In Africa, more than 50% of business angels prefer to invest in start-ups that are already generating income (report)

(Ecofin Agency) – Most business angels operating in Africa choose cautious investment strategies. They typically make investments of less than $10,000 per share. trading in well-established start-ups.

More than 50% of business angels active in Africa prefer to invest in high-growth start-ups that are already generating revenue, according to a report by research firm Briter Bridges on behalf of the African Business Angel Network (ABAN).

This report specifies that these investors, who are often wealthy individuals, business leaders or former entrepreneurs, perceive these well-established innovative companies to be less risky compared to young shoots in the start-up phase.

The report, which is based on a survey of a sample of 110 business angels, 84% of which are based in Africa, also reveals that most of the investors surveyed said they had a multi-sector approach. 51% of them expressed an interest in three or more sectors as part of their investment strategy.

In terms of the most targeted sectors, fintech ranks first with 11% of positive opinions, ahead of agritech (10%), Edtech (9%), logistics & supply chains (7%), healthtech (7%) and e-commerce (6 %).

With regard to the most desirable qualities in start-up management groups, 25% of respondents prefer to bet on start-ups bringing together several founding members, while 24% prefer start-ups founded by “recidivist” entrepreneurs.

24% are also looking to add capital to technology clusters whose managers have strong technical skills, and 13% are moving towards entities run by people with proven management skills.

Tickets under $10,000 per operation

In terms of ticket size (amount invested in each deal), more than 50% of business angels surveyed said they typically invest less than $10,000 per deal. deal as these small tickets allow for diversified and less risky investments.

However, 72% of business angels declare that they make additional investments (follow-up) in companies that are already in their portfolios.

The report also points out that 41% of business angels invest in a network (or in a group), an approach that makes it possible to raise the staked ticket in start-ups, while 23% prefer to invest individually.

31% prefer to invest funds in innovative companies both in a network and individually, against 3% who choose investments through a financing platform and 1% through rolling funds (specific investment vehicles that raise permanent funds).

In terms of the preferred investment types, equity investments in start-up capital have the upper hand with 70% of the positive opinions compared to 8% for equity capital in the form of debt and 22% for mixed financing transactions.

The instruments used in this context are simple future equity agreements (SFAE) up to 43%, shareholder agreements (36%), financing agreements convertible into shares (11%) and loan agreements (8%).

On another level, the survey shows that 23% of business angels surveyed rely on their personal networks to find investment opportunities, while 19% use events dedicated to start-ups.

The other channels used to identify nuggets in which these investors can inject funds are recommendations from other categories of investors (19%), business angel networks (16%), direct contact with founding start-ups (15%), consultation of venture capital fund databases (3%) and the media (3%).

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