Why Africa is the new frontier for venture capital

By Andualem Sisay Gessesse- Studies show that the practice, skills and knowledge of Venture Capital (VC) in Africa is very small and rather untapped compared to other parts of the world. This is not because African countries lack startups and entrepreneurs in small businesses.

Global investors shy away from inviting in these startups mostly because most African countries’ policies are unpredictable and the political landscape is also unstable in most cases. Shortage of skilled professionals in the VC industry in most African countries is also mentioned often as among the bottlenecks.

Even on the face of these challenges, some believe that there are still opportunities for VC growth in African countries. In an attempt to address the knowledge gap and bring aboard VC that can work within the challenges, companies like Dream Venture Capital, have been showing good results in many African countries over the past years.

Unleashing Africa’s startups potential
Expanding on its success, Dream VC today has launched its training programs by inviting young African professionals to join its virtual training that also aims to accelerate investors.

“While Launch into Venture Capital is oriented more for younger working professionals who are keen to directly work in VC firms or Investment firms with an African focus, the Investor Accelerator Program is much broader in its coverage,” says Mark Kleyner, Cofounder and program Director of Dream VC.

“Both our programs are 100% remote, and while the content does require a mix of live and on-demand interactions, the programs are open to individuals in any of the 54 African markets, or beyond, sitting in Europe, the US etc. In our first program, we welcome fellows from 12 plus different countries, across different parts of Africa and from Europe and the US,” he says.

“In our first program, we had really strong interest from professionals from West Africa, specifically from Nigeria and Ghana and we are delighted to see this interest is only rising. At the same time, we are fully aware of how large the gap is between the different startup ecosystems on the continent and this year we are super keen to also open up our program for professionals in less capitalized markets – markets such as Ethiopia, Tanzania, Uganda, as well as a range of countries in Francophone Africa that were underrepresented in our inaugural cohort,” he told New Business Ethiopia.

Commenting on the significance of VC to African economies Mark Kleyner says: “Venture Capital is an industry that fuels innovation, that creates jobs and connects talent with an opportunity to build a strong, self-sustaining private sector. The VC industry, however, has historically been very small, much smaller than real estate, family business, land or agriculture investments, in most African economies.”

He stated that while VCs around the world account for just over 10,000 firms, the startups they invest in employ more than 10m people in the US alone, with almost all of the top 100 firms in the world having previously raised VC funding, helping them reach their current stage.

“Ethiopia is a beautiful country with a very large population of 100m+ people and limitless potential. Despite being the 2nd most populated country in Africa, and having the 6th largest GDP, Ethiopia is notably missing from maps of startups or the innovation ecosystem on the continent. As a generation of tech-enabled and non-tech-enabled new businesses are born, grow and scale in markets like Kenya, Nigeria, Egypt, South Africa, Rwanda and more, the Ethiopian innovation ecosystem has an unprecedented opportunity to capitalize on domestic innovation, by enabling a generation of investors to fund this innovation,” he says.

“What does that mean in practice? In practice that means that, with more individual “VC skilled and trained” professionals in Ethiopia i) More international funds will be able to open offices in Ethiopia ii) More African or pan-African funds will be able to expand to Ethiopia iii) There will be substantially more capital at the critical early stages, funding Ethiopian startups and Ethiopian entrepreneurs iv) Domestic and Diaspora talent can enable the faster growth of a bustling startup ecosystem,” argues Mark Kleyner.

He believes that with an influx of capital, skill, talent and opportunity, this can really open the doors to a whole new private market, which can generate significant wealth for the Ethiopian people, for the Ethiopian economy and for the Ethiopian government alike.

“Dream VC definitely sees ourselves as part of that process. We want to make sure more people move into the VC space. We want to see more professionals engaging in the space. We want to provide opportunities to any aspiring investor to learn about Venture Capital, engage with the sector and spearhead that change in countries like Ethiopia. As such, we strongly welcome any aspiring investors, passionate to upskill and with strong ambitions, to apply for the Dream VC programs. Our programs are expected to be extremely competitive, so prospective fellows are highly encouraged to apply early,” he said.

He stated that although Dream VC’s core programs are paid, several generous scholarships are available, so highly motivated applicants in need of financial support are still strongly encouraged to apply.

The 2022 programs are set to run from June to September (for the “Launch into Venture Capital“) and from June to October (for the “Investor Accelerator“) programs. The first is a foundational VC fellowship for young working professionals keen on pipelining into entry-level positions in VC or other investment firms. At the same time, the latter is geared towards experienced professionals [with a significant operator, entrepreneurial, or advisory background] who have the capital and network to pivot into an ecosystem-building VC career.

With over 65 percent of young population, Africa indeed is the new frontier for VC development with enhanced government policies and due attention to political stability.