Venture Capital For Africa on its report, a highlight on founders' lasting impact on startup growth: Interview with Thomas Van Halen, VC4A.
According to Venture Capital For Africa report, which came out this year, African startups owe much of their latter-day success to founders and original team momentum. Data from around 39 nations across the globe, 41 African nations and 111 Africa-oriented investors contributed to this report. Bizrika wanted to find out more about the salient details of what makes a new venture tick and progress from its establishment to growth stages.
What makes founders such an important catalyst for the success of a new entity?
A key outcome from this year’s study of startups was the identification of their unique traits relative to the startups’ level of commercial performance. And although many factors go into building a company, analysis of the data makes clear that a strong team of founders is the key driver of venture success in Africa. The right team of founders makes the difference, and is the single most unique characteristic we see across the companies making commercial progress.
Our research shows that the success of startups is determined to a large extent by the composition of the founding team. The right composition in terms of size, gender, education level and age enables the team to use past experiences to make the right decisions for the growth of their companies.
Going by VC4A’s findings, which are some of the reasons why startups make important milestones even prior to formal registration?
Only 4% of ventures had their first paying customers prior to formal registration. So we are talking here about a few outliers only. Main conclusion is that formal registration is a key milestone for African startups to proceed to next venture stage.
Though women are often discriminated against in many aspects of leadership, your report says that most success owes to male/female partnerships. How instrumental are female co-founders at making entities successful?
Gender balance can further explain venture success, as the founding teams of successful ventures are more likely to include male and female founders. It is noteworthy that 46% of these ventures include a female founder in their team. Exclusively female teams run 9% of the startups.
Among the countries with 20 or more ventures participating in the survey, Uganda and Kenya have the highest female participation. For Uganda, 57% of the ventures include a female founder where for Kenya the number is only slightly lower at 55%. South Africa has the lowest female participation rate at 33%. Nevertheless, these percentages of female founders far outpace averages recorded in more established startup hubs like New York or San Francisco. More details and other factors that differentiate a successful team of founders are included in the 2017 report.
How many startups + investors contributed to the compiling of this report?
The 2017 release is based on data collected from 1866 startups, coming from 48 countries, including 6 non-African countries. Nigeria and Kenya alone are responsible for more than 50% of the participating ventures. More than half of the ventures are hosted in just 10 cities: Lagos – Nigeria (98 ventures), Nairobi – Kenya (59), Abuja – Nigeria (21), Kampala – Uganda (21), Johannesburg – South Africa (16), Cairo – Egypt (15), Accra -Ghana (14), Hargeisa – Somalia (13), Lusaka – Zambia (12) and Uyo – Nigeria (10). Two-thirds of the ventures are located in a capital city or another major city. 17% of the ventures have been able to expand their business across borders, and conduct business in more than one country.
Among the key areas you monitor in coming up with the annual report, namely early stage investors, early stage performance and high growth ventures, which contributes the most to success?
Where many factors go into building a company, this year’s research analysis makes clear that a strong team of founders is the key driver of venture success in Africa. All other factors aside, the right team makes the difference and is the single most unique trait we see across the companies making commercial progress.
Capital and funding are very essential to startup growth. Does the report consider the source of the funds?
Sources of funding are: Founder capital, Friend/Family, Grant/Competition, Angel Investor, VC/Impact Fund, Bank loan, and Donations.
Do you also consider companies with less than 1000 employees in your survey?
Yes we do. We found the average amount of jobs created per venture is 7.
As a parting shot, which industries feature most in your report?
The comparison over a three-year period shows the emergence of more traditional sectors like agriculture gaining interest while the eagerness to start fully ICT based startups remains constant in total numbers. This interest in agriculture goes well beyond trade platforms. The most common combinations of sectors picked by the startups were ‘Agriculture’ with ‘Food & Beverages’ and/or ‘Manufacturing’, where many are combined with an innovative angle. This application and mainstreaming of technology in traditional business sectors works to advance core industries. VC4A expects this trend will accelerate in the coming years, and where an increasing amount of technology will find relevant applications across traditional sectors, including fields like education and healthcare.
Thank you so much for talking to Bizrika.