Facilitating Exits Across Africa
One major concept debated in VC spaces for the past 3/4 years has been liquidity of Venture Capital.
Is it a feature, is it a bug? do we need a liquid venture ecosystem? Western venture philosophies would agree to the former. You need quite a bit of funds, and time to extract value from deep moats; Think of this like drilling for oil, the deeper you can go, the more value that can be extracted.
In this time, you need as little distractions as possible. Funds raised by these companies need to be put into the use of extracting value, not exiting out early investors that got you to reach previous milestones.
This then raises the question, Is Africa a deep moat ecosystem? If we agree it isn’t, why do we then follow the western mode of venture? Firstly, how do you tell a deep moat?
I define deep moats as markets where you could have a niche focused target, and grow to $1bn in revenue. The biggest deep moat market we know is The United states
In comparison, the entire African private capital market ($7.6 billion) is much smaller than the UK private capital market ($28.01 billion) after dropping more than half the previous year. Europe in total saw $81bn flow in private capital.
Our capital markets also show similar stories, With the combined market cap of the 7 largest exchanges in Africa worth $1.5trn. For context, The LSE has a combined market cap of about $4.38trn. What does this say about our markets?
At GetEquity, we believe there has to be a different way of working with markets as ours. which should be more breadth-first. What does this mean? Faster, Recycled exits
The average time to unicorn in a developed market is 6 years, the average revenue multiples of a unicorn is (46x in the US, 18x in the EU) by 2021.
Major research and finding had argued about these being overhyped, we saw the repercussions in 2022, with multiple startup valuations as much as halved. The average time to IPO or exit a startup is also 10 years, But these are still in deep markets, let’s come back to Africa.
The average investment timeline of most Africans is much less than the Western world, This means we need much faster, less valuable exits. Dow we have enough liquidity to sustain multiple $1bn local IPOs? how many? 5? 10? One way to establish this is Dual Listings
With the NGX currently having a startup desk, and the African Exchanges Linkage Project in play, we would argue the time to facilitate these exits is now.
