By Nishika Bajaj
The fourth edition of the India-Africa Entrepreneurship and Investment Summit held in Mauritius over July 17-18, 2024, at the Royal Green Wellness Resort in Moka sparked discussions on how Mauritius can play a key role in facilitating growth in Africa and India.
A key panel was held on Day 1 on the theme of Internationalising the Mauritian Startup Ecosystem. It had insights from speakers such as Victoria Maingard, Managing Director of global asset management firm Hatcher+; Jason Delorie, Senior Platform Associate (Mauritius) at pan-African accelerator programme VC4A (Venture Capital for Africa); Michel Cordani, co-founder of angel investment firm Mo Angels, Michael Mutie, Investment Manager at pan-Africa VC firm Launch Africa Ventures, and Srishti Dixit, co-founder of independent global service provider ONS FinServ. The panel was moderated by Kartik Sharma, Portfolio Manager at Launch Africa Ventures.
Kartik opened the discussion by posing a quick question to the audience on whether anyone knew of a company called Checkout.com – a $40 billion startup based in the UK. It is well known that the startup was initially headquartered in Singapore, but less known is that the founder spent over two years in Mauritius and actually acquired a business and tried to launch it here before he moved to Singapore.
Barriers in the way of Mauritian startups trying to attract funding to scale
Given Launch Africa Ventures has about 150 portfolio companies purely focused on Africa, investing in early-stage technology, Kartik asked Michael how many of the startups are Mauritian and what are the barriers for an early-stage fund like Launch Africa to invest here.
Michael rued, “We have 0 startups in Mauritius that Launch Africa has invested in but we are actively tracking opportunities in Mauritius through the hubs and the incubators. And the biggest challenge we’ve seen with the startups that are operational here is the level of traction they have. As an early-stage seed investor, we look at ventures that have a minimum in terms of their monthly recurring revenue. Our focus is largely on B2B, B2C, asset-lite business models that have recurring revenue. And the minimums we look at are about $25,000. So, the challenge is a lot of the startups we’ve seen from Mauritius have really low traction from a revenue perspective. And also, commercially, they are not that far ahead.”
However, he noted that they are tracking such entities because, for a lot of the deals they’ve invested in, tracking went on for an average of 6-12 months. Such initial contact with the founders helps them to understand Launch Africa’s criteria, and allowed them to conduct their business operations with that in mind. And so, when they engaged with such startups six months later, they had a level of traction attractive to them as an investor.
What worked for Mauritian startups that successfully internationalised
“These ecosystem things are complex, and I love the first panel, because I think it sets the stage for what it takes to build an ecosystem. Some people employ the word ecosystem, a bit like a buzzword but it’s not. In the matter of building innovation and startups, you really need an ecosystem – an environment where these startups can start and flourish,” Michel explained.
He noted the case study of Rwazi in data collection and strategy where two Africans came to Mauritius to study at the African Leadership University. Being super entrepreneurial, despite a really hard time, they beat their MVP and got noticed by investors. Long story short, they are in the entrepreneurial hub of Los Angeles, and Rwazi is a global success story. “But that success story is really an exception. The usual story is of not showing entrepreneurship and the need to do that, perhaps even at home with the kids, but certainly at the university, is absolutely key for the long term,” he emphasised. “The second case is from the inspection segment where the founder is a super experienced professional from the inspection industry. Because of that, he noticed the flaws and the opportunity and he had the capital, and he had the co-founders, and he built a successful business that, simply put, ‘Uberized’ the inspection industry. And then, M&A came into play with the investor actually being a leader in Europe.”
However, Michel stressed that Mo Angels primarily supports the very early stage startups that need serious mentoring and the really early stage money to create their first traction – and this is to his mind, ‘the valley of death’. He built Mo Angels in the hope to solve that problem of early stage funds, he explained.
Jason noted that in his experience over the past decade in the startup ecosystem in Mauritius, one thing he has seen change, which is really promising, is that mindset of access to markets. “Earlier, everyone was talking about Mauritian solutions, talking about how they’re solving Mauritian problems. Now, when I look at your companies currently there, they’re thinking about how we’re solving global problems, how we’re solving problems for Africa. That small mindset shift will pay out a lot more further down the line,” he exclaimed.
How do we make sure that the Mauritian ecosystem is ready to internationalise?
Victoria noted that their early stage fund is similar to Launch Africa but with a global focus, and that surprisingly, their HQ in Singapore was not one of their biggest investment hotspots.
