Kinyungu Ventures calls for changes to cut-and-paste VC strategy in Africa

Kinyungu Ventures calls for changes to cut-and-paste VC strategy in Africa

Published: 18-01-2021 16:14:00 | By: Pie Kamau | hits: 1846 | Tags:

A new White Paper published by East African venture advisory firm Kinyungu Ventures shows there continues to be a wide misalignment between traditional venture capital models and the African market. The White Paper, titled  “Chasing Outliers: Why Context Matters for Early Stage Investing in Africa,'' details the misalignment between traditional venture capital models and the African market.

The paper notes that there are multiple mismatches between key characteristics of Silicon Valley VC and African markets, which influence how startups and funds maneuver as well as what results they expect and produce. Findings show that African markets are large, but also fragmented, and its consumers have limited purchasing power. Furthermore, consumers on the continent are difficult to acquire and retain, yet the sheer size of the African market also presents a real opportunity for profit once the environment is clearly understood. 

The team behind the report is now calling for a broadening of approaches to institutional investment on the continent. Speaking with 100 Pan-African founders, investors, and LPs across 15 African countries, the research suggests investors should prioritize investing structures and practices that reflect the realities of operating in Africa. This includes adopting more flexible investing structures with longer time horizons.

Tony Chen, Managing Director, Kinyungu Ventures and co-publisher of the report said: “Capital in Africa is scarce and pursuing a “growth at all costs” strategy where capital pools are shallow presents huge risks for companies. We’ve also found that many great businesses don’t fit the typical VC profile, but have tremendous unfulfilled potential.”

Tayo Akinyemi, lead researcher and writer of the report added: “In our conversations with numerous investors and founders, it is clear that nuances in variables such as consumer behavior, cultural norms, and business practices impact startups significantly and being on the ground is crucial for success.  While African markets aren’t always able to provide the outsized returns that Silicon Valley typically looks for in high-growth companies, a more focused strategy here could unlock real gems, as has been proven by some of the startup successes the continent has seen over the years.”  

Kinyungu Ventures catalyzes resilient businesses for local intergenerational prosperity. The East African-centric investor focuses on entrepreneurship in East Africa, startups, seed funding, debt financing, impact investing and angel investing.

You can read the detailed white paper here.

www.kinyungu.com

 

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