Unlocking Equity for Startup Entrepreneurs in Africa

IPDavid Munnich and Hugues Vincent-Genod from Investisseurs & Partenaires (I&P) ask if its possible to invest equity in African early-stage companies in a sustainable manner. If so, how should this be done?

Has anyone ever invested equity and provided support to early-stage companies in West Africa in a sustainable manner for amounts as low as EUR 50,000? Why not and why is it so hard? Another way to see this question is to ask: can equity investment bridge the financial gap encountered by entrepreneurs from the lower end of the missing middle of African Small Growing Businesses (SGBs)?

As we know, SGBs in Africa (as in all continents) usually have little equity, no collateral and weak management standards. This is precisely why they need equity investment, but also why professional investors are having a hard time reaching these promising, high-growth-potential entrepreneurs who are still starting their business. The next “Bill Gates” is certainly in Africa! But he is still working from his garage, and he needs a springboard to get out of it. More precisely, not only does he need money, but also skills, strategic advice and a multifold support from a shareholder, and this is costly.

But as we also know, no economy has ever sustainably fought poverty without developing SMEs, employment and an economic fabric. The yearly 5%-growth rate in Africa will not reduce inequalities if it remains circumscribed to the sectors of infrastructure, IT and oil & gas. That is why, if we want growth in Africa to be inclusive, we have to come up with an innovative way for small companies to have their say and their way.

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