Accelerating Growth in Africa: Top African Venture Capital Fund Managers Unite in Oxford.

The first edition of the Africa Venture Finance Programme at Oxford University connected leading investors driving catalytic growth in Africa's booming tech startup ecosystem.??

The Africa Venture Finance Programme (AVFP), which took place between 12-16 September at the 英国牛津大学 's Sa?d Business School, is the first of its kind: participants consisting of 40 African venture capital (VC) fund managers gathered to learn from renowned sector experts, economists, Oxford academics, and – most crucially – from each other. The fund managers represented 15 different funds from across the continent, all investing in early and growth-stage technology companies. Other participants included experienced European fund managers, leading impact measuring and reporting academics, economists and limited partners (LPs), and guest speakers such as Dario Giuliani from research firm Briter Bridges, David Cowan from Citibank and Mayowa Kuyoro from 麦肯锡 .

"We came up with the idea of this course because we wanted to find the best way to bring African fund managers together and to expose them to content relevant to them. Other training programmes mainly cater to VC funds in the West, and many conferences bring together different stakeholders, but the challenges that fund managers in Africa face are unique to some extent. We wanted to give the fund managers enough time and combine lectures from the best experts in the market within a 'safe space'," says Eelco Benink, who leads the fund manager component of Boost Africa's?Technical Assistance Facility.?

The role of venture capital in Africa's burgeoning tech startup industry?

The African tech space has grown spurred by the COVID pandemic and regardless of macroeconomic instability. The attractiveness of African startups as an investment destination has steadily grown over the past decade and accelerated towards the end of the 2010s. Since 2018, the number of African technology companies raising at least USD 1 million of investment capital has quadrupled. 2021 marked a record year for the continent when African startups attracted a record?USD 5 billion?in investments, a record which will be broken in 2022. The wave of optimism, interest from investors and growth is illustrated by the fact that the continent now boasts seven "unicorns" – private companies valued at USD 1 billion or over – when only a few years ago, there were none.??

Africa's startup scene is not only vibrant but also promises to solve many of the continent's challenges, including high unemployment, especially among youth. While the buzz can be felt across the continent, the challenge of successfully scaling up African businesses remains. Key scale-up challenges are finding the right talent, access to markets, leadership capacity, and accessing finance and infrastructure. Entrepreneurs often feel that finance-related issues, in particular, are daunting.??

The African VC industry is rapidly developing in response to the need for startup financing, with many new fund managers entering the arena. However, African VC funds are still adjusting the typical Silicon Valley approach to the African context, in which "exits" (a sale of one's shares to another strategic or financial buyer) are relatively rare. One important aspect here is that "Africa" is 54 countries with significant differences in regulation, infrastructure, talent, and financial markets. Since many fast-growing startups require scaling across different geographies, it is critical for funds to understand the context or the 54 different contexts of operations.??

Fostering locally-led solutions??

This is why a course like the Africa Venture Finance Programme is so crucial. Keet van Zyl , Co-founder of Knife Capital , expects this programme's impact on the African investment ecosystem will be "immense". During the course, many lively discussions were held to understand challenges and share knowledge on overcoming them in the African context.

?"I can't think of a better way to catalyse and inspire: convene lead players in the space and let them take it from there and do their thing. Over the past 15 years in the African VC ecosystem, I have been part of many conferences, events, think tanks and learning initiatives. None of them was as immersive, fun and real as this one. With many outcomes still to come."??

Other participants were also optimistic about the course, as were the lecturers. Aunnie Patton Power of Oxford's Sa?d Business School found the classroom "absolutely electric" and felt energised by being in a room with the top Africa VCs and engaging on content, ideas and insights together. "The depth of the experience in the room was unlike any other course I have ever convened."???

The Africa Venture Finance Programme has brought together a strong network that is likely to create many noteworthy deals, relationships and benefits to a thriving ecosystem in Africa. The course was designed and funded by?Boost Africa?in partnership with?AfricaGrow. Boost Africa is a joint initiative of the European Investment Bank (EIB) and African Development Bank, co-funded by the European Union and the Organisation of African, Caribbean and Pacific States Secretariat. The Sa?d Business School organised the course at the University of Oxford.??

?Key takeaways?

