Keet van Zyl begins his keynote address of the Viva AfricArena conference by telling how an ignorant remark by a prospective US funder for his venture capital (VC) firm Knife Capital made him blindingly mad.
It was 2017, and Van Zyl and his team were on an investment road trip to the US to look for people to invest in emerging, technology-focused businesses in Africa.
By then, Van Zyl was a veteran of the South African VC sector and had built a reputation for helping to turn startups into substantial businesses.
An inconsiderate question from a potential investor, however, soon tested their self-control in a way they had not expected.
They were casually asked: “But tech in Africa is an oxymoron. Does it actually exist?”
Van Zyl was so taken aback, he spent the evening writing an angry post blog post, which (probably wisely) went unpublished after he decided to sleep on it.
The reason he was so angry about that remark, was because Knife Capital, in 2011, had sold mobile payment platform Fundamo for R110 million to Visa and also sold its predictive analytics business, CSense, to General Electric for an undisclosed sum.
It had also just sold its holding in a radar start-up iKubu to Garmin, and was preparing to exit its point-of-sale business, orderTalk, in a deal with Uber in the following year.
Van Zyl pointed out the irony that though the US-based funder did not think technology companies could be created in Africa, Knife Capital had sold all its businesses to US companies.
“Therefore, there is definitely tech in Africa, and there has been for a very long time.”
Even so, he noted that tech in in Africa is concentrated in certain areas. This concentration meant there were a lot of opportunities that remained untapped.
This can be seen in a quote in the e-Conomy Africa 2020 report, released by the International Finance Corporation and Google: “Africa’s internet economy is one of the largest overlooked investment opportunities available.”
Van Zyl said factors such as a rapidly expanding population, a rising middle class, young urban citizens entering the workforce at scale, and increased connectivity, were providing a lot of opportunities.
But he cautioned against treating Africa as “one country”.
Rather, it must be seen as a conglomeration of ecosystems, which are very different from each other.
Van Zyl said tech funders are starting to take note of the potential of the continent. In 2019 total funding for startups in Africa was $1 billion. In 2022, funding was predicted to reach as high as $9 billion.
Though African startups only attract 1% of global venture funding, he pointed out that this funding was going into businesses that were “solving meaningful challenges.”
In essence, the problems the continent was dealing with were seen as opportunities for these businesses. “For all the challenges we have on the continent, the opportunities lay in the digitisation of the solutions to these challenges.”
Another thing that makes African startups different, is that they tend to be more sustainable, as entrepreneurs have limited access to funding and have to be more efficient with their capital.
While the maturing of the continent’s ecosystems was going well, Van Zyl pointed at that there were areas of concern.
There was, for instance, a tendency to have high return expectations and a lack of not providing enough detailed information about the underlying investment.
Even so, he remained optimistic, despite the negative economic outlook. He said there was still capital available, especially when it came to fintech.
“A lot of money has followed this ecosystem, including our fund and many other VC funds. There is dry powder that needs to be deployed into companies that can show a path to profitability.”