It has been a while since I’ve updated my site and a lot has happened! Not only has WaystoCap gone through an acquisition but I’ve had a son and lots of other exciting stuff has happened, but that will be for another essay. For now I wanted to discuss a few of the sectors I am personally tracking and my interest in investing/advising/tracking the African startup scene, and as is always the case it starts with a personal story!

Naively in 2011 I thought starting a business in Africa would be easy. 10 years later I can tell you definitively it is not. This is not due to a lack of talent or ideas, it is more that as one of the pioneers of the startup movement on the continent so much of what we were doing was also convincing people that startups can exist, and make a difference and are more than simply a side project or a cute idea.

That being said there are now some really interesting and transformative businesses being set up at the moment, and the rush of capital chasing them is evidence that they have been found convincing by more than just their friends and family. It’s why I will be investing in emerging markets technology through my syndicate and personally. I will not name anyone startup in particular as I believe the arc on innovation on the continent has only just begun so it would be a mistake to talk about winners so soon!

Areas that I’m personally involved in and am looking for, particularly on the continent are:

fintech – this is a very broad catch-all term for an enormous sector that encompasses everything from payments to remittances, and all the way through to digital wallets, neo-banks, KYC/AML solutions; open banking innovations, credit, and mobile money. And the list goes on. The fundamental change that is underway is that in countries and geographies where banks have traditionally been the only institutions that can be involved in finance, transfers, and all the ordinary operations individuals and businesses need to make. They are now seeing new entrants that are beginning to have an impact.

Each of these subsets can be an outsized opportunity for independent and highly successful startups. Each represent a multi-billion dollar opportunity. Great teams with the right technology and execution will be able to tackle these industries. Regulation is always a major issue in emerging markets and finance, and banking operations so finding a way to innovate is key. Early in this current cycle some interesting models were developed that leveraged existing systems and built different business models on top of them (particularly in remittances and money transfer – think mpesa with phone credit).

As startups start to innovate further and take on large incumbents in not just the remittance space, but also more traditional sectors like lending. We can now see the beginning of the next wave of innovation, what I call the ‘building on the shoulders of giants’. The data and KYC that for example MPesa has access to and the interconnectivity that is allowed by open banking and common banking frameworks, that will start to impact the ability of startups to capture and use financial data. 

It would be foolish to predict specifically what will emerge but it is certainly an area where considering the huge opportunities teams are able to work backwards from the ideal outcome. Then considering the opportunity and the risk of starting a new venture. The truly great teams will have a vision of how they want things to be and will work towards that. I look forward to seeing (and being lucky enough to invest) the next wave of fintechs in Africa. Without payment systems we cannot do anything!

Agriculture – a huge employer on the continent, agriculture is a sector that is dominated on the continent by small tenant farmers who very much rely on their farming to subsist. Looking at India and China we can see examples of regions that are seeing changes in the way agriculture is being managed. 

The level of innovation should reflect the reality of the market, that is – the need for small farmers to increase their income and also improve their route to market and efficiency. Inspiration from other emerging markets will be most useful. The emergence of collectives and other community efforts was very much the beginning of efforts to improve both efficiency and also bargaining power. 

The next stage of that will be improved logistics (around both collection and distribution), but further selling and storage. Although many farmers are still very much at the subsistence stage, there is an opportunity to improve their earnings through creating efficiencies in their supply chain. 

Although Africa is not at the stage of drone crop monitoring; as a sector agriculture is a huge employer meaning it is also very strategic so one that should be taken seriously; and will have a huge positive impact on the continent as it improves output and satisfies local needs.

Infrastructure

We are all aware of the need for solid infrastructure on which an economy can develop. That is not necessarily even just roads and bridges, but also access to high speed internet; and well established and modern fulfilment services, payments, etc.

This is an area where we have seen great ingenuity already, with the often referred to ‘leap frog’ to mobile networks skipping often entirely the copper wire phase of connectivity. Furthermore with climate change predicted to hugely impact large areas of the continent moving beyond fossil fuel power generation might seem suitable (although obviously this is a global issue). 

Building infrastructure with the advantage of using the most up-to-date technology and often at significantly lower capex investment. Even what might seem transitional such as drone delivery to remote areas are in fact highly cost efficient ways of delivering all kinds of supplies to remote areas. For startups this offers a particularly compelling area to innovate in – not only are there business models that can be adapted to the local reality (subscription based health insurance models for local clinics / pharmacies) last mile delivery services based on micro hub warehouses; Internet connectivity through low-cost micro towers built close to population hubs; local banking through simple POS solutions that are portable in market areas; drone delivery of essential medical supplies to remote areas; the examples go on. 

Building an entire train line is a major investment and would require many years to complete, but startups can operate in the area of digital and logistics infrastructure more easily than ever. With the connectivity offered by mobile telephony alone introducing the bridge in communication and coordination that is often one of the key tenants of a lightweight infrastructure technique. We saw this a lot at WaystoCap. Through a progressive web view we were able to achieve what major fortune 500 companies took massive investments to achieve. Exact GPS locations, delivery within 48 hours, and many other advantages using a smart phone.

I will continue to explore themes that I am particularly interested in, in African startups – but if you are working on any of the above areas; or something that is improving the way we do work and live in Africa and beyond please get in touch I’d love to hear what you are up to and your vision for the step change.

In my next piece I will also discuss other areas of interest: education technology; and the huge movement to improve skills, health care and all it’s components particularly in a low technology setting; trade technology, regulation innovation, and improvements in the supply chain.

My syndicate and person investment profile can be found here:

angel.co/arboremventures