneurs as possible, leveraging on local experts to build greater capacity, analysing opportunities and providing early-stage funding to transition nascent enterprises into investable companies just like Andela.

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