Most "Investors" in Africa Don’t Have Money!

The sad reality is that most investors that you’ll speak with are wasting your time.?

You may finish jumping through endless hoops, go through Due Diligence, and sign a Term Sheet, but the truth is that they won’t invest in you.?

They couldn’t even if they wanted to.

They never had any money!

Most times, they’re using you as “DealFlow”. A pipeline of companies that they’ll use to entice Limited Partners (LPs), those with the actual money, into giving the Venture Capitalist (VC) money to manage.

If the VC can convince those LPs to trust them, then the VC has money to invest, as well as pay their own bills.?

If not, which is the case most of the time, the VCs can’t and won’t invest.?

A VC acting in good faith will tell you from the beginning that they don’t have “dry powder” to invest, and that they’ll reach out once they get cash.?

Unfortunately most aren’t so high integrity.?

They will go through months of back and forth negotiations, Due Diligence and even sign Term Sheets only to disappear when they’re supposed to send the money.

From what I’ve seen, this is particularly problematic in Africa, especially when I compare it to what I’ve seen in the US and Europe.

I don’t understand is why some investors think it’s OK!

Is it because African founders are more desperate? Is it because there’s limited LP money to go around? Or are they simply unbothered about reputational damage from making deals that they can’t fulfill??

I don’t know.?

From my experience I’ve benefited from assuming that nobody has any money, and proceeding accordingly.?

My focus remains on the business.?

When someone REALLY wants to invest in you, they’ll make sure that you know!?

That’s why I rarely follow up, chase, or even send monthly updates.?

An interested investor will be monitoring our progress. Once they want to invest they’ll reach out to me and push me to update my deal room.

Otherwise our data room is sitting there, dated.?

I’m perfectly happy with that.?

Conventional wisdom says that fundraising is a full time job, and that you should have everything in order to make deals progress as smoothly as possible.?

That may work in Europe or the US.?

But from what I’ve seen, Africa is a low-trust environment.?

You need to be selfish with your time. Focusing all of your resources into doing the real work. Building your Business!

Everything else is a distraction.?

Especially VCs.?