The Indian connection that could fuel African startups

Africa s largest economy and India
Africa s largest economy and India
Image: REUTERS/Adnan Abidi
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Most tech ecosystems across Africa look west, to Silicon Valley, for inspiration. When young African entrepreneurs and investors have looked in the other direction, they have generally focused on China.

With the increasing number of Chinese businesses on the ground, the rise of Chinese educational and trade opportunities, and tech giants like Alibaba and WeChat making their presence felt, this view makes sense.

Yet the Indian subcontinent has had trading links that pre-date colonial times, particularly on the eastern coast of Africa. Still, there’s little discussion about looking to India’s tech ecosystem for partnerships, investment and market opportunities for African startups.

Even as one of the world’s fastest-growing large economies, India faces some of the poverty and urban development challenges seen across Africa. Still, the rise of India’s Institute of Technology colleges have seen it become the world’s leading producer of software developers and engineering talent. At home, India’s startup ecosystem took in some $10.5 billion in 2018, compared with around $725 million for African startups.

Now some investors from India and African tech hubs are seeing opportunities in each other’s markets. “I strongly believe Indian entrepreneurs can share their learnings—dealing in inefficient, developing markets and building products and services to meet them—to the benefit of African entrepreneurs,” says Baljinder Sharma, a Mauritius-based veteran Indian investor. Sharma, and a group of Indian and African investors organized an India-Africa forum for around 300 entrepreneurs and early-stage investors in the island country this month.

While still nascent, there’s a particular opportunity for African startups to exchange knowledge with Indian investors and entrepreneurs about scaling the growth of local startups. The Indian regulatory and economic environment has more in common with African countries than Silicon Valley or London, says Tomi Davies of African Business Angel Network. “Angel investing is what we need to focus on in Africa to build the pipeline there’s a lot we can learn from the Indian Angel networks on how to do this at scale.”

And it’s not just about the opportunity for Indian investors in African startups, but also for those startups to be helped with access to India’s huge market of 1.4 billion people, where internet and mobile penetration is higher than in most African countries.

It’s also important to note that while there isn’t yet a pipeline of startup investment and tech talent going both ways, one of India’s biggest tech investors is South Africa’s Naspers. In fiscal 2019 (which ended March 31) it invested $3.1 billion in mid- to late-stage startups in sectors from fintech to food tech companies.

The sheer size of Naspers’ moves in India relative to what’s possible in Africa’s markets highlights why investors like Davies and Sharma are focused on developing the early-stage investor networks. Building out the startup pipeline across the continent for billion-dollar deals is key to such investment becoming the norm in Africa, too.