Lateef Ashekun is a member of Suites Capital, who has been mentoring start-ups in Africa – primarily in Lagos and Abuja, Nigeria, for the past 2 years, through the Founders Institute. During this time, he has had the opportunity to evaluate hundreds of early-stage companies across critical investor benchmarks, including: team/human capital, market opportunity, product/market fit, competitive moat, scalability, business model, and traction.
The Suites Capital team sat down with Lateef to chat about his experiences.
Why did you get into investing and mentoring African Startups?
I’m a first generation Nigerian-American, so while I’m living in the United States – Nigeria is also home. And unfortunately, Africa has long been plagued by lackluster governance and poor leadership despite its richness in natural resources and human capital. As a result, I always envisioned myself delivering impact and fulfilling my duty as a leader, by focusing on problem-solving through venture-building and investing.
I am excited and bullish on the future and upside of the African continent and like many others, I share the vision that Africa can economically transform and be the best version of herself in the next 50 years like other transformational success stories i.e., Singapore, UAE, China, South Korea, etc.
What are some relevant statistics in the African Startup ecosystem?
2021 was the biggest year for venture capital investments in Africa in terms of deal size and deal volume. This validates Africa as the next frontier, with tremendous growth opportunities. Some relevant statistics:
- 650 companies raised $5.2 Billion (104% YoY increase from 319 deals in 2020)
- 16 super-sized deals raised $2.6 Billion
- Finance was the largest sector by deal size (32%) and deal value (60%) followed by technology (16% and 6%), consumer discretionary (16% and 8%) and industrials (13% and 13%).
- FinTech (31%), E-Commerce (7%) and HealthTech (6%) were the top 3 sectors within technology
- West Africa was the largest region for VC deals (33%)
- Top 4 African Countries with the largest number of deals and deal value were Nigeria (23%), South African (17%), Egypt (15%) and Kenya (13%)
- There were seven African unicorns ($1+ Billion Valuation)
- 75% of the investors were international vs 25% African investors
- 24% of investments aligned with diversity goals (female founders)
What are the biggest challenges for founders in Africa?
In my conversations with founders, they are running into challenges with respect to raising capital and building teams with good to great talent.
Despite the explosive growth in Africa’s number of venture deals in 2021, the startup ecosystem is in its infancy stage compared to mature markets like the US, which raised $329.9 billion in 2021. Most African founders have difficulty raising at the pre-seed and seed stages because they are mostly pre-revenue, post-MVP (Minimum Viable Product) and have minimal customers or traction. Founders typically raise beyond their borders and in most cases source capital from international investors focused on Africa.
The brightest talent is highly educated, well trained technically and have the pedigree to work anywhere. As a result, the best talent on the continent isn’t as bullish on the startup ecosystem regardless of the attractive pay and equity packages. Essentially, entrepreneurs are competing with established brands and corporations for talent that are typically risk averse and not as informed on startups as a wealth creation vehicle. The great resignation globally has further compounded this problem on the continent.
What is the upside for founders in the African Startup ecosystem?
Africa has 1.3 billion people across 54 countries with a combined GDP of $3.4 trillion. This translates into a large market opportunity for problem solving and the ability to nimbly scale ventures across the continent. For example, entrepreneurs solving problems in Nigeria can initially target the 200+ million people and easily scale to neighboring sub-Saharan Africa all within hours (i.e., Ghana, Togo, Cameroon, Benin, Guinea, Cote d’Ivoire, Congo, Kenya, South Africa, Senegal, etc.).
Furthermore, the establishment of ACFTA (African Continental Free Trade Area) – the largest free trade area in the world will facilitate continental trade by reforming policy and streamlining the existing process and procedures to do business across borders.
Another upside worth mentioning is Africa’s ability to leapfrog some infrastructure development, whether that’s via the mass adoption of mobile phones across the continent which skipped the copper wire landline infrastructure or the significant popularity and usage of mobile banking/payments.
What are the expectations for mentors/advisors?
There’s a huge emphasis on providing strategic value beyond capital. This usually manifests by serving the CEO and helping to craft the long-term strategy (Customer Intimacy, Product Leadership or Operational Excellence). Other expectations include introductions to Investors, facilitating partnerships with corporates that could be prospective customers or relevant to their supply chain and distribution, sourcing great talent/recruiting, succession planning, governance, etc. As a mentor/advisor, founders expect you to share practical and tactical insights for executing strategy and minimizing risk as they grow the company.
What else would you like to share about your mentorship experience in the African Startup ecosystem?
Problems are like puzzles that need to be solved via creative and innovative methods. Africa has unique constraints and circumstances that are very different from developed nations. Therefore, Africans everywhere and non-Africans should be clear on their “purpose” and “why” as they commit to building the best version that Africa can be.
What advice do you have for others who would like to mentor African startups?
It is like any other experience; you’ll get as much as you invest in it. For me, it continues to be an extremely rewarding experience because it enables me to hone my servant leadership competency and sharpen my growth mindset by engaging with startups and the innovation ecosystem. Also a bit of sobering advice: experts are forecasting a significant reduction in funding for African startups due to the inflation and the looming US recession. My advice to African startups, and anyone who is mentoring founders, is to strengthen your resiliency, intensify capital efficiency and prepare to run a lean operation over the next 12 – 18 months. Despite the precautionary measures that founders put in place, unfortunately, there are many startups that won’t make it during these interesting times.
* Lateef Ashekun is a US Marine Iraq war veteran and an operator with extensive experience driving business transformations, maximizing operational excellence, and establishing strategic partnerships as a trusted technology advisor and thought partner to executives.