Unconventional Wisdom for Investing in African Startups

Read time:?3 minutes

A big thank you to our sponsors who keep this newsletter free to the reader:

This week’s newsletter is brought to you by?Raenest. Raenest optimizes accounts receivable & expenses for startups & freelancers with global bank accounts & simplified multi-currency invoicing. If you’re looking to pay your employees or contractors across Africa, Raenest is the platform for you. We have been using Raenest for all our payroll needs at Ajim Capital for over a year and have been delighted as clients.?Book?a demo today.

?I recently had the pleasure of having coffee with a highly successful Venture Capitalist who has been actively involved in the industry for over two decades. Our conversation delved into the intriguing world of investing in African startups, and I couldn't help but be astounded by the unconventional wisdom he shared. Today, I want to pass on these valuable insights to you.

Here's what he said:

1. "Never invest in a startup whose founders have never failed before."

Why?

They won't know how to handle it when they eventually do.

When it happens, it could lead to disastrous consequences.

2. "Never invest in a company whose pitch includes the word 'disruptive.'"

It's overused and almost meaningless.

It's become an ego phrase used to make founders feel important.

3. "The team is more important than the idea."

A mediocre idea with a great team will always produce better results than a great idea with a mediocre team.

Why?

The team can always adapt the idea or pivot.

4. "Don't be afraid to invest in messy, unsexy businesses."

Fintech and AI have become crowded spaces.

But there are still gaping holes in industries like Agriculture, Logistics, and Retail.

5. "Don't be afraid of investing in a solo founder."

One great leader is better than 5 mediocre ones.

Solo founders can also pivot more effectively than a team.

6. "Invest in industries you understand."

African startups are not that different from startups everywhere.

Valuations, competition & business models are universal.

When investing in an industry you understand, you can call 'BS' on pitches that sound too good to be true.

7. "Good entrepreneurs understand that they are selling and not just building products."

Successful entrepreneurs can sell their products to a client, employees, and investors.

If they can't sell their vision, they'll struggle to grow.

8. "Africa is not a monolith."

Just because an idea worked in Kenya doesn't mean it will work in Cameroon.

Different regions have nuances.

Understand the culture, regulations, and industry of the country you are investing in.

In conclusion:?

I hope these insights will prove valuable in your own investment journey. As the African startup ecosystem continues to thrive, it's crucial to approach opportunities with an open mind and a willingness to venture into new and untapped territories.

Wishing you fruitful investments and entrepreneurial success!

See you next Wednesday.

?Whenever you're ready, there are 3 ways I can help you:

1. Invest with Ajim Capital: Ajim Capital is a $10M pre-seed/seed fund investing into high-growth tech companies in Africa.
2. Book a Call: If you've ever wanted to pick my brain, now is the perfect time. Feel free to book time with me on Intro.
3. Sponsorship: Promote your brand to 6,100+ subscribers by sponsoring this newsletter.