“So, 50% of our investments are in the US and then we have Europe, MENA, and Australasia. We’ve co-invested in 320 companies alongside accelerators from early stage accelerators through to VCs. Funding up to Series A is our focus area so we don’t come in at the angel stage, but we come in at that next gap where there’s a lack of capital and it’s really difficult to get the funding of $500,000 – $7.5 million. But the 25 accelerators we work with, none of them are from Mauritius. And I’m from Mauritius, funnily enough. And I think the internationalisation of our ecosystem is obviously crucial and it’s not easy. I think the previous panelists were talking about India which is a fantastic example, but we should not forget that they’re a billion and we’re a million. It’s a very big difference and a huge ecosystem to kind of contend with. In all of our companies that we’ve invested in, several across Africa – be it Egypt, Morocco, Kenya, Ivory Coast or Rwanda – all came from US or Australian Startup bootcamps such as YCombinator, and Plug and Play Tech Centre.”
She rued that it was a shame such startups were not coming from direct African accelerators or Mauritian-based ones. Hence, there was a need to figure out how to better position and internationalise. As one of the ways of doing it, she suggested partnering with some of these other global accelerators in co-investments or in getting them to back their original investment – for instance start with 50K, and get them to put another 200 or 500 and take on the next steps to globalise startups based out of Mauritius or in the other African countries.
For her part, Srishti noted that she has many lessons to share with startups from ONS FinServ, which started life as a Mauritius-based entity. “I’m an Indian, my business partner is Mauritian and the thing that we really worked on, and I think that helped us, is trying to create an ecosystem rather than just a business. We didn’t start with a lot of money. Everybody has limited resources. So how do you still create a global presence or maybe a presence in more than one continent? What we very interestingly did is that we started to purchase and we started doing well, so we moved to Dubai and then Singapore. However, we are not just serving these jurisdictions. We are serving seven to eight jurisdictions and most of them we are not even present in. So what did we do? We actually worked on creating local allies and we found partners which are doing the same kind of job which can be our competitors, but we saw collaborations in them. And what we actually went ahead and did is found the best in those countries,” she explained. She took the example of African jurisdictions like Comoros and Kenya where if a client for Dubai, for instance, wants to come and set up something over there, she can help based on partners in those countries that are doing exceptionally well.
Success stories of African companies or startups operating in multiple jurisdictions
Michael continued to build on the success story of Rwazi, noting that co-founders Joseph Rutakangwa and Eric Sewankambo were both his classmates. “We came to Mauritius in 2015 as part of 176 students form 26 African countries that got full scholarships to come under the inaugural African Leadership University class. And so seeing the hardships they were going through, the key things I think they did different was first, finding an accelerator, and second, getting angel investors. And with that, they got advisors who could lead them on how to think bigger and not just think of building Rwazi for the Mauritian ecosystem alone, but for the continent and now the world, with operations in the US, in Asia, and in Africa. And to the point of partnerships, in large Africa, we usually have this saying that it takes an ecosystem to raise a successful startup,” he stated.
To give their own example, he noted that as an early stage VC, Launch Africa cannot go it alone. To contextualise, the Launch Africa Ventures Fund 1, when fully deployed early last year was a $36.3 million fund, and the maximum ticket sizes were $300k. Now, for Fund 2, they’re raising a bigger fund, $75 million, average transaction size is $200k- $250k, and have capacity to follow on with up to $1 million, and that ensures that the funded business doesn’t die off early, but that they successfully get it to that later stage of its growth where the Series A and other bigger VCs and Vs can take over. As a success story from their portfolio, he indicated that a banking platform from Nigeria provides analytics for creditors to score and profile the worthiness of individuals to get credit. They are operational in Nigeria, Kenya, Ghana, and lately expanded into the US through a partnership with a US-based bank to help migrants from Africa use their credit information from their home countries to get scored in the US so that they don’t have to start building a credit profile from scratch.
Jason added that on internationalising the startup ecosystem, there is a tendency to focus only on the startups. However, bringing talent, such as getting the right resources to the University of Mauritius, is a two-way street. At other levels too, not just the startups, but infrastructure, incubators, such as the Catalytic Africa initiative at AfriLabs, are a key piece of the puzzle. These primary partnerships are important to lay the foundation so that startups are able to collaborate with other players in the industry because policies make it easy as there’s access to different perspectives and talent, or those other elements, including finance, must have an element of collaboration. “If you look at Mauritius in itself, even within our own ecosystem, we’re fragmented. And that is ridiculous for a 1.3 million population. How can different players not be collaborating? Forget trying to collaborate externally, we must collaborate internally before we even approach external opportunity,” he rued.
Michel noted that, for him, internationalisation means two things – at the startup level, and at the ecosystem level. “At the startup level, it’s all about the mentality. If you don’t have ambition, you won’t attract the talent. At an ecosystem level, we have a very good experience in Mauritius with the ICT DPO sector. That sector is a success, but started as a European play. Outsourcing stuff from Europe and building capacity here, with the Europeans first, and now it has become a local industry. I really see the same kind of game over 10-20 years happening for innovation with India, just because of everything that was said in the first panel.”
