Earlier this year I was kicking around the idea of angel investing in some African start-ups. I asked my VC friends what I should do to prepare, and their advice was to firstly come up with a good thesis. Without a thesis, they said, you’re most likely not going to have the diligence you need to identify good investments, nor would you invest in things you are passionate about. So I spent a couple months mulling it over with my brother, and in the end, we never got anywhere. We decided we just weren’t going to be committed enough to add value to any companies we invested in. Both of us were starting new positions and at the time and those were just taking up too much time. The question about what my investment thesis was wouldn’t go away though, and although I’m still mulling it over, I’ve settled on this:
“The most valuable African tech companies in the next ten years will understand the identity of their customers, and build value from that.”
If I were to unpack that, I’d say that identity means the economic, social, demographic, and geographic characteristics of the customer, plus their interests, aspirations and fears. I’d also say that understanding means having modelled the characteristics using data, in a way that can segment and forecast those groups of people in different ways.
Africa is growing incredibly quickly, and there are extremely poor systems in place to identify people. A lot of countries in Africa don’t have a credit bureau, let alone a national ID system. Figuring out how to identify people in a systematic way opens up huge opportunities for the people of Africa to use that identity to move around the world, to buy things, to get access to credit, and to meet people. I’m not saying those things don’t happen now, I just think some of the things have huge barriers in front of them for many Africans. Companies that help address this understand the identity of their customers while packaging that identity in a way that is useful to the customer will create massive value.