SMEs are said to play a pivotal role in any economy, yet entrepreneurs running small businesses struggle to access financing and most collapse before their third anniversary. Venture Capital for Africa (VC4Africa) is an online platform that facilitates funding and mentorship by connecting entrepreneurs with venture capitalists. VC4Africa founder Ben White told How we made it in Africa’s Dinfin Mulupi about the platform’s efforts to bridge early stage funding gaps and encourage local and foreign investment in African businesses. Below are excerpts.[hidepost=9][/hidepost]
What was the inspiration behind VC4Africa?
VC4Africa is a community that has grown organically over the years. It started at the annual congress of the African Venture Capital Association in Dakar, Senegal in 2006. At this meeting it was made clear that innovative early stage ventures with the potential to yield high social and environmental impact and requiring less than US$500,000 in financing, remain the most difficult segment of the SME pipeline to reach. The perceived challenges of businesses operating in an African context, higher costs of due diligence, and the inexperience of the investors and entrepreneurs are some of the reasons that hinder economic activity.
It is very easy for entrepreneurs to fundraise through VC4Africa. After a one click signup it is possible to register a venture profile and seek out partners. Entrepreneurs should follow the five simple steps to fundraising on VC4Africa, one of the many self-help tools we offer. Once the fundraising request is screened and approved by our team, the venture is put into fundraising mode and made available to the VC4Africa Investor Network.
What are the key milestones VC4Africa has achieved?
The VC4Africa community has evolved into what is now the largest peer-to-peer network of entrepreneurs, angel investors and early stage venture capital firms dedicated to building Africa’s greatest companies. So far, entrepreneurs have raised more than $1 million in funding and joint ventures and investments have been secured by members in countries as diverse as Cameroon, South Africa, Egypt, the United States, Kenya, Nigeria, the Netherlands, Somalia and Zambia.
I am always amazed to see how far this entrepreneurial movement extends, and there are great businesses being built in markets like Burundi and Somaliland. The great thing about the internet is that we can link entrepreneurs and resources beyond the borders of the known tech hubs. Listed entrepreneurs have access to free online tools, mentorship opportunities and private deal rooms.
Registered investors are able to see which screened ventures are fundraising, track their progress and review private documents. To date we have processed more than 1,000 venture applications and more than 500 profiles are published publicly to the website. The ventures on VC4Africa are early stage and require investments between $10,000 and $1 million. The primary sectors include mobile, web, renewable energy, sustainable agriculture and healthcare, among others.
How does the platform make money?
We have seen tremendous growth in our venture pipeline over the last year, and this gives us a unique opportunity to begin rolling out a premium-level service to our investor network, at pricing levels that accommodate the spectrum of individual angel investors up to large institutional fund managers. For example, say an investor wants to conduct a financial due diligence on a company they find interesting. This is something VC4Africa can facilitate via its network of trusted partners like BDO, the fifth largest tax consultancy firm with offices in 15 African countries. We also host competitions and challenges in collaboration with like-minded partners. We are currently working to launch a video pitch competition and would like to host a series of investor roundtables bringing both foreign and local investors together. We are currently working to identify sponsors for these activities that are needed to further mobilise necessary networks and resources.