Summary:
Big exits are crucial for Africa’s startup ecosystem to attract more investment.
The acquisition of Paystack by Stripe was a significant milestone.
In 2024, African startups raised $2.2 billion, with 22 exits recorded.
Investors need to plan for exits from the start to foster growth.
The technology sector remains a bright spot despite challenges in private equity.
The News
Africa’s startup ecosystem is at a critical juncture, with a pressing need for big exits to attract more investors and capital. During a recent summit of venture capitalists in Lagos, Shruti Chandrasekhar, head of the Africa private equity division at the International Finance Corporation (IFC), emphasized that realizing returns on high-profile investments can create the watershed moments necessary to accelerate growth in the industry.
Chandrasekhar highlighted the acquisition of Nigerian fintech Paystack by Stripe for $200 million as a pivotal moment, noting that while there have been a few significant exits in South Africa and Kenya, they are insufficient to ignite widespread growth. She stated, “You haven’t seen this realization of real capital within these markets for it to take off.”
In 2024, African startups raised $2.2 billion across equity, debt, and grants, with 188 ventures securing $1 million or more, while 22 exits were recorded, according to consultancy Africa: The Big Deal.
Know More
The private equity landscape in Africa has faced challenges in delivering competitive returns due to ongoing currency devaluations. However, the technology sector stands out, with valuations for African startups skyrocketing over the past decade, albeit with few acquisitions or IPOs.
Chandrasekhar pointed to India as a model for emerging markets, where successful exits have encouraged reinvestment, fueling market growth. She stressed that investors should have an exit plan in mind from the moment they make an investment.
Room for Disagreement
Genevieve Sangudi, co-founder of Alterra Capital, noted that while there have been eight full exits returning millions to investors, many were to global strategic players. She cautioned that not every successful company is a suitable private equity investment, suggesting some might be better off as family-owned businesses.
The View From a Venture Capital Firm
Kola Aina, founder of Ventures Platform, acknowledged some exits in Nigeria but indicated they are mainly strategic acquisitions or secondary exits. He highlighted the importance of IPOs in the next five to seven years to prevent congestion in the market.
Notable
The CEO of Flutterwave, Africa’s most valuable unicorn, expressed that while he is focused on achieving profitability, he does not rule out a potential sale to a larger player.
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