6 Takeaways on the Role of Research in African Venture Capital and Startups

6 Takeaways on the Role of Research in African Venture Capital and Startups
September 21, 2021 Abbey

The African VC space has gone through tremendous growth over the past five years, hitting $2 billion in 2019 and averaging more than 40% annual growth rate. In 2021, it has already surpassed that figure and stands at more than $2.2 billion, with name-brand VC firms such as Founders Fund, Sequoia Capital, SoftBank and Tiger Global arriving at the party.

However, at the same time, there are still persistent concerns around the disproportionate amount of funding that goes to white founders compared to the indigenous ones. The ecosystem has also, in some instances, recorded little to no funding for the locally educated founders as the foreign-educated receive more funding due to the pattern matching mechanism deployed by most VCs when deciding to allocate funding.

Because of the incredible work that firms like Briter Bridges and TC insights are doing, we can know these statistics. They’re making research among the most necessary fields to build an African tech ecosystem that is fair and self-correcting with timely resources needed for assessing the progress made.

That is why Future Africa is constantly looking to bring attention to the recent developments in research and data across Africa. In August, we hosted a Clubhouse session with Olanrewaju Odunowo (Head of TC Insights at TechCabal) and Dario Giuliani (Founder & Director at Briter Bridges). We discussed the role of research in venture capital and startups in Africa with our Researcher Peter Kisadha. In this article, we highlight the key things we learnt that you might find interesting.

1. There is a growing demand for quality data and research

As the VC and startup ecosystem across Africa is becoming of age, it is now increasingly difficult for an individual or organisation to keep track of the activities and make timely sense of the data gathered. As a result, many now seek help from those dedicated to the business of research and data gathering. According to Olanrewaju Odunowo of Techcabal, TC Insights is a product of various requests by individuals and organisations who need access to unique and valuable venture capital and startup research and data for the African market.

2. Need for internal code of ethics

Because trust is a crucial element for research companies, Dario highlighted the need to have an internal code of ethics that guides the moral campus. He also recommended that the organisation be as transparent as possible, especially with the methodologies and classifications used to arrive at the conclusions or findings presented- An excellent way to gain trust is by giving back to the community.

3. Good research helps VCs and Founders with market strategy

Olanrewaju and Dario emphasised the importance of good research in informing VCs and founders regarding their approach in terms of market entry, expansion, diligence etc. As a founder, for example, research can help you understand the market opportunity, whether it’s growing or whether it’s not. With research, you’re able to understand customer behaviour, see whether it’s changed from the original ideation process as well as gauge the relevance of your project from an unbiased eye.

4. Research highlights gaps in funding dynamics

There has been a growing need to indicate where the funding that comes to Africa goes in terms of race, gender and geography. According to Olanrewaju, TC Insights strives to ensure that sections that give a deep dive into these issues are highlighted in their research. Dario also highlighted the work that Briter Bridges did with the ‘Gender and Demographics Report’ in mapping out the education background of founders across Africa with a follow-up edition of the report on the way. Such report findings spark conversations around the role of education in determining the founder’s success and the quality of education on the continent, and whether it is suitable for producing world-class entrepreneurs.

5. Lessons learnt from building a research business

Having spent the past three years bootstrapping Briter Bridges, Dario is among those who have an in-depth understanding of what it takes to build a self-sustaining and thriving research business. He emphasised the importance of being vigilant with the finances and fleshing out a sensible business model that can ensure self-sufficiency as soon as possible.

6. Areas unexplored

More work remains despite the tremendous work that players such as TC Insights, Briter Bridges, and others are doing. Today, research around venture capital and startups across Africa is not as comprehensive and informative as it can be. Both Dario and Olanrewaju agree. Some of the areas highlighted for improvement include articulating how the government, DFIs and other support organisations and institutions can better view the role of venture capital and startups in developing the African economy.

That way, they will be able to support the ecosystem better. Dario also indicated that more research needs to be done around consumer trends, especially with technology products and services, to represent the market share and product uptake rather than macro figures.

We look forward to having you at our next session. Please follow us on Clubhouse to join more insightful conversations on Venture Capital in Africa.

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