I recently had the pleasure of having coffee with a highly successful Venture Capitalist who has been actively involved in the industry for over two decades. Our conversation delved into the intriguing world of investing in African startups, and I couldn’t help but be astounded by the unconventional wisdom he shared. Today, I want to pass on these valuable insights to you.
Here’s what he said:
- “Never invest in a startup whose founders have never failed before.”
They won’t know how to handle it when they eventually do.
When it happens, it could lead to disastrous consequences.
- “Never invest in a company whose pitch includes the word ‘disruptive.'”
It’s overused and almost meaningless.
It’s become an ego phrase used to make founders feel important.
- “The team is more important than the idea.”
A mediocre idea with a great team will always produce better results than a great idea with a mediocre team.
The team can always adapt the idea or pivot.
- “Don’t be afraid to invest in messy, unsexy businesses.”
Fintech and AI have become crowded spaces.
But there are still gaping holes in industries like Agriculture, Logistics, and Retail.
- “Don’t be afraid of investing in a solo founder.”
One great leader is better than 5 mediocre ones.
Solo founders can also pivot more effectively than a team.
- “Invest in industries you understand.”
African startups are not that different from startups everywhere.
Valuations, competition & business models are universal.
When investing in an industry you understand, you can call ‘BS’ on pitches that sound too good to be true.
- “Good entrepreneurs understand that they are selling and not just building products.”
Successful entrepreneurs can sell their products to a client, employees, and investors.
If they can’t sell their vision, they’ll struggle to grow.
- “Africa is not a monolith.”
Just because an idea worked in Kenya doesn’t mean it will work in Cameroon.
Different regions have nuances.
Understand the culture, regulations, and industry of the country you are investing in.
I hope these insights will prove valuable in your own investment journey. As the African startup ecosystem continues to thrive, it’s crucial to approach opportunities with an open mind and a willingness to venture into new and untapped territories.
Wishing you fruitful investments and entrepreneurial success!