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Towards A Business Model For Funding African Startups

Note: This blog post is adapted from a much longer discussion by the author under the same title that was published at Tekedia on January 7, 2013. You can read that blog post here. Small sections of this article are identical to segments of the original article.Africa's entrepreneurs are teeming with ideas for innovative startups. But where can they get the funding?

The problem in brief
Africa is experiencing a boom in entrepreneurship due to proliferating Internet and mobile computing technologies. Simultaneously African startups face the often life-threatening impediment of inadequate access to seed and early stage venture capital. Fortunately, a number of developments in other parts of the world point to the contours of an approach to solving that problem in a manner that necessarily starts out small, but that can eventually be scaled in a meaningful way.

Angel Investors as Startup Enablers in the Developing World

A normative definition that I use as a recovering angel investor myself is that an angel investor actively helps a seed stage startup succeed with both mentorship and capital in exchange for those intangible benefits of mentorship and a return on investment.  In World Bank parlance, then, they automatically provide both investments and technical assistance with no agency costs; a great recipe for solving multiple problems (funding capacity, entrepreneurial capability and access to early stage finance) in a cost effective way. Knowing that 318,480 of them invested $22.5 billion on 66,230 ventures in the US and achieved 27% annual returns forms the basis of our hypothesis that angel investing could work well in the developing world.

Notes from the ‘Capital of Innovation’

Murat Seker's picture

This past summer, I joined my colleagues on a visit to the Global Innovation Summit and study tour in Silicon Valley—which is undoubtedly the world’s capital of innovation and entrepreneurship. Also joining us were representatives from Lebanon and Vietnam, who were clearly interested in enabling inclusive innovation in their respective countries.

Silicon Valley isn't afraid of failing and risking its way to success. The Global Innovation Summit brought together more than 500 innovation practitioners—including entrepreneurs, financiers, think tanks, NGOs engaged in inclusive innovation, and government officials from emerging markets.  While we were there, we got an inside look at business accelerators, financiers, higher education institutions, and NGOs engaged in inclusive innovation.  It was an important learning opportunity for us, considering the importance of innovation to the development agenda and the World Bank’s role in fostering innovation in our client countries. 

Lessons from a Start-Up Nation

Murat Seker's picture

I recently visited Israel  to learn about various programs andResearchers are helping Israel succeed in the field of innovation. (Credit: Flickr Creative Commons, IsraelMFA) tools used to support Israel’s innovation and entrepreneurship ecosystem. It is well known that innovation and entrepreneurship are two pillars of the Israeli economy and a source of global leadership.

The educational visit was arranged byMATIMOP, the government agency of the Office of the Chief Scientist (OCS) under the Ministry of Industry, Trade and Labor. It included visits to incubators, technology transfer offices, research institutes, universities and the OCS. We had the opportunity to interact with both directors and beneficiaries of various support programs, and to learn about day-to-day operations, programs, management, and the role programs played in beneficiaries’ lives and businesses.