How to make a Delicious Entrepreneurial Ecosystem
Why does the American VC model not work in many parts of Africa? Because the same ingredients can produce very different cakes depending on the recipe. In a recent article, Manuel Koser of Silvertree Internet Holdings points out why the Silicon Valley recipe can’t and shouldn’t be copied in Sub-Saharan (SSA) Africa.
According to Pitchbook, the average time it takes a VC to exit an investment in the U.S. is 6 years, which is entirely too short for SSA. The American market is huge and well connected globally, where as many African markets are smaller and more isolated. If a VC firm invests in an African startup with a 6-year timeline, it will likely not be enough time and the company will not gain enough traction for either a second round raise, or for the VC firm to make a successful exist. This helps explain the common ‘burnout’ rate African startups experience. Mr. Koser suggests that VC firms need to be willing to partner with companies in less developed countries for at least 10 years before they can successfully exit.
This observation reinforces our research on six different African entrepreneurial ecosystems, where we were able to map out the most important elements and compare what the best ‘recipe’ for each would be. From this analysis SKA was able to make policy recommendations that build more vibrant environments that promote entrepreneurial growth. To read the full report of our research click here!