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Six lessons learned from speaking to Africa's top VCs

In this article, Jeremiah Ajayi shares six lessons that he has learned from talking to top Africa-focused investors.

Six lessons learned from speaking to Africa's top VCs
Back row (L-R): Luke Mostert, Lesego Tladinyane and Maya Horgan. Front row (L-R): Lexi Novitske, Jake Kendall and Caleb Maru.

Raising venture capital as a startup founder is a sure claim to fame. Once you do it, you become the most interesting person in the room. Everyone—publications, vlogs, and podcasts—clamours to hear from you.

On the flip side, little is known about the humans leading investment vehicles to invest in startups. We rarely hear from investors. The awareness of this information gap motivated the Benjamindada.com team and me to start The Investors' Corner, a series spotlighting Africa-focused VCs.

Since the series' inception, I've spoken to six VCs—some of Africa's finest. While reflecting on their respective journeys, each shared insights that other investors and founders would find helpful.

Below are the top 6 insights that stood out for me.

1. Fintech doesn’t have to be the bread and butter of your investment

Fintech is the honeybunch of investors in Africa. In the first half of 2022 alone, fintech accounted for 60% of venture capital raised. As if that’s not enough, fintech startups have received the most funding in Africa over the last three years. But not every investor buys the fintech hype—for instance, Jake Kendall, Partner at DSF Labs.

Jake believes fintech might have been slightly overhyped and invests in digital commerce startups instead. Interestingly, that approach is increasingly getting validated as there has been a surge in the number of investors in the digital commerce space. So if you're an investor reading this, know that you don't have to follow the fintech hype when forming your investment thesis. Instead, invest in startups that align with your values and interests.

2. No one in VC knows what they’re doing

Speaking to Caleb Maru uncovered a simple truth: successful investors aren’t people with infallible investment theses and criteria. Instead, they’re people lucky to have bet on businesses that deliver outsized returns—an outcome which they have no control over.

Of course, universal rules are needed to thrive as a VC, but at the end of the day, the venture business is a game of numbers (and luck).

3. You don’t have to be wealthy to succeed as a VC

The money and connections required in the venture business might discourage people in the lower class from becoming VCs. However, the success story of Maya Horgan Famodu is a ray of hope to such people.

Born in a low-income family who lived in a trailer park, Maya didn't have access to connections or a trust fund. As a result, she had to build from the ground up, knocking at every HNIs' door. On top of that, she spent five years developing Ingressive, an advisory firm, into a profitable company with clients that would later become investors in her first fund.

Today, Ingressive Capital — her venture firm — is a $10 million fund with 39 investments. Maya's story proves that anyone can become a successful investor if they put in the work, develop meaningful connections, and preserve.

4. Being an early adopter will set you apart

When Lexi Novistke first arrived in Nigeria, there was a new wave of founders, building tech businesses, whom no investor was paying attention to. Local investors were sceptical about the possibility of tech succeeding in Africa. Foreign investors, on the other hand, were concerned about risk factors like insecurity, political instability, and poor economic performance.

But Lexi saw the vast opportunities both parties were missing out on and launched one of the first VC firms in Nigeria: Singularity Investments. That forethought and courage positioned Lexi as a pioneer in an industry that has birthed seven unicorns, some of which she invested in.

You see, Africa's tech ecosystem is filled with opportunities that favour only the nimble and adaptable—the early adopters. If you're an investor, key into that trend by paying attention to the underdogs—startups in underrated industries. Be willing to look foolish today so that you can win tomorrow.

5. Founder-market fit is king

Regardless of your investment thesis, always prioritize founder-market fit over anything else. Before you invest in a startup, ensure its founders have experienced a pain point relating to their startup's mission and possess grit. Else, the startup will most likely fail. This is a key lesson I gleaned from speaking to Lesego Tladinyane.

6. VCs also have to account for investments

As a layman, I assumed VC firms didn't have to pitch and account for returns on investments. But speaking to Luke Mostert made me realize the VC Ecosystem is a multistakeholder model, with each stakeholder accountable to the other.

On top of the ecosystem, there are Limited Partners (LPs) who provide capital for VC funds to invest in startups. In exchange, LPs get equity in the fund and huge capital returns in the event of a great deal.

Next, we have VC funds that sync with accelerators, other VCs, and venture builders to provide capital, intros to potential customers and strategic assistance to startups. Then, we have startups, the most popular in the hierarchy. They get capital from VCs and are often expected to offer between 1% to 15% equity to investors.

Just like founders pitch VCs and are accountable to them, VCs also pitch and are responsible to LPs. When you consider the venture business in this holistic picture, it's easier to navigate the industry seamlessly, whether you're a founder or VC.

These are valuable lessons sourced from speaking to just six VCs. Now imagine the endless nuggets of wisdom that await you as I spend the rest of the year speaking to other Africa-focused VCs. You’re in for a ride!