What are the challenges in getting the tech ecosystem to headquarter in Mauritius?
Srishti noted that just last year she was working with an India-based accelerator, and arranged their visit and their meetings with the government of Mauritius as well. However, one of the issues that they discussed at that time was if somebody was to come, let’s say, from India, how many customers they can gain within one country.
“However, when we come to Mauritius, or start considering Mauritius individually, Mauritius must also be factored in as a gateway to Africa, because when people look at Mauritius from a customer-based perspective, it falls short. So that is one of the main deterrents. So if somebody was to set up in Mauritius today, what is that gateway that takes them to Africa? So that needs to be really clearly brought on, as something that people from, or startups from, other countries will be interested to know,” she explained.
Victoria added that Mauritius remains a highly favourable jurisdiction with the Variable Capital Company (VCC) structure putting it at par with a world class jurisdiction like Singapore. “We were speaking of Dubai and the UAE itself is obviously a huge economy, but it doesn’t mean that their stock exchange is super active or super big, so they’re doing a big push on that at the moment. Despite how huge they are as an economy, structuring funds over there is complex and time-consuming. It’ll take you 12-18 months to have a fund structure, which poses a massive opportunity cost loss in terms of being able to deploy your capital, but also get your capital, because often LPs will pull out, or have their money go somewhere else, so there’s a lot at a loss here. I don’t know what the latest is on Mauritius in terms of time to market, but if I want a fund of $50 million coming in, how I can create a structure, and how quickly and efficiently I can do it is a massive advantage if we have that as a sure thing,”
Srishti confirmed that of all the jurisdictions that Victoria mentioned, be it Dubai, Singapore or Mauritius, ONS FinServe helps people set up funds in all of those jurisdictions. She rued that that the accessibility and visibility of Mauritius is not that huge, because Mauritius is one of the most cost-effective jurisdictions to set up a fund. “Mauritius has a PCC structure and now also have now a VCC structure, which makes it one of only two countries that have this structure in the world. We have done a comparative analysis which shows that the VCC structure of Mauritius is an advancement over the Singapore one, because there are a lot of additional flexibilities that you get as a fund manager here, that you wouldn’t get in Singapore. In terms of time to market, if a client comes to me today, and we have all the structure ready, then we can apply today and have the fund ready in three months’ time. Since we are doing this in so many jurisdictions, it’s the quickest time to market, and if you compare other regulators, they take up to a year or even more in order to give you that license, and then there are other stages after that, only then you can actually start deploying your capital.”
What can Mauritius do to make itself more attractive for African startups?
Jason mentioned some great examples such as leading pan-African payment solutions provider Peach Payments that have been attracted to operate out of Mauritius. On clarity, visibility, and understanding, there is a lot of work being done in the ecosystem from all sides of play. “I point to La Plage Factory and the accelerators, the universities, the government, the MRIC and the PPP, all doing some fantastic work in enabling this. However, again, their approach is very fragmented, and there is no clarity. If I’m in this industry, and yet I don’t know about all of the support available, all of those different mechanisms, all of the abilities to do this, how can we expect foreign entrepreneurs to even consider Mauritius?,” he asked.
He gave the example of Estonia where a population of 1.2 million people (akin to Mauritius) translated into a thriving start-up ecosystem. “Their approach is that they ran Splash , a really interesting founder-focused competition that would give them a month in the country with expenses paid, the ability to come to Estonia, engage in some high-level competitions and prizes, while crucially exposing them to the various options there. Given the approach that Estonia used to catalyse that investment, I think we can do something similar here.”
Michel mentioned that Mauritius has a lot of the pieces of the ecosystem puzzle, but the issue is not just that the ecosystem is fragmented, but the puzzle is not assembled yet. “If you come to the portals, you will see a lot of entry points, but you don’t have that innovation entry point. If you come to invest in various options, and for each case, that’s what we do at the incubator, we try to have a customisation of the puzzle, so we take that piece, and that piece, and that piece, and that makes a journey for the person,” he emphasised.
Michael ended on the note that Launch Africa Ventures has worked with Jason of VC4A to provide support to some startup founders from Mauritius, and done a session with La Plage as well, for some of their founders. “What I’ve realised working with founders or accelerators, hubs, incubators, across different African countries, is that there’s also a gap of information in terms of the understanding we as investors have of certain markets, and the understanding founders have of us as investors, and I think there’s a gap of knowledge sharing that needs to be breached, and going back to the partnership of VC, angel network, incubator, accelerator, that we’re able to, as Michel rightly puts it, join the puzzle, and the journey’s clear for everyone looking to gain more exposure in Mauritius and the ecosystem for their founders, or as institutions,” he concluded.
The session ended with audience questions exploring how Mauritius can leverage partnerships and collaborations to make its mark in the African startup ecosystem.
