[WeeTracker] 2023 Lessons & 2024 Outlook: From Early Investors In Africa’s Highest-Valued Startup

As the curtain draws on a year during which the tech landscape in Africa took on unprecedented challenges yet unlocked opportunities, understanding the lessons learned from 2023 and predicting the trends for 2024 becomes pertinent.

By Henry Nzekwe | December 28, 2023

Originally posted on WeeTracker

Flourish Ventures, a global venture capital firm, has been an instrumental player, particularly in supporting fintech entrepreneurs across emerging markets amid a trying macroeconomic climate.

With a recent commitment of USD 350 M towards bolstering their investments in emerging markets, Efayomi Carr, leading the Africa investments at Flourish Ventures which counts Africa’s highest-valued tech startup Flutterwave among its hits, is in the engine room.

In this exclusive interview, Efayomi shares key takeaways from 2023 and anticipates trends for the upcoming year. From lessons learned in a challenging market to predictions shaping future investment strategies, the conversation explores innovation, market shifts, and strategies for startups seeking investment in today’s landscape.

The interview has been edited and condensed for clarity and brevity.

In the challenging macroeconomic climate, how has Flourish Ventures adjusted its approach to supporting startups, especially in Africa, to yield positive outcomes?

We adapt our strategies across three investment stages—initial investment, ongoing support, and exit preparation—based on the macroeconomic environment. In flush times, quicker investment decisions are made at higher valuations with less diligence. In unstable environments, we focus on thorough diligence, reasonable valuations tied to concrete data, and advising on sustainable growth rather than just expansion.

How can a startup catch your attention for investment at this point? What’s crucial in gaining support from investors like Flourish Ventures in this market climate?

We start with basics, understanding what innovations pave the way for transformative business models. It’s about identifying core changes driving businesses forward. There are continuous waves of transformative innovation. Think about the history of technological leaps – from semiconductors to blockchain. Within the African context, I find the digitization of merchants and stablecoins quite exciting.

That’s interesting. Can you elaborate?

Merchants now utilise the internet and POS devices for more than just transactions. They employ software to track business and secure loans. And stablecoins are changing the game for cross-border liquidity.

It’s about whether a startup is leveraging an innovative approach that transforms what previously existed. For instance, we backed Flutterwave in its early days because it revolutionized digital payments. They were a seed round investment. On top of innovation, we look for a meticulous team with a vision for their industry, sector, and product – those are the twin pillars of our investments.

Were there standout sectors in 2023 showing resilience despite economic challenges?

Climate-related sectors witnessed significant growth. Climate-focused companies received substantial funding and attention, signalling opportunities for transformative market changes.

Regarding reported cases of misconduct and failings at startups in 2023, what lessons can the industry learn?

Misconduct falls into regulatory challenges, corporate malfeasance, and internal operations. Regulatory clarity is needed to avoid grey areas in compliance. Investors need to ensure proper governance. For moral conduct, a safe space to address issues is essential to create a safer ecosystem.

What are the top three anticipated developments or trends within the African landscape for 2024, and how does Flourish Ventures plan to position itself in light of these expectations?

I foresee three significant trends in Africa for 2024. Firstly, I believe there’ll be a surge in climate-related investments. Secondly, I anticipate increased IPO activity due to nascent markets and companies seeking alternative funding. Lastly, I foresee a rise in B2B cross-border remittance companies due to macro uncertainty and Forex challenges. Flourish Ventures aims to actively engage and capitalize on these trends.

Does this mean interest in African tech’s most coveted sector, fintech, which also happens to be a big part of Flourish Ventures’ bets, is cooling?

Our focus is on fintech, but we’re interested in adjacent sectors like embedded finance. For instance, businesses combining deliveries with embedded credit and payment systems.

Within the fintech space, where do you anticipate significant growth, and what about consumer fintech (B2C)?

I believe B2B fintech, especially those providing banking-as-a-service and aiding account reconciliation, will see significant growth. However, I’m cautious about consumer fintech due to revenue generation challenges, especially in credit and small margins in payments. Transformative innovations in consumer fintech are yet to emerge.

How much money does Flourish Ventures plan to deploy in Africa in 2024, and what sectors are they eyeing for investment?

While I can’t provide an exact figure, Flourish Ventures raised USD 350 M globally for deployment over the next few years, with about a quarter typically invested in Africa. Our deployment varies annually due to market volatility. We’re keen on sectors like climate tech, B2B fintech, AI, and embedded finance.

What industries or sectors do you foresee gaining momentum in Africa, and which ones might face challenges?

I’m optimistic about B2B fintech and cross-border payments, expecting substantial growth. However, B2B commerce might face challenges as investors seem wary, influenced by companies like Jumia. Pure credit-based businesses might also struggle due to economic downturns and currency volatility.

How might currency volatility in African markets affect startups’ operations and access to capital, and what strategies could businesses employ to mitigate these effects?

Startups might face challenges due to currency fluctuations. To mitigate these risks, strategic diversification across markets and capital pools is crucial. Additionally, operational strategies like hedging against currency fluctuations and diversifying products can help reduce dependency on a particular currency, protecting against currency devaluation.