A Guide to Investing in African Tech Startups | Angel Investing Vs Venture Capital

Read time: 6 minutes.

Welcome to The Eunice Ajim Newsletter, a weekly newsletter that provides actionable ideas to help you invest in Africa, scale your startup, and live a prosperous life.

I want to warmly greet the 20 new members who joined us last week! If you still need to, please sign up to join our community of over 8,000 African funders, founders, and friends.

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I would like to share some of the updates I sent to my investors last week as part of this week's newsletter. This is only a tiny part of my updates since most information is confidential. However, I wanted to share some of it with you so that you can understand what our limited partners receive. You can find the updates below:

Dear Investor,

Happy New Year! I hope you are having a great start to 2024! We are thankful for your faith, trust, and confidence in us on this incredible journey of investing in African Tech Startups.

2023 confronted us with profound global challenges—wars, inflation, rising rates, and layoffs - which made raising capital difficult, especially for emerging VCs and startups. This and other economic factors caused multiple companies worldwide, especially in emerging markets, to go out of business.

Despite all these economic turbulences, our disciplined investment strategy proved prudent, and none of the companies that Ajim Capital invested in went out of business. This reaffirms our commitment to partnering with resilient founders focused on solving pressing problems affecting the needs of the African markets. It also highlights our resilience as a company that we are in for the long term and will tackle these headwinds as they come along.

Despite these challenges, we doubled our efforts in investor outreach, gained and fostered strategic partnerships, supported our portfolio companies, grew our social media presence, and visited the HQ of several of our portfolio companies in Nigeria (pictures below).

I am incredibly thankful to the team at Ajim Capital for their resilience in braving through this year with me. But my ultimate gratitude is to You, our investors! Without your trust, unwavering support, and encouragement, we would not be where we are today. I am excited for 2024 and the years to come.

Best,

Eunice Ajim

Industry Updates

In 2023, African startups secured $3.2 billion in funding. This marks a sharp -39% YoY decline compared to the previous years.

The ecosystem experienced a quarter-on-quarter decline from Q1 2023 when $1.2 billion was raised, to Q2 with $877.8 million and Q3 with $492.7 million. There was a slight uptick in Q4, which saw $551.2 million in raises.

At $3.2 billion, what’s clear is that 2023 marks the lowest funding for African startups since 2020’s $2.1 billion. It’s a 36% decline from 2022’s ~$5 billion total. The debt raised reached $1.1 billion, a +47% growth YoY.

In 2022, start-ups in Africa had raised 19 cents of debt for every $1 of equity. In 2023, this number went up to 65 cents, and debt comprised 38% of all funding raised.

The good news is that the decline in venture funding isn’t just an African affair—it’s a worldwide trend. Per Crunchbase, VC funding has been on a steady downhill slide since January 2022, the last time global tech funding exceeded $60 billion monthly.

January 2023 marked a descent to just under $40 billion, which, compared to the modest $19.2 billion raised in November 2023, almost feels like a beacon of hope.

Firm Updates

Ajim Capital, in partnership with AWS, held the AWS Women’s Demo Day in Lagos on November 8th, 2023. The event brought together inspiring women founders across Africa to pitch innovative tech ideas and connect with investors, partners, and customers.

While in Nigeria, I had the opportunity to visit the HQs of several of our portfolio companies. Collect Africa, truQ, eBanqo, EdenLife, Flex Finance, and Spleet are Pictured below.

Here are some of our favorite moments of 2023 in photos.

Closing Remark

As we reflect on the challenges and triumphs of the past year, I am reminded of this Nigerian proverb: “Smooth seas do not make skillful sailors''. Guided by this wisdom and united by hope, we welcome the bright opportunities of this new year with renewed strength to meet our objectives.

The road ahead promises growth and progress. Hence, we will continue with our core purpose of nurturing our communities and investing in people building proven technologies that serve the needs of the African continent.

Thank you for being a significant part of our journey. Together, we will be a force of change and continue building a brighter future for the African continent.

I wish you an excellent new year and onwards!

Sincerely,

Eunice Ajim

Now, let’s look at two of the recent podcast episodes:

A Guide to Investing in African Tech Startups | Angel Investing Vs Venture Capital

In this episode, Eunice Ajim discusses how to get started investing in African tech startups. The conversation covers different types of investors, including angel investors and venture capitalists. She recommends joining an angel group to gain knowledge and access to the best deals. Another option is investing as a limited partner (LP) in venture capital funds, which allows for diversification. Eunice advises starting with small check sizes and gradually increasing investments. Making investment decisions depends on factors like the stage of the startup and the amount being raised. The episode concludes with a summary of the key points discussed.

Takeaways

• There are different types of investors in African tech startups, including angel investors and venture capitalists.
• Joining an angel group can provide knowledge and access to the best deals.
• Investing as an LP in venture capital funds allows for diversification.
• Start with small check sizes and gradually increase investments.
• Consider factors like the stage of the startup and the amount being raised when making investment decisions.

How to Make Sure You Don't Miss Out on The Best Deals as An Investor

In this episode, Eunice Ajim discusses the importance of not missing out on the best investment opportunities in African tech startups. She shares examples of successful companies like Airbnb and emphasizes the need for investors to keep moving forward and explore the numerous opportunities available. Eunice also highlights the factors she considers before making investment decisions, including her ability to provide value to the founders. She explains that investing in Africa is less risky due to the proven success of certain investment models. Additionally, she discusses the challenges of competition and the importance of working closely with founders to provide support and guidance.

Takeaways

• Investors should strive to not miss out on the best investment opportunities in African tech startups.
• Factors to consider before investing include the ability to provide value to the founders and a clear understanding of the problem and solution.
• Investing in Africa is less risky due to the proven success of certain investment models.
• Competition can make it challenging to determine the success of an investment.
• Founders need support in areas such as fundraising, talent acquisition, and mindset development.
• Having someone who understands and supports founders' challenges is crucial for their success.

If you enjoy the podcast episodes, please consider subscribing, liking, and sharing them with your network. You never know who might find this information helpful.?

That’s it!

See you next Wednesday.

I'd love to hear from you:

What are your thoughts on the two podcast episodes?

Tweet at me @euniceajim or reply to this email, and I'll do my best to get back to everyone.

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