2016 was a “firm step in the right direction” for angel investing across Africa, and the level of activity suggests the angel investing landscape has come-of-age on the continent, according to the African Business Angel Network (ABAN).
Looking back on 2016, ABAN identified a number of positive trends to have emerged across the angel investing space over the past year; perhaps the most prominent being the fact that the number of angel groups in Africa almost doubled.
There were 25 angel investor groups across Africa at the end of 2015, ABAN reports, which grew to 40 spread across 25 African countries by the close of 2016.
On a regional level, ABAN praised developments such as the Lagos Angel Network (LAN) introducing syndicated Deal Days; and the launch of the South African Business Angel Network (SABAN).
Overall, ABAN says what is most encouraging, is that there has been a consistent and pervasive discussion of the “African Opportunity” at leading global events, while the support from major global institutions – including AfDB, the World Bank and EIB – has also grown.
This combined, “suggests a ‘coming-of-age’ and reaching critical mass for angel investing in Africa”, the organisation concludes.
A number of specific lessons can be taken away from a review of 2016, ABAN says.
First, there is still much work to be done to introduce potential investors to the concepts and best practices of early stage investing.
There also needs to be heightened focus on co-investing, which is “critical” to moving angel investing on the continent forward at a quicker pace.
“This is a vital mechanism in risk reduction, more shared learning and on-boarding first time investors,” the organisation said.
The importance of knowledge-sharing between investors is another key lesson ABAN points to, and can be supported by relevant events. Corporate chief executive officers (CEOs) and successful founders in Africa should also be drawn into these efforts, as they are in a prime position to become angel investors.
For angel investors themselves, 2016 has highlighted that they must learn to contribute more than just funding.
“Contributing relevant business acumen and market access to a start-up are just as important – this makes angel funding smart capital,” ABAN says.
For investors based in other global markets, ABAN believes Africa presents a great opportunity.
“Comparative to the US and Europe, angel investors in Africa need relatively little capital to be notable players in the market; this presents a real opportunity for new and small players in the US and Europe to have a superior market position by relocating to or focusing on African deals.”
Nonetheless, ABAN concludes there is still a long time to go before African policy makers introduce incentives for angel investing. Angel investing is a long game in Africa, which faces very real challenges along the way.