1. There is still a need to incubate more emerging fund managers (particularly women and those in frontier markets). These type of fund managers play a critical role in growing the VC landscape, particularly in Africa, because they often focus on overlooked markets and founders, the latter very often being female. Despite all the hype around the African VC space, the story would be incomplete without mentioning that funding to all-female founding teams has been critically slow, and remains in the single-digits. A 2021 World Bank study found that only 3% of early-stage funding since 2013 went to all-female founding teams compared to 76% for all male-teams. This trend will need to be reversed to realise the industry’s full potential. ?
2. More local institutional capital needs to be deployed into funds alongside the international capital that has flowed in the past two years. Currently, the majority of capital flows into Africa are private and international, with the majority coming in from the US. Right now, Africa is the most profitable region in the world, yet African capital funds are sparingly deployed. It is domestic institutional capital (and attendant in-house expertise) that is needed for long-term sustainability. ?
3. Venture debt / mezz has an interesting role to play alongside equity in the market. Venture debt should be another tool in the toolbox of African investors. Using debt financing for the right deals and at the right time, prevents the further dilution of the equity stake of a company's existing investors and can be used alongside an equity raise.?
4. More patient fund structures would benefit the dynamics of the African market but are not attractive to LPs. Until and unless there is a mature and well-functioning exit market, the global standard investment period for funds puts unreasonable pressure on African fund managers and raises unrealistic expectations towards LPs.???
5. Access, inclusion and affordability are driving the most attractive deals coming to the market. Quality trumps everything and access to the right deals is a critical success factor for investors. Inclusion is opening up opportunities across the continent.???

More patient fund structures would benefit the dynamics of the African market but are not attractive to LPs. Until and unless there is a mature and well-functioning exit market, the global standard investment period for funds puts unreasonable pressure on African fund managers and raises unrealistic expectations towards LPs.??

Access, inclusion and affordability are driving the most attractive deals coming to the market. Quality trumps everything, and access to the right deals is a critical success factor for investors. Inclusion is opening up opportunities across the continent.??

Responses from participants??

The course was met with lots of enthusiasm from the participants. Keet van Zyl, Co-founder of Knife Capital, finds this programme's impact on the African investment ecosystem "immense".

"I can't think of a better way to catalyse and inspire: convene lead players in the space and then let them take it from there and do their thing. AfricaGrow, Boost Africa and the EIB thought out of the box here, and the results will show. I can't thank them enough. Over the past 15 years in the African VC ecosystem, I have been part of many conferences, events, think tanks and learning initiatives. None of them was as immersive, fun and real as this one. With many outcomes still to come."

Other participants were also positive about the course, as were the lecturers. Aunnie Patton Power of Oxford's Said Business School found the classroom "absolutely electric" and felt energised by being in a room with the top Africa VCs and engaging on content, ideas and insights together. "The depth of the experience in the room was unlike any other course I have ever convened."??

The participants sharing and discussing practical case studies included experienced European fund managers, leading impact measuring and reporting academics, economists and limited partners (LPs), as well as guest speakers such as Dario Giuliani from research firm Briter Bridges, David Cowan from Citibank and Mayowa Kuyoro from McKinsey.??

Building on a newly-formed power community??

The Africa Venture Finance Programme has brought together a strong network that is likely to create many noteworthy deals, relationships and benefits to a thriving ecosystem in Africa. We feel privileged to having been part of its creation and can't wait to create more opportunities in the future that bring this group together again and to see what has spun out of it.? Following from the enthusiasm and momentum generated by the course, conversations have already begun looking ahead to a 2023 edition and beyond. Follow the University of Oxford, DEG Impact, and Boost Africa Technical Assistance Facility on LinkedIn for updates on this emerging community.??

?About Boost Africa??

The Boost Africa Technical Assistance Facility provides bespoke support to strengthen the core professional and operational skills of partner fund managers and their investees to realise growth potential among innovative tech startups and high-growth small and medium-sized enterprises (SMEs) in Sub-Saharan Africa. The Facility is funded by the European Union and the Organisation of African, Caribbean and Pacific States, through the 11th European Development Fund. The European Investment Bank (EIB) manages the funding and is implemented by Adam Smith Europe, part of the Adam Smith International Group. The Technical Assistance Facility sits under the broader Boost Africa programme, a joint initiative launched by the EIB and the African Development Bank (AfDB) to enable and enhance entrepreneurship and innovation across Sub-Saharan Africa.?

???[email protected]? Boost Africa Technical Assistance Facility?

About AfricaGrow?

AfricaGrow is a fund of funds domiciled in Germany, which aims to support small- and medium-sized enterprises (SMEs) and startups on the African continent by investing in pan-African regional and country-specific private equity and venture capital funds with proven track records and capacities. The Fund intends to have a catalytic effect on the emerging and dynamic African SME and startup ecosystem and thus contribute to the promotion of jobs and income, as well as strengthening sustainable economic growth. As a legally independent entity, AfricaGrow is a central instrument of the Compact with Africa (CwA) initiative, launched in 2017 under the 50 German G20 presidency. The technical assistance facility is funded by KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ), while the Fund is managed by Allianz Global Investors and advised by DEG Impact GmbH.? ???[email protected]??DEG Impact?

The authors take full responsibility for the contents of this article. The opinions expressed do not necessarily reflect the views of the European Union or the European Investment Bank.??