The entrepreneurs, business angels and venture capitalists behind the start-ups of the last 2 decades are still looking for the “next big thing” to bet on. A small number of these are beginning to bet on Africa. The eVentures Africa Fund launched last month is one of these.
Even by the risk-hardened standards of America and Europe’s entrepreneurs, this is a bold move. Working in Africa presents some phenomenal challenges. There are not only gaping cultural differences, but also weaker commercial laws, higher overhead costs when working across continents and less liquid stock markets.
Most investors who have ventured here have either given up the aim of profitability in favour of more philanthropic goals (e.g. E+Co), or restricted investments to very large sums in the millions (e.g. Actis), in order to justify the huge overhead costs and lower returns.
The eVentures Africa Fund promises to make no such compromises. This fund plans to invest €25 to 250 000 in companies and generate “attractive financial returns for investors” alongside strengthening enterprises, developing economies and creating jobs. Quite some claim.
Why is this so exciting? For two reasons. Firstly, because the vast majority of African entrepreneurs don’t need millions to start their business ventures; they need tens to hundreds of thousands. Secondly, if an investment fund is for-profit rather than non-profit, it can move beyond dependency on applying for millions of dollars from donors and foundations, and can tap into the billions available through international financial markets.
This is a risky gamble with high rewards – which makes is a fitting playing field for venture capital. But in order to succeed, the managers of the eVentures Africa Fund are going to have to have to show at least as much skill and innovation as the entrepreneurs in whom they invest.
Maurice Pigaht is an entrepreneur involved in two energy start-ups in Rwanda and a consultant on renewable energy, development aid and private sector development.
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Great development. As many innovative Africans are out there searching for VC funds.