Happy Tuesday, and welcome to the final post of The Trajectory Africa series! I launched this “pop-up podcast” almost exactly a year ago as an experiment. I’d just co-published Chasing Outliers: Why Context Matters for Early Stage Investing in Africa, a report exploring the key elements of African VC. As much as I’d learned from researching and writing that report, I still had loads of questions. But I was also really tired of conducting and writing labor-intensive, neuron-taxing reports. So, on the advice of two friends, I decided to try my hand at podcasting. Why? Well, a key premise of Chasing Outliers is that copy/pasting Silicon Valley-style investment models won’t work in Africa. If that’s the case, the question becomes: “What will work?” The desire to understand how African venture operates was the driving force behind The Trajectory Africa—that, and the hope that podcasting might actually be fun. Eleven episodes, countless hours of editing, numerous audio mishaps, and a general sense of relief later, here we are…
Over the last 10 episodes, we’ve been on a wide-ranging journey to understand: the key characteristics of African markets; the opportunities presented by digital commerce, SME financing, and fintech, and how they power the broader venture opportunity; what drives fund performance in terms of economics and structure; and how funds raise money. What else is there left to cover? Well, lots, of course. But in this specific story, all roads lead to the land of limited partners, or LPs, because they fund the GPs who fund startups. If you want to know what’s right or wrong with a venture ecosystem, the LP pool is a good place to start, or in the case of this series, end. I know this thanks to the GPs I interviewed for Chasing Outliers; hearing about their fundraising experiences and the fund construction constraints they faced inspired this episode and the one before it. For that episode, Track 10, we dove into the intricacies of investor relations and how funds raise money. In this episode, Track 11, we tackle the other side of the coin—the world of (DFI) LPs and how one, in particular, makes investment decisions.
For this conversation, I’m fortunate to have Babacar Seck as my guest artist. Babacar is a senior investment professional with Proparco who’s currently designing and deploying a €200M venture capital program to fund and support African entrepreneurs, while also managing a global investment portfolio of banks, insurance, and fintech. Prior to Proparco, Babacar led key areas of strategy and development for AXA, a 1 trillion euro insurance firm, working under the Chairman and CEO.
Babacar and I discuss how he started his career in venture capital and private equity, Proparco’s distinct characteristics as an LP and how it evaluates funds, how DFIs’ ESG standards benefit African VC, common mistakes that GPs make while fundraising, and how the process works against them; why Africans, women, and first-time GPs struggle to raise money; what drives (African) fund underperformance generally and how LPs can help; and what micro and macro factors will drive future adjustments in the African VC space.
So that, folks, is all she wrote…for now. It’s been an interesting ride that I’ll reflect on in the coming months. In the meantime, I’ll leave you with this…
As the US slides into in/stagflation, “winter is coming” messages from investors proliferate, and existential reflection on core values (and core value) dawns on African ecosystem(s), the call for fundamental, systemic change in venture capital persists. It’s becoming increasingly clear that a risk-chasing capital allocation system that excludes underrepresented founders and fund managers, favors white founders over African ones or African founders with foreign degrees, destroys certain types of value while relentlessly pursuing others, and doesn’t always objectively (or consistently) operate in ways that maximize returns, could use some re-imagination. Certainly, there are many who still believe in the power of venture capital to transform markets and solve massive problems. Founders like Esusu’s Abbey Wemimo give me hope that this could still be true. But as the venture capital model takes root across the globe, how well it can be adapted to the environments where it lands remains to be seen. If The Trajectory Africa demonstrates nothing else, hopefully, it showcases the unprecedented opportunity to build what actually works in Africa for those it should work for. But as always, the journey continues…
Until next time,
Tayo