In the run-up to the Fourth India-Africa Entrepreneurship & Investment Summit on the 18th and 19th of July, Baljinder Sharma, Convenor of the India Africa Entrepreneurship Forum, shares his thoughts on funding entrepreneurship. The Summit will explore how Africa’s wealth can support its burgeoning startup ecosystem.
In the year 2023 alone, startups raised over $848 billion in financing, with 1,435 startups reaching unicorn status, despite a prevalent funding winter. This highlights the continuously growing importance of entrepreneurship in the economy. Their overall contribution to the global economy is estimated to be $3 trillion annually.
7 of the top 10 global companies are in the technology sector and were founded less than five decades ago. The success of these ventures has spawned an investing culture that started with tech founders investing in other companies – first directly and then through investment clubs and angel networks. Over time, High Networth Investors and Family offices (HNI segment) began making investments in bridge rounds and structured deals of higher amounts.
The returns profile on these alternative investments has spurred interest from the HNI segment in increasing their allocation to alternative investments, from a growth and diversification perspective.
As per a Financial Times survey, the allocation to alternatives is less than 3 per cent of high net worth (HNW) individuals’ portfolios, with $5m to $30m in assets, and only 0.7 per cent of HNW’s portfolios with $1m to $5m in assets. Wealth Managers and Private Bankers recognise the need of the HNI segment to increase allocation to alternative investments including PE, VC and direct investments.
In India, the LetsVenture 2023 report shows that 75% of the businessmen/founder-CEO HNIs and UHNIs are interested in mentoring startups and contributing towards the entrepreneurial ecosystem.
While one may argue that the global startup ecosystem is far ahead of Africa and there are no parallels to be drawn, the underlying nature and drivers of the sector remain fundamentally the same.
One question is this: Is enough being done to access African money for the benefit of African entrepreneurship?
According to the Henley & Partners’ 2023 Africa Wealth Report, banks and wealth managers in Africa have tapped into a minuscule $150 billion of the estimated $2.4 trillion of investable wealth held by the super-rich, with a significant portion directed towards real estate and listed company holdings. The continent boasts 138,000 high net worth individuals (HNWIs), 23 with wealth of at least $1 billion each, and 328 with individual wealth of at least $100 million.
With this rising wealth in Africa, the need for family offices will grow and Mauritius is well positioned to benefit from these trends. As Africa’s wealthy relocate to Mauritius, the country can effectively channel part of that capital into strengthening the entrepreneurial ecosystem, including advising early investments in pioneering ventures built on path-breaking ideas.
At the Fourth India Africa Entrepreneurship & Investment Summit, Saral Advisors – an investment manager will lead a Panel to discuss how Africa’s wealth could be made to work for the benefit of the continent. Panellists will include Founders, HNIs, Banks, Wealth Mangers, Pension Funds, VC, Angel Networks etc.
