Lessons learned from being Africa’s most active early-stage investor

The first time I saw Zachariah George online was when a video, where he was playing the guitar while singing sonorously with the support of equally talented backup guitarists, popped on my LinkedIn feed. This made me assume he was a musician.

Unsurprisingly, my assumption was right to a large extent.

Zach is an acoustic guitarist, pianist and vocalist with cover albums ‘Give A Little’ (2010) and ‘Humans with Hearts’ (2018) on iTunes and Spotify.

However, music isn’t his full-time job. Venture capital is.

Zach is the Managing Partner at Launch Africa Ventures - Africa’s most active early-stage VC fund with a portfolio of 130+ tech companies across 20+ countries. Before Launch Africa, he co-founded Startupbootcamp, a top venture-backed accelerator program in Africa. Beyond these, he is a reputable angel investor in over 50 leading tech startups, including Mono, Kuda, and Flutterwave.

Impressed by this track record and curious to know his thoughts on key issues in the ecosystem, I invited Zach to feature on Investors’ Corner. Despite being 4600 miles apart and a short timeframe (no thanks to Zach’s busy schedule), we had a riveting conversation on the African startup and VC landscape.

Tsamina mina zangalewa. This time for VC

Zach’s life is a testament to how much transformation can happen in a decade. At the start of the 2010s, he was a “disgruntled” investment banker from Wall Street who had just arrived in South Africa. Like other African countries at the time, rainbow nation had many promising startups with stunted growth due to the lack of a thriving venture ecosystem. Filled with the euphoria from the 2010 World Cup, Zach was convinced that the trend could change. Much more, he knew he could be a part of that change.

Hear this from the man himself:

“When I came to South Africa in 2010, little to nothing was happening in its VC landscape. Small Angel groups, friends and families funded most startups at the idea and MVP stage at the time. On the other hand, private equity companies had dabbled in technology-focused growth equity ventures (many of which may today have been considered the equivalent of a Series B or C type financing situation).

But while I wanted to help African entrepreneurs to execute and scale their ideas better with smart capital and non-financial support, I didn’t start a VC fund immediately. Instead, I gained more meaningful experience working at companies like Old Mutual, ABSA and others, helping them better work on corporate-startup collaboration initiatives.

Later in 2017, Phillip Kiracofe and I co-founded Startupbootcamp, the first and largest multi-corporate-backed tech venture accelerator in Africa that has supported 3,000+ startups across the continent. The success stories from Startupbootcamp laid the groundwork for Launch Africa Ventures as it was easy to get buy-in and capital from investors.”

Launch Africa: the generalizing specialist fund

Launch Africa is a jack of all trades and a master of one. In other words, a generalizing specialist. The fund demonstrates this unique approach by covering multiple sectors but investing in only Seed-stage entrepreneurs. Little wonder Zach chose to christen the fund with a generic name such as “Launch Africa Ventures.” He explained this better when I asked him to share the inspiration behind the name choice.

“We named the fund Launch Africa because we didn’t want to attach it to any particular region or industry. I wanted to provide smart capital to the millions of African entrepreneurs across Africa in different sectors, who need smart capital to grow their businesses, without taking on huge amounts of debt.”

He then went on to explain how the fund is a generalizing specialist.

“We’re a generalist fund in the sense that we cover multiple sectors, regions, and products. We don’t have preferences in that regard per se. But in the grand scheme of things, we prefer to invest our resources into ​​B2B and B2B2C early-stage, technology-driven startups with strong management teams and scalable solutions. These are the companies that bring the most results.”

Launch Africa’s magic sauce

In 2022, Launch Africa was once again the most active early-stage investor in Africa. What is it about the Mauritius-based fund that makes them stand out from the sea of funds in the continent? I got an answer to this million-dollar question.

In Zach’s words:

“If a company fulfils our investment criteria and gets through our rigorous investment committee, we provide them capital alongside non-financial value add such as media content, access to co-investors, access to our own LPs, large corporates, talent sourcing, and cross-border expansion opportunities.

That knack for providing non-financial value gives us a distinct edge during investment rounds where we often lead or co-lead Seed-stage deals. Furthermore, we’re able to make decisions within a 4-8 week time frame, compared to a 3-6 month timeline for most funds.

