Why Africa Needs Angel Investors
Countries are becoming more interested in entrepreneurship, particularly because of the key role it plays in driving innovation and economic growth across borders. Yet one of the major challenge entrepreneurs face is raising capital. Entrepreneurial ventures are mostly viewed as too risky for banks and other financing houses, yet these ventures require a significant amount of investment that may not be raised from family and friends. This is where angel investors come in.
The development and commercialization of innovation is central to any country’s competitiveness and entrepreneurs who engage in such activities contribute majorly to growth of that country’s productivity and wealth. Angel investors can play a major role in developing a country’s economy in that they can provide the necessary resources, capital, network, guidance and business expertise in helping entrepreneurs transform their ideas and innovations into successful products/services; and consequently, create more job opportunities for Africans.
Angel investors are known to be high net worth individuals (with diverse experience in business and/or technology) who provide entrepreneurs with capital, networking and mentoring opportunities for growth. In recent times however, a good number of angel investors have come together to form structured groups realizing the numerous advantage investing through groups offers over individual investments — a more diverse investment portfolio, access to capital, increased deal flow, shared expertise, collaboration on due diligence, opportunity to invest in larger deals, social networking, etc. Some of these include The American Business Angel Network, European Business Angel Network, Lagos Angel Network and our every own Rising Tide Africa.
A viable angel community can be a great pillar for entrepreneurs and help maintain the existence of innovative companies within a region. They can provide venture capitalists investment opportunities and increase the possibilities of developing a regional capital industry. By this, they will be reducing the need for emergent businesses to constantly seek foreign funding or travel outside the country to attract investors.
Angel investors occupy a pivotal funding space once occupied by venture capitalist. Venture capitalists have moved from investing in early-stage businesses into more matured later-stage companies with significant customer traction and quantifiable product success. In fact, venture capitalists need the angel investors’ money and support to get entrepreneurs to the stage where they can eventually invest in them.
From job creation to economic growth, the roles of angel investor cannot be ignored especially at a time when the entire GDP of Africa constitutes only about 2.8% of the Global GDP. Successful angel investing requires significant support from the government. In the next edition, we will be looking at ways in which government can support angel investors in Nigeria.
In what other ways do you think angel investors are needed in Africa? How else do you think they can be more involved in economic growth? Let us know.
by Korede Omo
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