That’s why the authors, who spent a year interviewing over 100 founders and investors from 15 countries, say despite some of these mismatches and concerns on whether to invest in African markets, “a more measured perspective is that significant, profitable opportunities exist despite, and arguably because, of the challenges.”

These will be found by engaging “large, unexploited markets”; discovering huge opportunities through experimentation and stellar execution; and leveraging mobile infrastructure and nuanced local knowledge to digitize and organize analog markets.

“While African markets aren’t always able to provide the outsized returns that Silicon Valley typically looks for in high-growth companies, a more focused strategy here could unlock real gems, as has been proven by some of the startup successes the continent has seen over the years,” says Tayo Akinyemi, lead researcher on the paper.

Funding African startups

If there is one core message from the paper it’s that Africa’s startup ecosystems need to adopt norms, structures, and processes that reflect the realities of operating in Africa. Nowhere is this more essential than in the funding structure of venture capital and other investors.

The paper makes the case general partners of funds need more flexible structures to better cope with markets that are evolving as rapidly as most African ecosystems. These include using alternative instruments and structures, such as debt or permanent capital vehicles (PCVs), which work by offering an unlimited time horizon for recouping return.

Another approach could be having a more focused investment approach such as B2B investments or more mature companies for example. Ultimately, investors need to reconsider their assumptions and biases. “What is clear now is the need to respect the context in which funds and startups operate and use it as a foundation to develop appropriate fund and company building norms,” write the authors.

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