Investing in Africa

I’m frequently asked ‘why’ I invest in startups focused on Africa, and this post attempts to clearly articulate the reasons this is important to me.

I was born and raised in Mombasa, Kenya and my family has been in here for 5 generations (since the 1850s). I grew up in relative privilege compare to most Kenyans. I remember being about 6 years old sitting in our car when a homeless boy about my age knocked on our window. My father opened the window and handed him some candy, and turned to me and said ‘You are sitting here and that little boy is out there. I hope you appreciate that was luck of the draw and will do something good in your life’. I remember that moment quite clearly even now, over 30 years later.

There are many reasons for my interest in investing in Africa, and I don’t pretend that I invest out of altruism, but I think this is what led to my interest in supporting early stage entrepreneurs on the continent.

I always liked maths and science and studied engineering at university. This experience taught me to approach problems from first principles and think through effective systems. I don’t really have skills that I can directly help people (e.g. a doctor), so I needed to approach the problem space differently. In my early 20s, I realized that entrepreneurship and technology could drive economic development, in a relatively capital efficiency manner. I started building my career in technology, starting at Google in London. After spending time at Index Ventures and learning about venture capital, I realized that, with even small amounts of capital, you could have outsized returns both in terms of value creation and impact.

Technology entrepreneurs create products that improve the effectiveness for people and businesses, and create new jobs with new skills. Given all these benefits I decided to start investing in technology companies in Africa a little over 5 years ago, after ‘learning to invest’ in silicon valley as an angel through my own fund, Musha Ventures starting in 2011. As an inexperienced investor, I tried to maximize learning per dollar invested, as I did not have a lot of capital. I tried to be disciplined by writing investment memos (that no one read), conducting reference checks and completing annual reviews for every company. 

In 2014, there was little capital available for early stage entrepreneurs in Africa and even today in 2020, there is still a deficit of capital available for those who don’t have the right networks. With small investments I am hopeful that I’m able to have an outsized impact on this ecosystem. Even when I don’t invest, I try and give entrepreneurs feedback, be clear on my reasons for passing, or share articles or advice that I think might be valuable to them. 

There have are some early positive signals; my Africa portfolio has rougly doubled in value (on paper), and the companies have created thousands of jobs, enabled new startups to exist, and improved efficiency in archaic supply chains / markets. Despite these early signals, it’s still very early in the life of the venture capital ecosystem in Africa and it’s still unclear if these companies will endure and to have a lasting positive impact on the economic development and people’s lives in the markets. Only time will tell.

My plan, which has remained consistent over the last 5 years, is to continue to think very long term and invest consistently and conservatively in early stage (mostly B2B) technology businesses in Africa and support entrepreneurs doing the hard work along the way.