Article Summary
The importance of local capital and local knowledge in funding African startups is highlighted in an article that recaps five interviews with investors from the Ask an Investor series. The article underscores the value of local capital as risk arbitrage, with investors like Marge Ntambi of Benue Capital emphasizing the importance of local investment. The article also points out that the best solutions are built ground up for local realities, echoed by investors like Axel Peyriere and Fisayo Durojaye of Immerse VC. Local domain mastery is a crucial filter, with investors like Biola Alabi and Durojaye focusing on sectors they have operated in and have in-depth knowledge of.
What This Means for You
- Understanding the value of local capital and local knowledge can help you make informed investment decisions in African startups.
- Investing in sectors and industries that you have operated in and have in-depth knowledge of can help you avoid tourist traps and importing a Valley checklist into markets that do not care about Valley heuristics.
- Local domain mastery can help you spot opportunities and avoid investments that do not fit your investment thesis, and can help you prepare for successful exits in markets that lack deep public-market or private equity demand for $200 million tech companies.
- Designing exits in a market short on IPOs is crucial, and investors should be aware of the unique challenges and opportunities in the African market.
Original Post
The article entitled “Ask an Investor: The Importance of Local Capital, Local Knowledge, and Local Execution” explores the lessons learned from five interviews with Africa-focused investors. The interviewees include Marge Ntambi of Benue Capital, Axel Peyriere, a serial angel and founder, Fisayo Durojaye of Immerse VC, Biola Alabi, and Alexandre Lazarow of Fluent Ventures.
The importance of local capital and local knowledge
The article highlights the value of local capital as risk arbitrage, and the importance of local investors having information that can compress uncertainty and support better. The article also emphasizes the value of local knowledge, with investors like Fisayo Durojaye of Immerse VC focusing on sectors they have operated in and have in-depth knowledge of.
Local insight as a competitive moat
The article underscores the value of local context, with investors like Fisayo Durojaye investing in Shuttlers based on his years of experience in yellow buses and BRT queues. It also highlights the importance of understanding the local market and underwriting credit, with investors like Alexandre Lazarow recognizing OffBusiness’s Indian model but only funding Matta after proving they could underwrite credit in naira without bureau data.
Designing exits in a market short on IPOs
The article discusses the challenges of designing exits in a market that lacks deep public-market or private equity demand for $200 million tech companies. It offers three ways to generate returns, including secondaries, exit-first deal design, and valuation discipline.
What value-add looks like when cash is only 50% of the need
The article emphasizes the value of time-consuming, sleeves-rolled work, including cap table surgery, hiring CFOs, co-founder matchmaking, and regulatory hand-holding. The article highlights that the work of investors can often separate a good investor from a great investor, and that investors should focus on context-specific execution to generate returns.
Key Terms
- Investors
- Local Capital
- Local Knowledge
- Investment
- Startups
- Local Execution
- Valuation Discipline
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