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Why African entrepreneurs need to think bigger


Sometime in 2010, I met this interesting startup from Kenya at an event. They had built something that was badly needed to create a proper payments ecosystem and bridge the payments silos that were rapidly developing. I knew that interoperability was the inevitable future of mobile payments as the customers’ needs were very different from the assumptions of most of the players at that time. I courted this startup and made several trips to Nairobi until they agreed to take an investment of $100,000. I spoke to some friends who decided to back me up and asked the startup to provide some documentation before due diligence. I never heard from them after that.

The Kenyan startup space (probably all of Africa) has recently got shaken by revelations from a Bill & Melinda Gates Foundation funded report titled – “Breaking the Pattern: Getting Digital Financial Services Entrepreneurs to Scale in India and East Africa” that three companies got 72% of the $84.7million invested in Kenya. Two of these enterprises are in the off-grid solar and renewable energy space.

Patterns and nuance
It is true that a lot of technology investors follow a pattern. The Bill and Melinda Gates report indicated that 90 percent of funding for East African start-ups in the Fintech space typically goes to founders who have come on from outside Kenya. In Nigeria, there were a lot of complaints in the past that most of the people who got funded were those who went to school abroad and connected to the right circles. That was also true. I think there is some nuance to this pattern that commentators ignore. These expats or “I just got back” (IJGB) Nigerian founders understand that the market for products that require venture funding have to be bigger than just “solving local problems”.


The most ambiguous and probably deceptive term in innovation or technology in Africa is “solving local problems.” It locks you into a defensive mentality when the rest of the World is on offense. Value investors do not want to play defense. Markets do not reward you for solving their problems; they pay for what they want. There is a difference between the two.

Venture investors are looking for scalable solutions. In a previous article on The Guardian, I mentioned how we started a technology company and failed because we could not scale. Venture investors are not in the business of funding companies that could potentially die because they cannot scale. Investors want to be on offense. They want to create and dominate markets, not just “solve problems”.
Bulldozers vs. Tractors

A founder came to me with a solution to provide off-grid solar power in Nigeria. I had an idea that the potential market was enormous, I have always been talking about it. What I didn’t know was that there was a lot already happening and people were buying. I got that information from an entirely unrelated but complementary space. I saw that the demand was not just in Nigeria. In Ghana alone, there is a potential market of two million households. What was important was not just that people were providing solutions, it was important that the market was buying.

Yes, off-grid solar power was solving problems as pitched by the founder. As a potential investor, I saw a larger market than Nigeria and opportunities to complement my other initiatives. My motive for investing in services to augment off-grid power appeared not aligned with the founder’s purpose of “solving problems.”  I wondered if the founder had the vision to grow and scale? The Nigerian market was massive but is also a tough place to acquire customers. I saw that there were other complementary platforms elsewhere that would make customer acquisition easier and allow speedier growth. I immediately saw why most of the investment in Kenya would go to two companies in this space. Those companies were not looking at Kenya as a market but the entire emerging markets with electricity power problems. The companies also had the capacity to deliver.

I frequently ask founders who pitch “solving problems” if a bulldozer and tractor do not solve both problems? Investors prefer bulldozers to clear the tracks and create new opportunities. They do not want to invest in tractors carrying burdens or preparing the ground for others to come and harvest.


Markets are not loyal to problem solvers. Markets are faithful for a while to those who provide what they want. We hear now of how investors are biased and how unhealthy patterns are beginning to emerge. The reality is that most of the money for funding African technology ventures at this stage does not come from Africa. These investors expect a particular type of vision and structure. A Silicon Valley investor recently mentioned at a meeting that he preferred simple things he understood and was not interested in “capitalization table acrobatics”.

I believe that those with the greatest potential for a successful outcome, appear at the table fully prepared. Discovery at that level is not as difficult as it seems. It is really about the right structure for a potential investor exit. Expat and IJGB founders would have probably incorporated offshore in more investor-friendly jurisdictions, and they also understand what the investors what.

We stopped chasing the Kenyan payments company to provide further details we required for an investment decision when we realized that they did not have the vision or capacity to scale. They were not thinking big enough and were not acting like a company that wanted to grow fast. I have been there before, and I know when I see those heading down the same path. I invested in another complementary Fintech company that saw Africa as a market for an API opportunity instead of “solving a local payment headache”. Yes, it was founded by an “IJGB,” but they are bulldozers, not tractors. The bulldozer is doing much better. My decision was not about a pattern; it was about markets and vision. Yes, they are also better structured for exits.


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