In Nigeria today, it is almost taken for granted that you can start a business and begin collecting online payments immediately. But in 2015, when Paystack launched, online payments were as common as electric cars are today, and businesses struggled with things like recurrent billings.
Fast-forward to 2024, social commerce has taken off and is expected to grow to $1.5 billion by the end of the year. Market-creating innovations such as Paystack are the goal of Ventures Platform, one of the few indigenous venture capital firms in Africa.
Founded in 2016 by Kola Aina, Ventures Platform prides itself on being a firm that invests in the companies building the future of Africa. Since inception, it has invested in startups like PiggyVest, Paystack, Remedial Health, Raenest, Termii, and Fez Delivery.
Speaking with Techpoint Africa on the back of its recently released Impact Report, Managing Partner, Dotun Olowoporoku, stressed that while the firm isn't an impact fund, it does not see a dichotomy between making good returns and making an impact in Africa.
"One of the major reasons Kola and I came together to do this fund is that we fundamentally believe that economic development in Africa can also be done through innovation. Prosperity for all, not just for a few, can be catalysed through innovative entrepreneurship and market-creating businesses."
In 2022, it raised $45.7 million, $5.7 million more than planned, tapping Standard Bank, the International Finance Corporation (IFC), and the British International Investment (BII) as limited partners. It has since invested $19.6 million in 34 startups across ten sectors.
Fintech, software-as-a-service, and healthtech have received the most investments with $6.8 million, $2.8 million, and $2.4 million, respectively.
Its portfolio companies have created over 4,000 direct jobs and an estimated 20,650 indirect jobs. Additionally, 21% of portfolio companies have at least one female founder.
Increasing gender diversity in African startups
Boosting the participation of women in startups is a key impact metric for the firm, which launched the Levelling VC initiative in 2023. The initiative aims at increasing both the number of female VCs and the number of female startup founders.
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It's doing that through research programmes set up to identify and proffer solutions to the barriers faced by female founders and hosting ecosystem events to discover and inspire female founders.
It also encourages potential investments to include more women in C-level roles and at the board level and hopes to have 25% of its investments going to female founders by 2028.
"There's an unconscious bias that all of us have. One of the ways you can break that barrier is to have people with lived experiences in the room. For example, about 80% of the people in our investment team are female. Two out of the three members of our external investment committee are female.
"What that does for us is challenge any bias that we might have. So if there's a female founder that comes in with a female-focused product, somebody else in the room can understand it innately and challenge us to look at it more objectively."
Regardless of its goals to increase gender diversity in the startup ecosystem, it has no intentions of launching a dedicated fund for female founders.
Ventures Platform invests in less than 2% of the over 2,400 startups it sees annually, a common trend for venture capital firms.
"Most businesses in the world should not be backed by VC, and that doesn't mean they're bad businesses. They are good businesses, but venture has to have an outsized return," Olowoporoku notes.
In addition to businesses that are not venture-backable, Ventures Platform also turns down startups that may be venture-backable if it has a similar startup in its portfolio, as taking on more investments in a specific sector could limit its ability to diversify its portfolio.
Trends to watch out for
Olowoporoku sees two issues influencing investment trends in Africa. The first is artificial intelligence.
Startups using artificial intelligence are an investor's delight, with $35.6 billion going to them in the first half of 2024. Moonshot AI, Scale AI, and Wayve have raised over $1 billion individually.
Rather than view it as a sector, he shares that Ventures Platform sees it as a fundamental that could impact how businesses are run.
The second trend is climate tech. Just like AI, he does not see climate tech as a niche but as a development that will cut across multiple sectors.
Corporate governance should be stage-appropriate
The funding boom fuelled by the zero interest rate phenomenon pushed critical issues like corporate governance to the back. But high-profile cases of malfeasance at startups have forced VCs to reconsider their stance.
Where VCs often waited until the Series A stage to demand corporate governance procedures, early-stage investments now come with such demands. One reason for this, according to Olowoporoku, is that startups now take longer to reach Series A.
However, he argues that corporate governance should be determined by a startup's maturity.
"Startups should not be behaving like mature businesses because when you behave like mature businesses, it can hinder your growth."
Seeing corporate governance as being accountable to investors is crucial, and he notes that it begins with regularly reporting the relevant developments, such as revenue, challenges, and growth levers, to investors.
He encourages startups with more than one founder to institute checks and balances that ensure no one founder is empowered to make important decisions alone. Where there's only one founder, a board or senior leadership could provide that check.
Having a board is important, Olowoporoku says, but timing is equally vital. While startups often waited until they were raising a Series A round before setting up a board, he advises that those that have raised over $500,000 should constitute a board.
Audited accounts are also necessary, as not having them could hinder potential investments or acquisitions."Governance should not be seen or portrayed as a burden for startups," he advises.
