By Ben White, Thomas van Halen, Miguel Heilbron
Combined, 92 companies listed on venture capital community VC4Africa secured USD $12,000,000 in funding. That’s one of the findings from a recent survey VC4Africa held with entrepreneurs listed on the online platform.
VC4Africa is Africa’s largest online platform connecting entrepreneurs and investors. Presently more than 800 companies have published their venture profiles on the platform, selected from over 1600 applications of entrepreneurs all across Africa. The ventures on VC4Africa are early stage and require investments less than USD $1 million. The primary sectors include mobile, web, renewable energy, healthcare, education and agriculture, amongst others. Each venture registered on VC4Africa is scalable, makes smart use of technology, or is disruptive in their application of a business model. Around thirty percent of the ventures have an explicit social mission and could be qualified as a social enterprise.
Entrepreneurs who register their companies on the VC4Africa platform have access to free online tools, mentorship opportunities, private deal rooms, and networking opportunities with the VC4Africa Investor Network.
Survey
The team at VC4Africa recently reached out to entrepreneurs part of the community to find out more about their progress. Specifically, we were looking to see organizational advancement as measured by growth in revenue and the number of jobs created over time. By establishing such an index, the aim is to offer tangible evidence of SME Impact created by the entrepreneurs part of the VC4Africa community.
Entrepreneurs with a venture profile published on VC4Africa were asked to participate in an online survey. The survey was sent to 800 entrepreneurs and 160 entrepreneurs responded, a 20% response rate. Participants in the survey received the ‘Jobs Creator’ badge in recognition of their positive contribution to society.
Results
Below are some of the key results from the survey.
» Combined, 92 of the 160 ventures that participated in the survey were successful in securing nearly USD $12,000,000 in funding.
» On average, startups registered with VC4Africa secured USD $80,000 in funding vs. expansion companies that secured USD $237,000;
» There is about an 75/25 split for Commercial vs. Grant funding the companies have been able to secure to date;
» Ventures with an urban focus secured less than ventures with a rural focus. Where the former secured USD $119,000 the latter secured nearly USD $166,000 on average;
» 83% of the ventures registered on VC4Africa have an urban focus vs. 17% that have a rural focus;
» 75% of the ventures that join VC4Africa are pre-revenue startups. 25% join as ventures seeking growth and expansion capital;
» By the second operating year, 64% of the ventures had succeeded in generating revenue;
» Ventures are improving their revenue performance over time. For example 57.1% of the ventures registered in 2010 show less than USD $5K in revenue. 43.8% of those same ventures expect to generate more than USD $50K in 2013;
» It is clear the companies are growing in size and adding full time positions (FTE’s) year on year. By 2012 the companies registered on VC4Africa employed a combined 449 people. By 2013 the same companies expected to increase their combined staff to 2,263 FTEs;
» 2011 looked like a down year for most companies and there might be a correlation to broader economic factors i.e. the global recession;
Closing Remarks
It will be interesting to see what trends emerge given larger data sets showing how company’s mature over longer periods of time. It might be true that companies secure a higher percentage of grant funding at the earlier stages of their development, but the evidence is not conclusive.
» The mean and average value of invested capital per venture differs considerably. This implies a significant impact due to a few outliers. Therefore these outcomes have to be treated carefully;
» The top investment categories are related to the Technology sectors, and then followed by Energy, Agriculture, Retail, Finance and Tourism;
» In the top five investment sectors the average investment per venture ranges between 100K and 250K, agriculture and energy being more capital intensive;
This is the first time VC4Africa has endeavored to create such an index, an activity we look to build on in the future;
You can see which companies participated in the index and interact with the participants on VC4Africa.biz.
See the full report:
We would like to thank the entrepreneurs that participated in this study. They continue to inspire all of us at VC4Africa. Our hope is that research like this can be used by entrepreneurs as a tool for measuring the progress of their company in relation to their peers. We also hope the index shows that there are a growing number of businesses that are i) successfully growing their operations over time and ii) adding much needed jobs to the African marketplace. This is a key message if we are going to get more capital involved in this space. Finally, this exercise helps the team at VC4Africa think about how we can better contribute to the financial bottom line of our members and as we continue to think about ways we can do more to support their growth and development.
VC4Africa’s vision is to enable African entrepreneurs and investors to find each other online. We aspire to become the preeminent social network for entrepreneurs and investors focused specifically on innovative business opportunities across the African continent. Learn more about the community by checking out our welcome page. Get involved and join the community today!