Asia looking to Africa | October 2019

Asia looking to Africa | October 2019

October 2019

First, some good news!  We have successfully completed the fund's first close with an exceptional group of partners.  Our limited partner base includes founders of global technology companies, general partners of leading investment firms – including venture capital, private equity and public equity – and families with business interests across various sectors.  We look forward to working closely with you to support our founders and to create a community among the group.  More on that to come.  Thank you again for your partnership!

Asia looking to Africa

As many of you know, one part of our thesis is that talented people with experience at world-class companies are helping build the continent’s technology ecosystems.  Entrepreneurs from all corners of the world are setting their sights on building products and services for Africa’s large and growing base of users – in particular, young people.  By 2030, over 40% of the world’s youth will be in Africa.  These youth are digital natives, unlike their parents, and technology will play an ever increasing role in how they work, play and live.

To date, we have generally backed founders who have track records at leading technology companies (like Google, Visa, PayPal) or successful startup companies in the U.S. or Europe.  We are seeing an emerging trend – successful Chinese founders (backed by Chinese capital) building technology companies in African countries.  Recent examples include the $50M financing of OPay by Sequoia China and IDG.  OPay is a fintech company spun out of Opera, the Norwegian browser company that was acquired by Chinese investors in 2016 and is led by Yahui Zhou (a successful technology entrepreneur).  There are several other African technology financings that have yet to be announced, led by well-regarded investment firms like Hillhouse Capital.

Why are Chinese founders moving to Africa?  Clearly entrepreneurs are seeing opportunity outside the intense competition in China.  But another key factor is that Chinese founders are discovering that their experience building products and services in the developing Chinese economy can be transferred to leading African economies.  It was only in 1980 when Nigeria, Kenya and South Africa (and most all African countries) had a higher per capita GDP than China, per the chart below:


Look further east?

While China’s engagement in Africa is generally understood and acknowledged, the Japanese are also allocating capital and resources to Africa, and specifically to the African technology ecosystem.  In late August, African investors, leaders and start-ups traveled to Japan for TICAD (Tokyo International Conference on Africa’s Development).  TICAD is held every 3 years and dates back to 1993 – 25 years of development and still generally under the radar.  From our conversations with investors and founders, we are seeing increased capital formation and deployment from early stage dedicated venture funds and Japanese corporates.  One amazing statistic – the Japanese have over $17 trillion of savings and investments and their domestic assets are yielding virtually zero, with the average Japanese household holding over 50% of their financial assets in cash and deposits.  From the work we have done to date, we believe we will continue to see capital flowing from Japan to fund investments in the growing economies of Africa.

Thoughts from Ghana

I recently attended a CEO and investor summit in Accra, Ghana.  The summit brought together a small group of founders, VCs, family offices and leaders from companies like Facebook and Alibaba.  A few thoughts from this summit:

  1. The technology venture capital ecosystem, while being the least mature globally (Africa as a whole raised roughly the same amount of venture capital as Atlanta last year), is growing and gaining maturity. The quality of investors continues to increase and the investors leading rounds continues to broaden (including firms like Stripe, Visa and Goldman).
  2. The quality of founders continues to grow (seemingly exponentially). The trend we are observing is generation Z (people born from 1995 to 2010) focus their careers on building or joining companies that are mission driven and solving hard problems at scale. Building companies has become the route to opportunity in many African ecosystems today and we expect a strong flow of talent to exciting start-ups across the continent.