UK-based investment club backs Africa-focused start-ups

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Africa’s buzzing tech sector is increasingly attracting attention from entrepreneurs and investors. In the United Kingdom, a group of African diaspora and “friends of Africa” have set up an angel network that seeks to fund start-ups focused on the continent’s tech industry. According to a report by consulting firm Frost & Sullivan, Africa’s e-commerce space alone could grow to over US$50bn by 2018.

Founder Sean Obedih says NewGenAngels was established by African professionals abroad who do not want to “miss out” on the emerging opportunities in Africa. Obedih, born in Rwanda, has been living in Britain for 15 years now, and has been involved in setting up multiple ventures.

Established last year, NewGenAngels makes investments of US$150,000 and upwards. It seeks to invest in companies based in Africa, but also those outside the continent that are building solutions for the African market.

“I believe you don’t have to be in Africa to serve Africa,” says Obedih.

Collectively adding value

NewGenAngels has 50 members, but only half are active. To join the members-only investment club, one has to commit to a $25,000 investment should the right deal come along. Potential deals are presented to members on a quarterly basis.

“It appeals to investors because collectively they can add value to a company compared with putting in their $25,000 as an individual. By working together as a syndicate they can leverage each other’s networks and each other’s pockets to make the business grow,” says Obedih.

The club’s members are spread out across the globe from the US to Canada to Belgium.

NewGenAngels has so far invested into three start-ups based in the US and Europe whose products are focused on the African market. These include Orin, an African music streaming service and Tajiri WM, a fintech company currently operating in stealth. The third business, Kitaal, hoped to be the “African version of” enabling people to rate customer service – but it has since folded.

‘Failure part of investing game’

“I think it was too early in the market for such a product. Failure is part of the investing game so this will not deter us. At least half the companies you invest in fail, some do just okay and a few do really well. The only problem is that you never know which ones are going to do really well. That is why being part of an angel investor network allows you to syndicate deals and spread risk across many companies,” explains Obedih.

While start-ups in Africa struggle to access financing, he says it is even harder for businesses outside the continent that want to serve the African market.

“Most angel investors tend to work and invest in things they see and understand. If you are building an Africa-focused product in London it is very hard to get financing because most investors do not understand Africa. We close these deals because we understand the African market.”

Support and mentorship

“Even though we have invested in companies outside the continent we definitely want to support companies based in Africa, especially those that want to scale into markets outside the continent. We would like to showcase African companies to international investors to buy them up.”

Besides money, NewGenAngels offers its investees advisory support and mentorship. It has also partnered with locally based angel networks that will offer additional support to start-ups based in Africa when it invests in such businesses.

“We are able to give our investees objective feedback because we are not as attached to the company as they are. I also think because we are not on the ground [in Africa] it allows us to try things that someone on the ground wouldn’t try. Our way of thinking will sometimes be different, and that will be beneficial for our start-ups.”

Network of 1,000 ‘angels’ the aim

NewGenAngels plans to build a network of 1,000 investors by 2020. Obedih notes it is essential for Africans within and outside the continent to invest in the thriving tech industry.

“If we don’t we will lose out greatly,” he says.

“In Africa there is a paradox in that the youth who understand technology do not have money, and the people who have money do not understand technology. Our parents just don’t understand how they can give an entrepreneur $30,000 for 30% of their company. They would rather buy a car or a build a house.

“The money is available, we just need to create processes that allow people to invest and educate people that there are some good returns in investing in local businesses and Africa-focused companies.”