Most people don’t have access to investment opportunities in either emerging markets or private markets. Access to early-stage investing (venture capital), in particular, requires prohibitively high minimum amounts of capital, and emerging markets investing requires specific knowledge and access. While it would be rational (both for diversification and long term gain) for many investors to have part of their capital allocated to these segments, most investors are over-exposed to both traditional asset classes (public equities/bonds) and their home markets and lose out on the benefits of diversification. This needs to change.
I strongly believe that there is a tremendous market opportunity in African entrepreneurship and technology over the next decade. I’ve been an active angel investor in Africa for six years (and a global angel investor for ten years). I’ve set up a rolling fund focused on Africa to offer more investors in my extended network access to early stage investing in Africa.
This new fund is my small contribution towards democratizing access to global, private markets which have long been difficult to access. It has some additional benefits, including over 10x lower minimum commitment amounts and 10x lower management fees, and I am personally one of the largest investors, which is all atypical in the industry.
Access to private and global investments
Over the last decade, technology has enabled many notable trends towards democratization and decentralization — in publishing (blogging), television (YouTube), and radio (podcasting) to name a few. As platforms and tools continue to evolve, I believe this trend will extend to more industries (including private investing), and I’m excited to contribute towards this movement.
Access to private investments is becoming increasingly relevant and important; public equities are now more concentrated than ever, and actively managed public funds have been replaced by ETFs. This Morgan Stanley report summarizes the increased capital allocations over the last decade towards private investments driven by technology investing — and these investments have historically been impossible to access for all but the very wealthy, or large institutions (pension funds, endowments, etc).
Most individual investors have access to more limited set of assets that they can access and they are therefore excluded. This results in individuals being overexposed to the most liquid, tradable assets (e.g. public equities in the USA).
In addition, individual investors are typically over concentrated in their home markets (real estate, stocks, etc) relative to their net worth – foreign markets are harder to understand, and can be legally complex. I believe that there will be significant value created in global, and particularly emerging markets over the next decade. The data point to more and more entrepreneurs building businesses in their home countries (even after a tier 1 US education) versus trying to build their companies in entrepreneurial hubs like Silicon Valley and USA. Over 40% of Y Combinator founders are now international, and the vast majority want to build their businesses in their home markets. This trend has been accelerated by Covid 19, and the rise of distributed work which allows for much better labor mobility regardless of physical location.
AngelList (Rolling Funds) have built tools for angels to accept small amounts of capital from external investors, and invest this capital globally, which was previously difficult and expensive previously. My rolling fund was developed to democratize access to investing in private markets (venture capital) in Africa. I will provide further details on this in the next section.
Investing in VC in Africa
There is significant market potential in Africa – many young people ready to work (median age of 19), increased urban mobilization (45% living in cities by 2025), high smartphone penetration (50% and growing fast) with digital finance access, and increasing capital and talent flows into African technology hubs (e.g. Nairobi, Cape Town, Lagos).
This year we finally saw the start of technology company exists, where seed investors realized over 30x their capital. Stripe bought Paystack ($200M), WorldRemit bought SendWave ($500M) and GoDaddy bought Over.
I am passionate about advancing the technology ecosystem in Africa. I was born and raised in Mombasa, Kenya where my family has lived for five generations. I have a strong network of co-investors and local entrepreneurs, several of whom are investors in this fund. I’m a Kenyan, a product manager, and an entrepreneur, and my experience (including building technology products in Africa as an operator) allows me to have empathy for founders on their journey.
I’ve been personally investing in technology companies in Africa since 2014 through Musha Ventures, and am now excited to allow others to participate in these deals. Over the last six years I have backed 35+ African companies in 8 countries with an IRR of over 36% (based on future fundraising rounds) and MOI of 1.7x. The portfolio includes companies like Flutterwave, mPharma, Sokowatch, Branch, Twiga and Kobo360.
Here are some of key details:
- 10x+ Lower Investment Minimums: Investors are able to invest in this fund with as little as $2.5k per quarter whereas most VC funds have a $250k+ minimums for LPs. Investors will need to meet US-Accredited Investor requirements to participate.
- 10x Lower Management Fees: The fund has a management fee of 0.2%, to cover basic running costs, which is 10x lower than the industry standard. This further helps to align incentives; I earn carry when investors make positive returns.
- Alignment of Incentives: I’m personally one of the largest investors in the rolling fund, as this is an extension of my existing angel investing. This is not funded through deferred management fees, it is capital that I wire into the fund just like every other investor.
- Consistent Investment: I intend to invest conservatively and consistently into companies across Africa over many years. It’s very hard to ‘time the market’ and so we will instead focus on factors we can control like amazing entrepreneurs, evidence of traction, product quality and delighted customers.
- Investing in B2B: We are focused mainly on startups that serve other businesses — particularly fintech, marketplaces and software as a service technology companies. We may make the occasional consumer investment, but business is the initial foundation.
- African Entrepreneurs’ Fund: For entrepreneurs building businesses focused on Africa (and particularly portfolio company CEOs), they are able to invest in the fund with no fees or carry. This is my attempt to pay it forward, and also to get even better deal flow from my network due to further aligned incentives.
I believe in the power of being transparent, which I hope will allow me to build new relationships and deepen my current relationships – it’s why I’m publishing this openly.
Want to learn more?
If you’d like to get in touch please fill out this short form and I’ll reach out to you so we can get to know each other better.
If you’d like to see more detail on the fund (market opportunity, detailed investment history and fund terms) please check out the rolling fund page (https://angel.co/v/back/musha-ventures).