Lastly, we typically don’t do follow-on rounds because we want to be able to extend the number of deals we can do without having to invest in the same companies repeatedly.”

Far from the goalpost

When Zach first moved to South Africa, he had the goal to help African entrepreneurs thrive with a functioning venture ecosystem. With the number of wins Launch Africa has garnered in less than two years and Startupbootcamp’s success, it might be safe to assume Zach has achieved the bulk of his mission. But far from it. According to Zach, he still has a long way to go.

“You cannot completely finish your mission. I mean, my mission is to build a fund that spans multiple asset classes, not just equity. But also revenue-based financing, venture debt and multiple stages. But ultimately, you have to be a generalist before you can become an expert in your desired field. So while my team and I are tempted to do late-stage deals, we’re focusing on our strength right now: investing in Seed-stage entrepreneurs and adding significant value to them.”

Observations learned from investing in 200+ companies

Zach has invested in over 200 companies as a VC, accelerator and Angel investor. Surely, there are lessons he must have seen from those angel and venture rounds. And thankfully, Zach didn’t hold back from sharing these lessons, which focus predominantly on founders.

He said:

“I have gleaned many lessons from my investments, but the top-level ones are founder-focused. First, I’ve noticed that many founders work in silos and have no idea what’s happening in regions outside their home markets. They also don’t spend enough time researching their competition.

Founders don’t speak to customers as much as they should, signifying the need for more customer research. Moreso, many founders tend to project unrealistic valuations. Interestingly, we’re seeing a turnaround of this worrisome trend, almost setting the industry back.

I think the biggest observation for me has to be how most founders are quick to ask for money but rarely give feedback to investors after raising capital.”

What African VC needs to do better

VCs are just as important to the overall ecosystem growth. For this reason, they need feedback on what to do better. And who better to give such recommendations than Africa’s most active investor?

“There needs to be more collaboration between VC funds, especially on term sheets, acceptable investment terms for different stages, founders’ rights, terms and rounds, and liquidation preferences. Similar to how YC Combinator set the standard for early-stage investing in the US, there needs to be a similar level playing field for VCs in Africa.”

The trendsetter predicts trends

Having long years of experience trains you to be prescient. Zach’s case is no different, as he has over a decade of experience. This is why I couldn’t help but ask him to predict what would happen in the ecosystem.

“I foresee Fintech being a key driver of growth. Healthcare and education will keep having significant disruptions. There will also be more corporations working with startups.

More importantly, M&A will significantly expand as unicorns like Chipper and Flutterwave will buy smaller companies to increase their market share. This will be a great trend because more M&A means there are exit opportunities for investors.”

Related Article: This woman influenced six mergers and acquisitions (M&As) at Autochek

Zach also addressed the possibility of raising more unicorns in Africa in the aftermath of MNT Halan’s success. He said:

“Outside of the market correction we’ve had over the last 12 months, the fundamentals of many leading African tech startups are at levels that would ordinarily command a unicorn valuation. Nonetheless, they’re delaying their next raises until the market gets better instead of raising at flat or down rounds caused by macro-economic market correction despite better fundamentals. So yes, there will be more unicorns in Africa, but mainly when the market has improved.”

Lastly, Zach predicted the type of funds that will outperform in the long run. He said:

“Only funds that invest based on strong fundamentals, not hype, will deliver superior returns and stand the test of time.”

Beyond the big four

In February, the ecosystem hit a new funding milestone, with Kenya, Egypt, Nigeria, and South Africa (or KENS for short) accounting for 95% of the $696 million raised. Undoubtedly, these markets, otherwise known as the Big 4, have produced outliers turbocharging Africa’s growth. However, investors must expand beyond those markets for the African tech ecosystem to realize its full potential. What are the other markets to consider, you ask? Well, Zach has a concise yet poignant answer.

“I believe some of the markets worth investors’ attention include: Senegal, Côte D’Ivoire, Morocco, Tunisia, Ghana, Uganda, Tanzania, DRC, and Ethiopia. These countries have massive addressable markets.”