Back in 2016, Honey Ogundeyi, then founder of e-commerce startup Fashpa, received an email from a fellow founder, Shola Akinlade. Akinlade had just launched his fintech company, Paystack, along with co-founder Ezra Olubi, and was on the hunt for his first clients. It was the start of a collegial relationship, more like partners than client and customer, as both companies navigated the complexities of Nigeria’s startup ecosystem.

Fast-forward five years and Ogundeyi, a serial entrepreneur whose resume includes stints at Google, Ericsson, and neobank Kuda, is back as a founder, this time of Edukoya, an Africa-focused edtech startup. Akinlade reached out to her again, only with a new offer as an investor. He joined Edukoya’s $3.5 million pre-seed round, which closed in December. 

Experiences like Ogundeyi’s are becoming more frequent in tech ecosystems across Africa, which has seen a major boom in venture investment over the last two years. In 2021, African startups received more than $4.3 billion in venture capital funding, according to research house Africa: The Big Deal. That number was 2.5 times the funding raised in 2020, itself a record year. 

Much of the narrative and media coverage around the booming market have focused on the biggest names, with billion-dollar valuations for unicorns, like Nigeria’s Flutterwave and Egypt’s Swvl, or major exits, like Stripe’s $200 million acquisition of Akinlade’s Paystack. But insiders said the real energy is found in early stage ventures, where more local angel investors than ever are taking chances on a new generation of entrepreneurs. Increasingly, those investors are themselves former founders and startup executives. It’s a marked change from 2013, when Ogundeyi launched Fashpa. “There was very limited access to capital with a few choices of local angel investors,” said Ogundeyi. Anecdotally, investment figures were often around the $5,000 mark, according to the tech veterans Rest of World spoke with. Last year, a survey of angel investors in Africa by African Business Angels Network (ABAN) / Briter Bridges found that “most angel investors invest up to $50,000.”    

One of the key elements of that change is not just that more deals are being done and that they are much bigger in size but also that the deals get done quicker. David van Dijk, an advisor to ABAN said that new structures and tools, like the Simple Agreement for Future Equity (SAFE) model, a contract that gives an investor a right to shares in a startup if it lists or raises another round, have created off-the-shelf investment packages for angels, streamlining the often onerous process of due diligence in major tech hubs like Lagos, Nairobi, and Cairo. “There’s momentum in the ecosystem with a sense of urgency,” van Dijk told Rest of World. “People are more triggered by the upward potential than the downside risk.” 

Cairo Angels, a group of early stage investors in Egypt and the Egyptian diaspora, has also noted that increased urgency. The group launched a $5 million micro-venture fund last month to give investors more efficient and flexible tracks for investing. “Good startups want fast deployment,” said Aly El Shalakany, CEO of Cairo Angels Syndicate Fund. “It was a structural challenge for us. They’d say, We love you, but we need you to move a bit quicker.”

Leading early stage funds, including Launch Africa, Kepple Africa, LoftyInc Capital, and Y Combinator, who did the most early stage venture deals on the continent last year, have all been tweaking their funding mechanisms to keep pace with the market and ensure smoother deal flow. 

But perhaps the most notable development of the last couple of years has been the increasing number of founders and senior tech executives — who, during later stage funding rounds, are “taking cash off the cap table,” as Idris Bello of LoftyInc Capital put it — to invest back into the next generation of founders. According to ABAN and other sources, founders of startups, including those of Flutterwave, Paystack, and Andela, were among the most active early stage investors over the last year.

And while there’s lots of goodwill toward founders giving back to the ecosystem, there’s plenty in it for them too. For instance, when Flutterwave became a unicorn with its series C funding round in March 2021, several members of the Afropreneur Angels Group (AAG) were able to partially exit with returns between 30 and 116 times their angel investment, according to its 2021 annual report shared with Rest of World. “I’ve seen an angel put in $100,000 and the stake valuation has jumped to $4 million in just six months,” said Bello, who also helms the AAG. These founders-turned-investor often understand the challenges as well as the market potential of new tech models better than the average angel, said market insiders. This can often mean they are able to make quicker investment decisions — an attractive quality for entrepreneurs at the start of their journey.

Experienced founders can also bring more than just cash. Caine Wanjau, who has been chief technology officer of Kenya’s Twiga Foods since it was founded in 2015, said he offers mentorship and advice to founders. Twiga has raised nearly $160 million to date, but Wanjau said he still only writes “small checks” provided there are no conflicts with his current role. "I’d say it’s early days, but with exits and opportunities for liquidation events, we will see more and more investments from founders and founding teams."

“I always had this thesis that early stage founders needed more patient angel capital.”

Ken Njoroge, who founded pan-African fintech giant Cellulant in 2004, stepped down from the CEO job last year and has taken the advice and investment approach a step further. He set up a boutique investment firm called Pani, which offers executive coaching and cash investments to promising founders in exchange for equity. “I always had this thesis that early stage founders needed more patient angel capital,” Njoroge told Rest of World. He said Pani doesn’t invest cash in any founder he hasn’t spent at least six months coaching. “A lot of the value that people see in me is as a coach who has also been an experienced founder. A lot of high-quality founders are willing to give up equity for that.”

Some observers have worried that with so much money flowing into the market, it could overheat. But for the moment, it’s giving new founders the luxury of choice. Edukoya’s Ogundeyi said, “I was quite intentional that I wanted founders and female angel investors.” Unlike with her earlier startup in 2013, founders like her now have many more options to consider for the type of sector experience and startup knowledge the angel brings to the table. “There’s been a change of guard,” she said.