One reason for the increase in attention to African startups is that DFIs are looking to deploy their dry powder across the world. While European and North American DFIs are experiencing difficulties fundraising, African DFI’s have seen successes in recent years. This has drawn attention to African startups, as these companies may be a better option for building up a business model or product than traditional corporate entities.
BII’s investment strategy is aimed at kickstarting African tech startups to compete in a global economy. With the right strategy and help, these startups have the potential to become some of the region’s leading companies.
While the BII and other development banks remain largely inactive in the startup scene, their investment in more than 10 startups over the last four years shows that they are not alone in their interest in this new form of enterprise. The International Finance Corporation (IFC) and the Netherlands’ Dutch Entrepreneurial Bank (FMO) have each invested heavily in startups, demonstrating their faith in these early-stage businesses. With a $225 million fund aimed at backing early stage startups around the world, it is clear that both institutions believe that there is great potential for success with this type of business model.
Some of these initiatives are specifically geared towards startups in Africa that engage with big data, biotechnology and other areas where the continent has an opportunity to lead the way. The hope is that these early-stage companies can build out their businesses quickly, attract additional investment and help spur economic growth on the continent.
Many development experts see the private sector as a powerful, yet untapped tool for social and economic development. Dario Giuliani of Briter Bridges believes that this paradigm shift has the potential to create significant change in how we approach development finance. By approaching private enterprise as an essential part of socio-economic growth, we can afford to wait longer for large-scale projects while also encouraging more innovative solutions. This flexibility could help us overcome some of the challenges inherent in developing nations, such as a shortage of resources and limited infrastructure.
BPI, an international development organization, has decided to invest an extra $6 billion in Africa over the next five years in order to bolster the continent’s economy. This comes on the heels of previous investments of $100 million into Egyptian startups. BPI’s hope is that this influx of capital will help African startups achieve greater success and create new opportunities for growth. Additionally, by supporting African entrepreneurs, BPI believes it can help bolster regional economies as a whole.
Overcoming various challenges, such as rampant poverty and weak infrastructure, African countries have made great strides in recent years in terms of economic development. In order to continue this momentum and create jobs for their citizens, many tech organizations are investing in these regions. One reason for this is that technology can be very effective at driving wider socio-economic development. By increasing the availability of good jobs, it enables individuals to break from poverty and improve their overall quality of life. Additionally, by improving communication andtransportation systems, tech companies can boost regional trade potentialities thereby promoting socio-economic stability.
Investing in tech to meet development goals
Technology and innovation offer a plethora of opportunities for social good. DFIs, recognizing this, are eager to back tech startups that can have a significant impact on marginalized populations in less industrialized economies. For example, mobile technology that grants and increases marginalized populations’ access to financial services, food and energy is desired by DFIs because it can promote sustainable economic growth while also creating job opportunities.