KopoKopo was one of the finalists in the recently concluded Pivot25 Conference/Competition. Ben Lyon, the company’s VP of Business Development has written a great post on their blog about why Africa is a particularly ideal location for tech business at this point in time.
One of the interesting assertions that Ben makes is that, unlike the US, where there is an abundance of capital chasing a scarcity of good ideas, in Africa there is a relative abundance of good ideas chasing after scarce financial resources.
Not only are there ample investment opportunities in Africa, but many of the tech companies behind them are capital efficient, have realistic valuations, and have first-mover advantage. With three fiber cables, a network of tech labs, a vicious price war between mobile operators, and the arrival of affordable smart phones, tech companies in East Africa in particular are positioned to capitalize on an exploding market.
Even though LinkedIn, Groupon, and a looming host of other companies (Facebook, Twitter, Zynga, etc) are IPOing in the US, the IPO vs. M&A ratio is still 10:1. In East Africa, that ratio is even higher on the side of M&A (only 55 companies are listed on the Nairobi Stock Exchange). That said, tech companies in East Africa are being made to be sold. When multi-national companies decide to enter the East African market, as MasterCard and Visa are planning to do in Q3 2011, their first step will likely be via strategic acquisition.
For example, Visa recently acquired Fundamo, a mobile money platform provider, for $110M. Visa’s move, not only validated the mobile money industry in Africa, but signaled that Visa considers the Sub-Saharan African market critical to its success. As Fred Wilson, Mark Suster, and Seth Levine – all prominent VCs – have all been writing about, a $100M+ exit is nothing to laugh at.