The African Business Angel Network (ABAN) in the latest edition of its annual Africa’s Angel report, offered a comprehensive exploration of emerging trends in Africa’s angel investing landscape.
The survey leveraged primary and secondary data sources to highlight the pivotal role of angel investors in fostering innovation and driving growth across the continent.
Among the key findings, the report reveals that 90% of surveyed angel investors prefer startups based in urban areas, reflecting a strategic focus on environments that typically offer stronger infrastructure, access to talent, and proximity to markets.
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The majority of angels favor high-growth startups, with 43% prioritizing scalable and disruptive business models. Additionally, 68% of respondents prefer ventures that generate revenue from both companies and consumers and 50% focus on businesses demonstrating market traction. Inclusive practices are also a priority, as 79% of investors favor companies with strong female representation in leadership or as customers.
However, concerns arise over startups with overvalued capital structures or excessively diluted founder shares, an issue flagged by 73% of respondents. Angel investors employ various financial instruments to balance risk and reward. Half of the surveyed investors use equity agreements, including SAFEs, while 28% opt for debt instruments like loans or convertible notes with short maturities.
The accessible nature of angel investing is evident, as 64% of respondents invest between $1,000 and $25,000 per venture. These investments often require collaboration with other angels due to the relatively modest ticket sizes.
Notably, Angels offer more than financial assistance to startups, playing an integral role in helping them to focus on key elements of the business and achieve key milestones. 93% of respondents provide at least one form of business-related value-added support to entrepreneurs including business advisory (29%), mentoring (26%), access to networks (25%), and governance (13%). Some angels double down on their investments by providing follow-on funding (6%) for their invested company based on strong performance and growth metrics, confidence in the management team, and positive market trends and potential.
The report also explores how broader challenges in Africa’s startup ecosystem, such as funding slowdowns and liquidity constraints, influence angel investment strategies. While 36% of investors remain unaffected by these challenges, 64% have adjusted their approaches, with 61% adopting a more cautious stance by prioritizing follow-on funding, pausing new investments, or reducing capital injection rates.
Interestingly, a small segment, 3%, has increased their activity, recognizing opportunities within the evolving landscape. Investment decisions are driven by several factors, including stable macroeconomic conditions like inflation and interest rates, the ease of conducting due diligence, access to high-quality deals, and a supportive regulatory environment. Policies that offer fiscal incentives and enable cash repatriationalso play a crucial role in shaping these decisions.
As the African innovation ecosystem continues to evolve, angel investors are proving to be essential in bridging funding gaps and nurturing high-potential startups.