Notes From The Week #29

What’s good everyone. Hope we’re all doing well. This week I’ve mainly been preoccupied with the Nigerian Presidential Election set to take place later this month. I’ve been thinking a lot about my context as a British-born Nigerian. What that means? I’ve come to peace with the fact that my context means that home is where I’m most comfortable. It doesn’t necessarily mean a location but where I feel local. The shopkeepers in North London that know my name and can tell stories of when I would run around the area as a teenager but also my grandmother in Lagos who would look after me when we would return to spend our summer holidays in Nigeria. If I asked you where are you local—what would be your response? I’m interested to hear so hit me back.

Africa’s Need For Liquidity

Traditionally, venture-backed startups have three main exit options: IPOs, mergers and acquisitions. In most cases, each of these avenues would require a company to have achieved a reasonable level of growth. In Africa, it often takes more time to reach this level of growth as the startup ecosystem is not yet well-developed. In addition to this most public exchanges do not provide enough liquidity to make an IPO (initial public offering) attractive for startups considering their exit opportunities.

I’m bullish on the role that the continent will play in the coming years. I’ve backed one African startup and hope to back many more over the coming years. I believe my interests and experiences could prove beneficial to the growing fintech ecosystem. Between 2020 and 2021, the number of tech start-ups in Africa tripled to around 5,200 companies. Just under half of these companies were fintechs, which have made it their mission to disrupt traditional financial services. With cash still used in around 90 percent of transactions in Africa, it is clear there is still so much more room for fintech revenues to grow. It is estimated that if the sector overall can reach similar levels of penetration to those seen in Kenya, a country with one of the highest levels of fintech penetration in the world, African fintech revenues could reach eight times their current value by 2025.

Both investors and startups will need a more liquid equity market to ensure long-term viability. I still hold the belief that the creation and promotion of more secondary markets in Africa that will allow early-stage investors to get liquidity—will create a virtuous cycle seeing the recycling of funds within the ecosystem.

I’m preparing a video series that will provide deep-dives on the four African nations that received the most startup funding—Nigeria, Kenya, Egypt and South Africa. I’m going to provide brief breakdowns and then have a look at both of their public and private market fundamentals. The research and script development has been pretty fun to do so hoping it provides value to those of you who may be interested in learning more about the African startup landscape.

Pass Me The Aux

Until next week. Peace.