First Circle's 5 Cents on “Why is Venture Capital Relevant in Africa Now?”

As the co-founder of a VC firm actively investing in Africa, I met many global LPs and VC investors, who are not yet sure whether Africa is an opportunity they should pursue. Some of the people I spoke to overthe last three years still hold a perception of elevated risk when word “Africa” is mentioned and assume investing in Africa is a matter of pure philanthropy with zero or lower return expectations. Other investors see it as a single market or assume the same growth trajectory for African startups like they have seen in China or India.  

This motivated me to write a short paper over the past few months, titled Venture Capital and Why It Is Relevant to Africa, which provides an overview over what venture is and what role venture capital can play in the African context, drawing parallels with global markets while emphasizing the unique challenges and opportunities within the continent.  Short summary of key points is below, but please contact me if you would like to read the paper in full.

With a large, young, and rapidly growing population, combined with double-digit smartphone adoption, Africa is fertile ground for VC investment - particularly in sectors like fintech, Insurtech, and financial infrastructure. Venture capital has the power to address some of the continent's most pressing challenges:

1. Expand Access to Financial Services: By scaling the distribution and reducingthe costs of financial services - such as credit, insurance, and remittance - venturecapital can drive financial inclusion and make essential services moreaffordable.

2. Reduce Friction and Leverage Information Arbitrage: VC-backed innovations canreduce costly inefficiencies by supporting solutions like reconciliationsoftware, aggregators, and cybersecurity, which help streamline operations andcapitalize on information gaps.

3. Generate Employment for Youth: Venture capital investments can directly createjobs in the ICT sector and indirectly stimulate job creation across the broadereconomy, thereby addressing the critical challenge of youth unemployment.

As a specialist fund, at First Circle Capital, we see fintech as a transformative force that can bridge these critical gaps in financial access, affordability,and inclusion across the continent, driven by rapid digitization and growing smartphone adoption. However,this potential will only be realized if we build a self-sustaining ecosystem that aligns local market realities with global ambitions. It will take the combined efforts of governments, investors, fund managers, and entrepreneurs to grow this ecosystem. The time for venture capital in Africa is now - not just for financial returns, but as a catalyst for a more prosperous, technologically advanced future.