Where are Zimbabwe’s angel investors?

The age-old challenge of raising funds to scale a start-up idea has always dogged anyone who goes beyond the school or college project/prototype stage of creating a tech-based solution.
Zimbabwe’s start-ups are no different and a number, if not the majority of them, will share testimonies of how this worldwide challenge is a tougher experience locally.

While the availability of investors in varied forms has always meant that some entity or movement is willing to show their belief in an idea with capital injection, the Zimbabwean start-up ecosystem hasn’t had that luxury.

There are a lot of factors to blame this on. Politics (queue the sanctions song), the absence of investor confidence, a shortage of bankable ideas, a dearth of business skills, uncommitted start-ups and the case of investor flight from parties already anchored in local commerce — The long and short of it is that there aren’t as many structures pouring capital into local start-ups and with good reason.

Of particular note is the absence of angel investors which has been one setback to the blossoming of the local ecosystem.
What’s an angel investor?

For most start-ups the first round of funding to take off is usually provided by “the 3Fs” in small business creation: Friends, Family and Founders. Angel investors step in after this initial stage when the business needs a fresh capital injection for growth and development.

As such angel investing is typically a huge gamble from high-net worth individuals with business experience able to invest time and money in these start-ups with the goal of profiting from their long-term growth. It is hardly a short term deal.

There are high levels of risk associated with this form of investment largely because the start-ups are early stage ventures which face the greatest potential of failure. On the upside, successes from these start-ups have huge returns.

Unlike venture capitalists, angel investors put in their own funds into fledgling businesses. They have a keen focus on the success of the business through a desire to give back to the community and at times wanting to live vicariously through a start-up that has loads of potential.

So why would we need Zimbabwean angel investors?
By their very nature angel investors help bridge the funding gap between ground zero investment and the capital injection a start-up seeks from financial institutions, private equity firms or corporate acquisitions. This gap, often called the “valley of death”, is where many dreams and businesses have met their demise.

Angel investors are also key in dispensing mentorship, knowledge and access to their networks. This area always challenges start-ups with a great product and immense potential, but with limited finesse that a seasoned player can provide through mentorship.

These two benefits of angel investment have the potential to change the course of various start-ups that have had their ideas stuck in the same spot.

Where are the potential angel investors?
High-net worth Zimbabweans usually invest in lower risk ventures in fields like agriculture, mining, real estate, FMCG, gas and fuel. In a primary resource-rich and highly consumptive environment it makes short-term sense to chase Aliko Dangote strategies for entrepreneurial success  rather than invest in tech start-ups with all their uncertainty and unproven models.

This is hardly a unique trend as it is characteristic of other developing countries.
According to a guidebook on angel investing  this challenge is also characteristic of other developing countries. Investors focus on industries engaged in natural resource extraction, with most opportunities identified and investment decisions based on personal connections. (Think political connections)

Investment from successful, financially sound entrepreneurs with battle scars and the time to spare is something that local tech start-ups unquestionably require. The angle of mentorship that angel investors provide is one factor that could help in the leap to a vibrant tech start-up space.

Zimbabwe has a lot of individuals who can step up to fill the angel investors spot. These same individuals have managed to find financial success in local investment opportunities or through successful careers abroad.

With an abundance of skills harvested from a tough local business environment and exposure acquired through the diaspora these cases both locally and abroad can give back to the ecosystem.

What we need are structures that help prepare start-ups for angel investment. — Techzim.