The revolution brought by new technologies in Africa is accelerating economic transformation at a spectacular pace. After exploring the functionalities of mobile and cloud technologies, start-ups are developing applications that are used to develop differentiated business models adapted to their markets. They have thus created new technologies, specifically African and therefore in phase with the lifestyles and complexities of the continent, by relying on existing infrastructures in order to provide essential services that traditional approaches were failing to provide.
The continent has recently launched innovative solutions to the problems faced by its citizens and businesses. Moreover, recent initiatives highlight the strong potential of African technology companies to offer solutions to global problems. The visits of Mark Zuckerberg, Sundar Pichain or Jack Ma just a few years ago prove how much the leaders of the sector are interested in the opportunities to be seized in the region. Proparco also intends to play its part by financing start-ups that provide concrete and innovative solutions to major development problems.
For the tech ecosystem in Africa, the future looks promising!
Nairobi hosts the 3rd Andela campus, after those created in Lagos and Kampala.
Joshua Mwaniki, Andela's Director for Kenya, presents Andela's mission while young developers explain what motivated them to apply and join the start-up. Finally, Maurizio Caio from TLcom explains why the Tide Africa fund invested in Andela's growth.
Maurizio Caio founded TLcom about 20 years ago in order to invest in technology venture capital in Europe and Israel. Over the last ten years, the company has taken a keen interest in African tech entrepreneurs. Then, in 2013, TLcom launched the TIDE Africa Fund, a pioneering venture capital fund, to seize investment opportunities in new and developing sub-Saharan companies.
Andreata Muforo, partner at TLcom, handles transaction flows and fundraising.
For TLcom, what are the technological opportunities in Africa today?
(Andreata) In the 1990s, we were wondering how to connect Africa to the rest of the world. The main objective was to develop ICT infrastructure. Then we tried to connect Africans using technology, especially computers, mobile phones and other electronic devices. As a result, mobile penetration rates now reach 70 to 80 per cent across the continent.
Consequently, the final stage of the technological revolution is how to use this connectivity to deliver services that meet the needs and desires of Africans. For example, access to basic services in several sectors such as finance, energy, education or health is rather low compared to connectivity rates, which is a great opportunity if innovative business models are exploited to allow entrepreneurs to increase the accessibility of their services at competitive prices.
An ecosystem that matures and evolves so quickly greatly increases the investment opportunities on the continent. In our transaction flow base, we have more than 1,200 companies that apply promising business models based on new technologies. About 70% of our transaction flows come from Nigeria, Kenya and South Africa. However, we have also seen increased dynamism in small markets such as Uganda, Ghana, Senegal or even Rwanda, whose authorities support innovation and entrepreneurship initiatives.
Was it easy to convince investors to adhere to TIDE Africa's vision?
Traditional international venture capitalists are unfamiliar with Africa. It is only today that we are seeing development finance institutions (DFIs) such as Proparco in the front line alongside funds like ours to invest very early in upstream opportunities.
(Maurizio) It is clear to us that without DFIs there would be no venture capital in Africa at this point in our history. These institutions have freed up opportunities by focusing on the tech ecosystem and start-ups.
How did your discussions with Proparco go?
(Maurizio) I think that the people of Proparco adopted a non-traditional approach for us, since they were going into unknown territory. We were very impressed with the entrepreneurial nature of Proparco's evaluation, as TIDE Africa was truly their very first venture capital fund investment.
We were also very impressed by how little time they took to make their final decision to invest. It took them about six months to complete the necessary studies, a very honourable time compared to the negotiations we were conducting in parallel with other investors.
Finally, DFIs are of fundamental importance to us, as these partners help us to engage more actively with other institutional funds, such as family offices. Proparco and other DFIs have really opened the way to new fundraising for TIDE Africa.
How many funding agreements have you signed so far?
We have signed with Terragon (Nigeria) and Msurvey (Kenya), who are helping businesses in Africa better understand their consumers through innovative technological solutions. We also invested in Andela, a rapidly growing software development company with a portfolio of international corporate clients.
How is Andela an interesting investment?
(Maurizio) Andela started as a social structure, but our many interactions with the team and our presence on its board of directors have contributed greatly to transforming their vision into a company in its own right.
Meanwhile, Andela has demonstrated and validated her business model. Three years ago, they were planning to expand in New York. Today, about 900 Andela developers work in Lagos, Nairobi and Kampala.
The company also understood very quickly that competition is not only in the services and products offered, but also in the job market. In Africa, this is a major challenge. Andela has proven its ability to attract the best managers and developers in Africa.