6 Steps To Assess Investment Opportunities in Africa For Feasibility

There has been a significant rise in investment opportunities in Africa over the past decade. Whether its Fintech, health related technologies (health-tech), education or logistics, investment opportunities in Africa are everywhere. Investment opportunities in africa

As an African focused venture Capital firm we are approached by entrepreneurs across Africa on a daily basis.  Being an investor, you have the unique privilege of getting a sneak peak into an investment opportunity before they are officially launched or made public. But how do you know the right business opportunity to invest in?

What makes the business opportunity feasible? Feasibility can be judged in several different ways of course. Depending on the investors interested in business opportunities in Africa I speak to, the ways of how feasibility is judged varies enormously.

Of course most investors are looking at a financial return, but other might be looking at environmental impact, jobs created, the ability to pay back a loan in a certain time period or even the ability to address a societal problem like the amount of unbanked people we still have across Africa. (Around 57% of the population of Africa, around 95 million people, do not have a traditional bank account, according to the Financial Technology Times.)investment opportunities in africa

We would hover still recommend that as an investor, while you should still do a detailed feasibility study for any business you’re looking to invest in, the below five steps will help you know the preliminary feasibility of the business and if you should move forward with them.

Feasibility of Investment Opportunities In Africa – Key Considerations

  1. The Entrepreneurial Team. – This always comes first in my view. The presence of an energetic, solution focused, resourceful, and committed team trumps just about every other feasibility requirement. The assessment of feasibility is not an exact science. It needs to also be an holistic approach that is taken. The number once factor in this holistic puzzle will be a natural fit between the entrepreneurial team and you who are investing.
  2. Real Demand- The first thing you need to consider when investing in any business opportunity is market demand. The business opportunity must either satisfy a need or solve a problem. While it may seem obvious, using Google and other search engines can be an effective way of gauging the potential market of the business, so start there.
  1. Good Return On Investment – Next, you need to make sure the opportunity has a good ROI. Its is probably easy to understand that those business opportunities worth pursuing must show a good evidence of delivering a good return. Take a look at the company’s gross margin (the percentage difference between what a product sells in the market and what it costs to produce the product) and the recurring revenue the company will be receiving in order gain a better understanding of what type of ROI you might receive.
  1. Meet The Objectives Of The Entrepreneur – Take a look at the aims and objectives the entrepreneur intends to achieve through the business. Does the business opportunity have the ability to meet those objectives? If not, you may have future issues down the road.
  1. Competence Of The Entrepreneur and His Team – This may be one of the most important factors that determines if a business opportunity is worth pursuing. An investment in a business will only be feasible if a strong business team backs it. Even a good and solid business opportunity can fail due to the incompetence of the team. Get to know the entrepreneur and his team. Don’t be afraid to be very inquisitive with them about their backgrounds and their ideas. A knowledgeable and trustworthy team is something the competition can’t duplicate.
  1. Competitive – Competitiveness is a big condition that makes a business opportunity feasible. Except if the business is the first of its kind, there is bound to be competition in the market. Take a look at the competition’s website and see whether the business you’re interested in is able to provide the customers with something better, or provide the same product, just more cost-effectively. If the business idea or opportunity is not competitive, you should forget investing in it.

Of course this list will not eradicate all risk involved in investing. And while investing in a growth stage business may carry less risk, you are likely to get a lower return for your investment. In the end you need to match your own ambition, access to resources and willingness to see the journey through with the team you are investing in.

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