What’s next for African & MENA VCs ?

This week Cairo became the temporary capital of African and Middle Eastern Venture Capital (VC). I must begin today’s newsletter by congratulating my old friend Karim Samra of Changelabs who has been the engineer of a truly phenomenal Egypt VC Summit. Him and his team have put together one of the most remarkable events I have attended. All the participants were unanimously enchanted and I am proud that our firm lent its support to such epic realization, which ultimately benefits the whole ecosystem.

As part of an upcoming podcast episode, I had the privilege to interview Dr Mohamed El Sayed Okasha of DisrupTech Ventures Dina el-Shenoufy of Flat6Labs, Mariam Kamel of LoftyInc Capital and Sara Enan of VentureSouq. Here are early insights which emerged from our conversation which also echo some of the conversations that I have had throughout the year with leading voices in VC in the US, Europe, the Middle East, and Africa. You can catch our

“Best Of in VC” here :?

Are you a seasoned VC investor operating on the continent ? Are you a foreign investor trying to decipher what all the noise in Africa has been about ? Are you an African or Africa-based founder looking to successfully raise your next round ? Silverbacks Valley is the podcast you need. Subscribe on Youtube here.?

We know that Artificial Intelligence (Ai) is getting a lot of traction from investors (AI-related investments rose from USD 3 billion in 2012 to close to USD 75 billion in 2020 according to OECD). Want to know more about AI ? Our good friends at Mozilla ’s IRL podcast have got you covered : Tune in here.?

1. Building and investing in companies vs chasing unicorns?

Reacting to Silverbacks Valley’s Best Of in VC video, Dr Mohamed El Sayed Okasha - the founder of the first Egyptian Unicorn, Fawry - discussed the importance for Africa’s innovation ecosystem to be built based on our existing realities. He believes that there is a way to invest that is consistent with what our ecosystem needs and not only with the blueprint created in other prominent markets such as Silicon Valley. In a way, his words mirrored the excerpt of my upcoming conversation with 美国哈佛商学院 Professor Paul Gompers : in our discussion Professor Gompers - who is both an academic and a prolific private capital investor - recommended that venture capital investors really thought out the value-add that they could bring to their portfolio companies. It goes beyond signing a check in hope of getting a piece of a unicorn. Our thought process at Silverbacks Holdings is all about structuring an ecosystem : we strongly believe in the power of cross-fertilization within our portfolio companies and that such cross-fertilization has a direct impact on increasing the chances of manifesting a community of dominant and timeless companies.?

2. When we said we were going to invest in Nigeria in 2012, people laughed?

We know that there is a misperception with regards to the risks around investing in Africa. There is also a massive perception arbitrage to exploit and there are signs that the African innovation ecosystem is becoming more attractive : as news of successful exits emerge and as more big players institutional investors take more risks the notion of early-stage investing in Africa is no longer laughable the way it was some a decade ago. Mariam Kamel of LoftyInc Capital , one of Silverbacks’ backed GPs, spoke of the importance of looking beyond the obvious jurisdictions. She was reflecting on a segment of Lexi Novitske, CFA ’s interview on the podcast where Lexi spoke of her own risk appetite and retelling her own journey as an investor in Africa. To Mariam, there cannot be true economic prosperity on the continent by the sheer growth of the Big 4. Such vision is what is leading LoftyInc to explore markets such as francophone countries, Central Africa or even Zambia. At Silverbacks, we are proud to support GPs who have the foresight of unearthing new markets and going beyond their initial jurisdiction.?

3. What investors can do while waiting for the return of summer

Carefully harvesting the benefits of past planting seasons is definitely the first thing to do. Sara Enan of VentureSouq? reminded us that the ecosystem continues to give birth to unicorns; their firm was an early investor in Tabby from the UAE which just joined few days ago the exclusive club of startups with valuations beyond? USD 1 Billion. Even in the early part of this year, another MENA company backed by Dr Mohamed El Sayed Okasha ’s fund, MNT-Halan from Egypt had also joined the club. It is clear that the best business models and their founders will strive (and scale) despite the increasingly tough environment. However Dina el-Shenoufy did highlight some crucial points to pay attention to in this current shift. As many of you already know, Flat6Labs is the MENA region’s oldest and most recognized seed and early stage venture capital firm. They are currently running some of the most renowned startup programs in the region and have regularly delivered some great companies for the region. Dina provided rich insights and detailed how seed and early stage investments came to normalize in Africa. She talked about the current “fundraising winter” (the number and value of transactions are down by over 50% compared to their levels of the previous year) and how she learned to look at market fluctuations with philosophy. These “winters” are indeed an occasion for investors to take a step back, look within to see how value can be added to the portfolio and anticipate the upcoming trends in portfolio construction. One of the trends that Dina particularly focused on is the apparent drop in seed fundraising that is occurring . While this can be a sign of investors shifting their focus towards later-stage deals, the broader investment community will need to consider how to enable innovative support mechanisms for early-stage founders in times like this ; after all,? early stage founders will continue to be a driving force required to build the future we want to see.