Marieme Diop is in a really interesting position. As one of the people behind Orange Digital Ventures she has a really good view of the big three African investment countries. But coming from Senegal, she's been a moving force behind setting up Dakar Network Angels to address growth issues in Francophone Africa.
Orange Digital Ventures was spun out of Orange's global Vice President fund in 2016 After a few years, with increasing VC investment in Africa, the company decided to create a fund specifically focused on Africa and Diop was part of the team that set it up.
The move was part of Orange's commitment to Open Innovation and other changes to its business model including: setting up a bank and financial services in Europe, and in Africa distributing energy products and mobile for development products in areas like agriculture and health. Since Orange sees Africa as one of its growth drivers, it made sense to invest in Francophone Africa where most of its subsidiaries operate.
However, given the shortage of investible companies in the less mature markets of Francophone Africa, it has started life investing in Kenya, Nigeria and South Africa. It looks at early stage and series A and B. Typical investments can go up to 3 million euros and it is focused on tech and tech-enabled companies:"We're very broad and sector agnostic but we like to invest in areas that are adjacent to Orange's existing business areas." Its total investment capital is 60 million euros.
Two examples of its investments are Africa's Talking and Yoco. Kenya-based Africa's Talking is an API provider to telcos and it also sells and distributes them to developers:"It's scaling fast and is already in 17 countries. It enables developers to grow the ecosystem as it enables them to plug straight in to mobile operators. This is relatively easy in East Africa but is a generally difficult process elsewhere in Africa."
Yoco is a Point-of-Sale (PoS) player in the fintech space similar in business model terms to Quest in the USA:"It has achieved product/market fit and has an impressive team. It's available on smartphones, PoS devices and software for merchants."
In order to be considered for Series B funding, start-ups it looks at must have the following: have product/market fit; have scaled in 2-3 markets outside their initial markets; be generating revenues; know how to create a profit; and have the right people/team.
Diop says that there are major issues with pricing because the small number of investible companies at scale has forced up prices:"Some are overvalued. Scaleability is really important for Africa. You have to demonstrate scaleability in markets that are big enough."
She points to the recurring debate around two questions: are there enough exists? Is there enough scale to IPO? She thinks the investment dynamics are very different from other regions that sets the bar lower. You can define a good late stage company in Africa as having an exit price of US$150-200 million.
This raises significant challenges for Francophone entrepreneurs. Their markets are relatively small and very fragmented:"Many are just focusing on their home market. Francophone entrepreneurs are not interacting with the rest of the world".
"This is a problem as most foreign investors are focused on Kenya, Nigeria and South Africa. Language is an issue but business culture is also very important. Many entrepreneurs graduate from places like Stanford and Harvard and it also means that they have a business language in common. Francophone entrepreneurs need to start thinking bigger. For example, there are (only) 10 investible start-ups in Mali. They need more mentoring and support. If nothing was done, nothing would change."
She also thinks that that there is an "investment illiteracy":"Start-up founders are not very well informed about when to engage with investors and this is an issue."
Not content to sit by and just analyze the difficulties faced by Francophone entrepreneurs, she has been a moving force behind creating Dakar Network Angels. The members are all either investment professionals or have investment experience:"It's not about making money. Angels always have big wins or big losses. It's about promoting relationships with entrepreneurs. All the angels are hands-on".
"It's very educational for the investors and they learn a lot through the process. It gives a structure for getting more insights. We've also set up an educational platform for entrepreneurs, which can connect them with mentors and other entrepreneurs. There are not enough role models for those who want to go to the next level so we are connecting them with entrepreneurs in other markets."
Investments decisions are made through conference calls with prospective entrepreneurs and then they discuss it amongst themselves. They try and find individuals who match the profile of the potential investment. They invest between US$25,000 up to US$100-150,000:"We want to bring business support resources to build the foundations for growth and get the fundamentals right to scale. We can open doors and make them fundable at the next level."