Unlocking the Mystery: Do African Unicorns Matter for Startups?

The Significance of African Unicorns

The fundamental question is simple: Do unicorns really matter for the wider African startup ecosystem? Lofty valuations don’t necessarily mean a young company is executing at the highest levels. A startup’s valuation can be as much about timing as it is about the quality of the idea or the abilities of the management team. For instance, if you had tried to raise venture investment for your artificial intelligence startup in Silicon Valley 10 years ago, you probably would not have done as well on valuation as a similar startup now.

The Perspective of Investors

Zecharias Amsalu, founder of Africa Fintech Summit and an angel investor, argues that developing African unicorns really matters beyond the bragging rights or vanity of the nine unicorns the continent has so far. He states that African unicorns are symbolic of the ‘investiability’ of the continent, achieving remarkable valuations despite economic challenges in some of the biggest African markets. He adds, “Unicorns help catalyze future investment.”

Aaron Fu, a seasoned venture investor in Africa, also believes unicorns are crucial for proving the viability of the continent’s tech hubs and attracting more capital. He looks to the example of the Latin American markets for a more regular output of tech businesses valued in the $200 million to $300 million range, which he says “would be awesome for Africa and investors like me.”

The Profitability Question

Ultimately, the bigger question for many investors will be when some of these companies will be able to return a profit on their investments. Flutterwave, a fintech company, has hinted strongly that it is getting set for an IPO. Additionally, there has been talk for a few years about Interswitch, a payments processing company, going public. Other than that, it is a wait and see as the management teams focus on building their businesses and the market.