A journey from the late 80's in Africa till now

VC in Africa has seen remarkable growth, but for it to thrive, a more tailored and sustainable approach is needed. Investors, startups, and policymakers all have a role to play in shaping an environment that fosters long-term success. In this third and final part of our series on VC in Africa, I explore some of the key steps required to unlock the continent’s full investment potential.

1. What Investors Need to Do

Adopt a Patient Capital Approach

• Africa’s markets require a long-term perspective. Unlike in Silicon Valley, where exits happen relatively quickly, African startups often need more time to reach maturity.
• Investors should set realistic return expectations, understanding that value creation in Africa takes time.

Increase Pre-Seed and Seed-Stage Investments

• Addressing the early-stage funding gap is critical. Investors should deploy more capital into pre-seed and seed rounds to help startups get off the ground.
• Early stage investors like Baobab Network play a key role in de-risking these early investments combining both investments and strategic support.

Leverage Local Expertise

• Successful investments require deep local knowledge. Partnering with Africa-based VC firms, accelerators, and advisors can help navigate market complexities.
• Understanding local regulations, cultural nuances, and consumer behaviors is essential for making informed investment decisions.

2. What Startups Need to Do

Focus on Sustainable Growth

• Startups should prioritize business models that balance rapid growth with long-term sustainability.
• Over-reliance on external funding without a clear path to profitability can be a risk in markets where later-stage capital is scarce.

Adapt to Local Markets

• Africa is not a monolithic market. Founders must localize their solutions to fit different cultural, economic, and regulatory landscapes.
• Success often comes from incremental, region-specific expansion rather than rapid pan-African scaling.

Build Strong Governance and Compliance Structures

• Investors increasingly look for well-governed startups with strong financial and legal structures.
• Adopting global best practices in corporate governance from the outset can improve fundraising prospects.

3. What Policymakers Need to Do

Streamline Regulatory Processes

• Governments should create more investor-friendly policies, such as clearer tax structures, simplified business registration, and improved foreign investment regulations.
• Reducing bureaucracy will encourage more startups and investors to participate in the ecosystem.

Encourage Public-Private Partnerships

• Collaboration between governments, investors, and startups can drive infrastructure development, digital transformation, and financial inclusion.
• Supporting local VC funds through co-investment programs or incentives can help bridge the funding gap.

Improve Exit Opportunities

• Developing stronger capital markets and encouraging mergers and acquisitions (M&A) will create more exit pathways for investors.
• Policymakers can also work on creating favorable IPO conditions to allow African startups to go public on regional exchanges.

Conclusion

For venture capital to thrive in Africa, all stakeholders—investors, startups, and policymakers—must work together to create a more robust and sustainable ecosystem. By adopting patient capital, increasing early-stage funding, and fostering a business-friendly environment, Africa can unlock its vast entrepreneurial potential.

This concludes our three-part series on venture capital in Africa. The journey is still unfolding, but the foundation is being laid for a thriving investment landscape. The question now is: who is ready to build the future?