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Why MENA Investors are Still Reluctant To Put Their Money in African Startups

Investors from MENA
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Many stakeholders and investors who focus mainly on the MENA region still do not get the right opportunity in Africa as a continent. One can also argue that the continent is still struggling to attract important investors. It is even harder since one cannot be in a position to exactly tell what is taking place on the continent.  Unless one is deeply into the continent then knowing what is going on is a hard nut to crack.

Startup Your Life’s co-founder Kenza Lahlou Shared out on what she thinks is taking place in the African ecosystem. Startup Your Life is a Moroccan based startup ecosystem builder. Lahlou is also the managing partner of Outlierz Ventures. Launched in 2017 Outlierz has a total of four startups. But it has only confirmed a single one and it is looking forward to announcing it soon. Lahlou is working on securing a partnership with entrepreneurs, players, and co-founders. The startup will target South Africa, Nigeria. Moreover, it will be pitching tents in Ghana, Senegal, Rwanda, and Kenya before the end of this year.

According to Lahlou, there are many interesting things that are taking place in Africa. She has been working hard from 2013 through Startup Your Life to develop the Moroccan ecosystem. She also worked on creating a network of stakeholders and entrepreneurs to link and learn from one another. Her first ever goal was to develop a leveled ground which she refers to as “building stone”.  She thereafter took part in the launching of startups and playing part in their growth. After she co-founded Outlierz she brought in stakeholders and advisers to help in its growth. Some of those brought in included venture partner at 500 startups MENA Hassan Haider, and Y Combinator’s CEO Michael Seibel among others.

Below are some of the reasons that she gave as to why investors are still not thinking of putting their money into the African ecosystem. She also shares why she thinks that Africa has a great platform for solving economic and social problems by the use of technology.

The continent’s ecosystem is not patient enough and it leans more towards B2B. According to her Africans do not like to engage themselves in e-commerce. They rather do B2B  because it has a wider market and it penetrates much easier. MENA region uses B2B and it has been successful there. But in Africa e-commerce is not flourishing. For instance, Jumia, one of the largest online marketplaces in Africa invested much but sill it gets it hard. The same applies to Konga. The main problems with this are payments and logistics. This is the main reason why there are many fintech firms which are offering micropayments. Nigerian based fintech firm Paystack, joined Y Combinator and managed to raise $1.3 million from international investors. Moroccan based WaystoCap is a B2B online trading platform that gives users a place to get best offers, better prices and buy products. The firm also joined Y Combinator and managed to raise $3 million.

Nigeria is one of the most populated countries in Africa with a population of almost 198 million. Furthermore, it has the largest market in the continent. If compared to Egypt then we can say Nigeria is almost twice its size and is almost the size of MENA market as a whole.  There is a high rate of internet penetration in the country and are also tech-savvy who speak English. These are the reasons why Nigeria has many startups. Nigerian based Andela startup majors in training developers and it’s the highly funded African startup.  It secured a total of $80 million. The startup trains developers and places them in tech startups globally. In most cases, they take them to the US because the big startups require talents that are affordable. One of the investors in the startup is Mark Zuckerberg.

The continent has the highest number of funded companies globally. The VC investment is highly increasing. In 2016 investment worth $360 went to the African startups. This was more than three times the amount invested three years back. Nigerian, South African, and Kenyan startups were the top beneficiaries of the money where they both took $100 million. The remaining $6 million went to the remaining countries in Africa. The continent has the leading ecosystem and in 2017, the total investment increased to $506 million indicating a 50% increase. Investors can now see that there is something taking place.

Africa has the highest number of youthful population with 70% of the population less than 35 years old. This makes it have the highest mobile penetration globally. In the coming few years Africa will record the highest smartphone penetration globally. One can tell that in the coming years there will be a high number of users who will be connected.

Most of the governments are supportive now than before. Morocco launched Innov Invest fund worth $70 million late last year. This was aimed at offering investment to four public VCs in the Moroccan market. Maroc Numeric was the only single investment body in Morocco there before. Furthermore, there is a lot of money in Africa but the challenge is getting the right startup to invest in. Tunisian parliament recently passed Startup act. This came after a group of players in the ecosystem came up with proposal and tools required for the growth of startups. The Moroccan Ministry of Industry, Investment, Economy and Trade developed a digital agency (L’Agence du Digital).  This was to help in regulation and the growth of the digital economy.

Lahlou says that Africa is the home of corporate innovation. Morocco-based LaFactory collaborated with Royal Air Maroc to link them with a startup that can offer them innovative ideas. LaFactory is an organization that facilitates partnership of startups and corporations in the country. Royal Air Maroc is the country’s national airline. The airline carried out a hackathon on 13 to 15th April 2018 inside a Boeing 747 aimed at coming up with innovative ideas for the airline. The airline’s employees were shortlisted and matched with entrepreneurs to take ideas, develop a prototype and share with the CEO of the airline. Five teams were picked by the airline and the organization. The teams were working on the product with the Royal Airline Maroc as LaFactory offered mentorship.  They also carried out two hackathons with banks and a single one with the Morrocan national train station that took place on the train. LaFactory also partnered with Outlierz to launch Afrikconnect.

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Written by Denis Opudo

Am an engineer who's a tech blogger, hit me up on [email protected] and we base our discussion on technology in Africa and the rest of the world.
Denis the Tech guru

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