A bit of background information: develoPPP was set up by the German Federal Ministry for Economic Cooperation and Development primarily to foster the involvement of the private sector at the point where business opportunities and development policy initiatives intersect.
As part of the programme, the ministry provides companies investing in developing and emerging countries with financial and, if required, also professional support. The beneficiary companies are however responsible for covering at least half of the overall costs.
And, as is well known, an angel investor can safely be described as a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the businesses.
Now, Catalytic Africa’s matching grant makes DawaMkononi the first startup in Tanzania to receive financing of the kind.
The tech startup ecosystem is growing rapidly in Africa and well beyond the continent, and startups in the industry face numerous challenges. Local angel investors are playing a crucial role in supporting these startups, including providing them with access to funds, mentorship, and networks that help them scale their businesses.
Angel investors offer unique advantages, including a deep understanding of the local market and a long-term commitment to supporting startups in their communities.
As the industry continues to grow, the role of local angel investors in supporting African startups will become increasingly invaluable.
DawaMkononi, a member of Ennovate Hub and FWD accelerator, serves as an excellent illustration in this regard – having secured a total of 624 million/- (equivalent to US$260,000) in equity and grant funding within the past five months.
The pharmaceutical industry in Africa has been growing rapidly in recent years, and it is currently valued at US$45 billion. Experts predict that it will continue to grow at a compound annual growth rate (CAGR) of 10 per cent, reaching a market value of US$100 billion by 2030.
This growth is driven by various factors, among them increases in population, a rise in the middle class, and ever-rising demand for better healthcare services.
Despite the promising growth prospects, African startups in the pharmaceutical industry face numerous challenges, one of the most significant obstacles being difficulty in raising funds they badly need to scale up their businesses. This is where local angel investors play a critical role in supporting African startups.
And just who are these angel investors? Simple: these are individuals or groups who invest in early-stage startups in exchange for equity. They typically invest smaller amounts of money compared to venture capitalists or private equity firms, but they provide crucial support to startups at their early stages.
Angel investors provide more than just financial support; they also offer expertise, mentorship, and networking connections.
Local angel investors in Africa are playing a noticeable and indeed notable role in supporting startups. They provide them with access to funds, mentorship and networks to scale up their businesses.
Tanzanian angel investors are familiar with the local market and understand the unique challenges that startups in the country commonly face. This knowledge enables them to offer needs-specific support that helps the startups navigate the complex regulatory environment, access local distribution channels, and develop products that meet the needs of the local market.
FWD Accelerator was launched late last year (2022) as a dedicated programme aimed at growing and scaling up Tanzanian startups. The programme places a strong emphasis on working with local angel investors and facilitating connections between them and startups.
With a deep understanding of the local market, including regulatory nuances, cultural differences, and infrastructure challenges, FWD Accelerator provides valuable insights, guidance, knowledge, and customised support meant to help the startups in overcoming these obstacles and achieving long-term success.
“Working with local angel investors has an advantage specifically in that they have a vested interest in the success of Tanzanian startups,” says Natalie Mgonja, Programme Director at FWD Accelerator.
“We have a pool of local angel investors who are committed to supporting our startups, helping them grow, and creating jobs,” she notes.
She explains that FWD Accelerator programmes are designed in line with the needs of particular startups. However, they also consider pre-funding and post-funding support through mentorship and advisory.
This long-term approach ensures that local investors remain committed to doing the most they can to ensure that the startups they support succeed, even in the face of daunting setbacks or challenges.
Joseph Paul, Co-Founder and CEO of DawaMkononi, has meanwhile expressed gratitude to Warioba Ventures and Catalytic Africa for funding their startup.
He also appealed to other startups and angel investors to apply for “valuable assistance of this kind, noting: “Funding is difficult in these regions, so such scarce opportunities are quite important.”
The involvement of local angel investors such as WV Angels Network under Warioba Ventures in African startups is decisive. First, it serves as a vital source of funding for the startups, which often struggle to raise funds from traditional sources such as banks and venture capital firms.
Paul stands convinced that local investors are comfortably positioned to understand the unique challenges faced by African startups and proceed to provide more targeted or focused support.
Additionally, he says, local angel investors are a gateway to larger investments from venture capital firms and international investors.
Startups that receive funding from local angel investors are more likely to attract bigger tickets and further funding from VCs and international investors. This is because local angel investors are seen as trusted partners who have already validated and continue to vouch for the startups’ potential.
For his part, Warioba Ventures founder Martin Warioba has offered advice and emotional support which Joseph Paul considers essential for startups. This highlights another benefit of having local angel investors standing by the side, as it were, of African startups. This is that they can provide not merely funding but also mentorship, guidance and emotional support, all of which are critical for startups in their early stages.
The funding round of DawaMkononi stands testimony to the importance of local angel investors in African startups.
Being a part of FWD Accelerator, an initiative by Warioba Ventures and SNDBX Investment, DawaMkononi benefits from critical funding and support, crucial inputs if startups in Africa are to flourish and achieve success.
Accordingly, more angel networks and programmes of the WV Angels Network and FWD Accelerator kind are needed to support the burgeoning startup ecosystem in Tanzania.
But merely having them in place would not in and by itself be good enough. Rather, it is also essential for startups to take advantage of such opportunities as agents to help them unlock their full potential for their own good and for the benefit of the country’s social and economic development generally.
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