The gap could contain ‘non-consensus’ opportunities

To be sure, investors tend to shy away from mushy middle startups because they are at a stage marked by uncertainty about product and market fit. It is easier for an investor to gamble small checks on very early stage startups (or even ideas) or go big on stable, fast-growing companies.

But the middle is “where we see an opportunity, because that’s often where you can come in for a great company at a great price before it accelerates and becomes obvious,” said Derin Adebayo, who leads the global Endeavor team’s Access to Capital unit. Citing an investment principle, he says the key is to be non-consensus and right.

And the argument for investors to take the plunge is that Africa’s digital economy—whose value is projected to reach $712 billion in 2050—is at an inflection point, accelerated by the impact of covid-19 on appetite for digital services, and an increasing supply of software developers and other tech talent in Nigeria, Kenya, Egypt and South Africa.

Some of what the report advocates for is already happening. For example, each of the 4 rounds Tiger Global has led for African startup deals this year—Float (Ghana), Bamboo (Nigeria), Union54 (Zambia), JABU (Namibia)—has been for around $15 million.

But Tosin Faniro-Dada, Endeavor Nigeria’s CEO, says this doesn’t have to be left to super investors like Tiger Global. “I’ve sat down with people who have never been to Africa but they have the funds to invest. Many still don’t have context about Africa.”

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