The Investors' Perspective: Key takeaways from the MEST Africa Summit 2019
Last month, MEST Africa welcomed over 500 attendees to Nairobi for its annual Pan-African conference, the MEST Africa Summit 2019. The three-day event featured several thought provoking panels, with focuses spanning from African infrastructure, to the next generation of Agritech, to data and the ‘new credit score.’
Amid sponsor-led workshops designed specifically for entrepreneurs and developers, day two featured a panel discussion facilitated by Teresa Mbagaya (Investment Principal at the Omidyar Network) on 'the Investors' Perspective.' Six key players in the African investment space shared their thoughts on the future of investment in Africa, and what early stage startups and entrepreneurs should focus on when it comes to investor readiness.
When asked about their thoughts on the common perception that there is a lack of pipeline or mature opportunities for investment in Africa, Andreata Muforo (Partner at TLcom) said, “It’s a young ecosystem, so it’s evolving, but there is no shortage of deal flow.”
Bruce Nsereko Lule (Investment Principal at Chandaria Capital) agreed, stating, “There are absolutely opportunities in the early to growth stage of the pipeline, as well as with more mature, later-stage companies. If an investor wants to come and invest here, there are key stakeholders and networks available to help them find those opportunities.”
Following up with some of the most common challenges that entrepreneurs face on the continent, and how to address them, Muthoni Wachira (Investment Director at Engineers Without Borders Ventures), said, “From a financing perspective, there are not enough seed-stage investors. In order for more seed-stage investors to come into this ecosystem, there needs to be more success stories, more exits. Later stage investors coming in can create those exit opportunities, which will incentivize more early stage funds to come into this space.”
Teresa then raised the point that some sectors or NGOs have received the lion’s share of investment over the past few years, and asked what up-and-coming industries or geographies the panelists think attract the most capital or attention.
“The investment goes to the industries that investors see African countries need development in,” Bruce commented. “Real estate, energy, healthcare, education, agriculture, logistics, platforms targeting unemployment that help Africans get hired. This is because the African population needs these services, and the investors know that.”
And when asked what a successful investment looks like, the panelists agreed there’s not just one answer.
“It’s difficult to define success," Andreata said. "Is it the amount that was raised, the investors that came in, the valuation, the return? My personal viewpoint of success as an investor is if there is an exit, if capital is returned back to the investors and entrepreneurs. This is what global capital is looking for, and the type of capital I think the continent needs."
Yacob Berhane (CEO & Co-Founder of Pariti) added, “Successful deals come from companies that understand their growth engine. They know why they need money, and it’s not just to ‘keep the lights on.’ They’re able to say ‘this money goes to this.’”
He expanded on what advice he would give to founders as they approach investors further, stating, “Be prepared with answers to the questions you will certainly be asked about how your business can grow and make money. If I put in X, what will happen to Y? If someone asks who your competitors are, or what challenges you will face, don’t say none. Understand the headwinds and tailwinds of your business.”
When asked what critical metrics investors consider when evaluating a deal, Andreata said she looks at three things: the industry, the team, and the investment. “We look at the industry potential before anything else, because many times it is too small. Sure, your problem is a problem, but is it a problem for enough people?... Next, is this the right team to get the job done?... And finally, is there a mutual understanding about what we as investors want from the deal?”
Yacob asked the audience to remember that this evaluation process goes both ways, however. "The same way investors backchannel and talk about startups, startup founders need to gather their own intel and communicate about their experiences with investors," he said. "It's a two way street - you need to find out if they're someone you want to work with as well."
Before accepting questions from the audience, Muthoni closed with some final advice for the entrepreneurs in the room. “Entrepreneurs need to understand that getting an investment is a process. Start having conversations with investors as early as possible, even before you’re ready to fundraise, so by the time you are, they’re familiar with you and your ideas. Plus, it’s free feedback!”
A big thank you to all of the panelists who contributed their opinions and insights to the panel. We hope to see you at the next MEST Africa Summit for more engaging conversations.
Read the full MEST Africa Summit 2019 recap here.
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