CrossBoundary Advisory discusses East Africa investment opportunities at the 2024 AVCA Conference & VC Summit

One of the highlights was the participation of Frederik Benzel, Managing Director at CrossBoundary Advisory, in a panel discussion titled “Seizing the Investment Opportunities in East Africa.” This session offered insights into the dynamic market of East Africa and the evolving strategies in private equity (PE) and venture capital (VC).

Evolving Investment Strategies

Frederik shared CrossBoundary Advisory’s experiences and observations, noting significant shifts in the investment approaches in East Africa. Traditional generalist PE models complemented by more nuanced strategies:

• Specialized Platform Approaches: There’s a growing trend towards buy-and-build strategies and raising funds around single assets or platforms. An example cited was Alta Semper’s backing of MyDawa in acquiring Guardian Health, aiming to build a broader regional ‘bricks and clicks’ pharmacy platform.
• Strategic Partnerships: Increasingly, funds are incorporating strategics as limited partners or establishing early-stage relationships with them. This move not only fosters commercial partnerships but also secures potential exit routes.
• Innovative Financial Instruments: The use of more flexible instruments, such as mezzanine financing and private debt, is becoming more prominent, reflecting a maturation in the financial landscapes of the region.

Within East Africa, Kenya remains a focal point due to its market size, talent density, and sector diversity – and for many investors continues to be seen as a logical entry point into East Africa.

Challenges and Opportunities in Venture Capital

The VC landscape in East Africa is undergoing a significant transformation, as deal activity dropped sharply from its 2022 peak, depressing valuations and leaving some companies stranded. Frederik discussed the mixed sentiments in the market due to global headwinds and some local failures, but also stressed BasiGo’s recent $3 million equity funding and Roam’s $24 million funding round as evidence that there is still appetite to back innovative firms in sectors like e-mobility.

E-Mobility as a Beacon of Growth

Although nascent, the e-mobility sector in East Africa is drawing considerable attention due to its potential for reducing greenhouse gases and fostering local job creation. CrossBoundary Advisory has been actively involved in supporting companies like Roam, which recently announced partnerships aimed at expanding charging infrastructure across the region.

Looking Ahead

The future of investing in East Africa seems poised for a shift towards more sustainable and impact-driven growth. Investors are likely to become more cautious, focusing on profitability and sustainable business models to foster a more resilient economic environment. As we look to the future, the lessons and strategies discussed at the AVCA Conference will undoubtedly influence current and prospective investors in the region.