How India tells us Africa's future 🔮

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Last week asked you how many unicorns there are in Africa. 5 out of 13 people got it right.

What was the answer? Keep reading to find out.

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Okay, let's dive in to today’s edition. It’s a special one

I’m teaming up with Aryaansh, author of Market Munch, to explore what India's explosive tech growth tells us about Africa.

By the way, Market Munch is the one newsletter I read every day to learn about global financial market news. If you want to get smarter on all market news (not just Africa’s), Market Munch is the place to go.

India’s rise to become the 5th biggest economy (overtaking the UK) has been a sight to behold.

And it’s a story that other developing countries (and even continents) can look to for a masterclass in economic growth.

So, what is India’s playbook?

What manufacturing is to China, software is to India.

India’s service businesses have been laggards for a long while, but a lot of fundamental changes have happened to India’s business atmosphere that have let tech accelerate the country.

India currently has -

• 800 million live smartphones, and 760 million internet users

• The cheapest broadband network in the world

• Some of the fastest domestic payments tech, with $1 trillion in volume last year

This makes a very potent cocktail. When stirred up together, you get a population of almost 1.4 billion, having instant access to the internet and global finance infrastructure.

And what do you do when you get on the Internet?

Learn. (And also play a little FIFA, even though the game hasn’t changed in forever.)

Indians are notoriously competitive. Everyone is trying to outlearn, out-earn, and get ahead of each other. This means that access to simple tech empowers people in a very literal sense.

And people in the foreign world know this.

If you want literally anything done on the tech side of things, you go to India.

Need a website built? Freelancers from India. Need someone to create a backend for your startup? Agency owners in India. Need simple support on using basic hardware? Call up a guy in India.

Tech investment in the country has almost tripled in the last 3 years - and it’s all because of fundamental shifts, not hype.

Why India can tell us the future 🔮

Yes, I know what you’re thinking. India is a country and Africa is a continent of 54 countries.

In Africa, you’re dealing with 54 governments, no unified regulation, 1,000+ banks with poor integration, and generally less infrastructure.

So when it comes to rapid growth in Africa, there are whole lot of constraints

But Africa and India do share similar traits that lets us draw parallels:

• India has a population of 1.4 billion people compared to Sub-Saharan Africa’s 1.7 billion people.

• 800 million Indian mobile users vs 650 million in Africa, with 300 million internet users (GSMA)

• Both Africa and India have young populations with more than 50% of the population under 30.

• Tech talent in Africa is also growing quickly. Github’s fastest growing developer ecosystems are in Africa, and Deel saw 800% growth in hires from Africa last year.

When we look at the state of tech in Africa and India, we see India about 5 years ahead of Africa’s tech growth. It's like looking into a (slightly murky) crystal ball.

And it’s not just underlying market conditions - we’re seeing another metric grow in India and Africa’s tech world.

The acclaimed ‘Unicorn status’ 🦄

5 years back, unicorns in emerging markets were unheard of.

You’d be more likely to find a unicorn in real life than you would in an Emerging Market VC’s portfolio.

But that’s quickly changed. Just look at India:

Today, India has 107 unicorns (only one person got this right in last week’s poll).

In emerging markets, unicorns are a sign of confidence, above everything else.

When an emerging market startup hits that billion-dollar mark, it’s a sign to the world that someone with ‘smart money’ believes in the thesis of a nascent company in a nascent country.

They’re literally putting their money where their mouth is.

This confidence compounds - attracting more ‘smart money’, more clever people, and some time in the spotlight for businesses that would otherwise go unnoticed.

A rare beast - and quite a sight to behold.

So let’s combine all of this -

• cheap internet

• deep mobile penetration

• strong financial infrastructure

• increasing financialization

• a pipeline of foreign money flowing

And we’ve now got some sparks flying. ✨

What about Africa?

Last week I asked how you how many unicorns Africa has.

If you chose 8 unicorns, pat yourself on the back - you were right.

And it's not just unicorns - we’ve also seen a handful of acquisitions (Paystack by Stripe) and IPOs (Jumia, Swvl and soon Flutterwave).

And having our first set of winners on the continent has accelerated the ecosystem in a way that could see explosive, compounded growth.

So, will Africa follow India's tech trajectory?

I think yes.

The Great Compounding

Shout out to George Rzepecki from Raba Cap for this term in his article on African Venture Capital

The great compounding is how Africa’s tech ecosystem will explode in the same way that India’s did. It exists on different levels:

Technology → With internet penetration, core infrastructure for startups and SMEs to build their products on, and payment infrastructure growth.

Startup Talent → Veteran founders and operators are moving on to their next startups, teaching the next generation of founders.

Capital → Funding has grow exponentially in the last three years for both startups and SMEs.

All these factors are compounding. That’s why we’re just at the beginning of Africa’s growth story.

And my favourite live example of this is Paystack.

Paystack and ripple effects 🌊

Nigerian fintech, Paystack, was acquired by Stripe for $200m. Wins like this compound the startup ecosystem.

Here we see talent compound. The early Paystack team, the ‘Paystack Mafia,’ have already gone on to start their next companies, with a few seeing early wins, like:

• Abdulhammid Hassan, CEO of Mono, who raised a $15m Series A round to build the Plaid of Africa.

• Idorenyin Obong, Co-Founder of Grey, letting Africans create digital foreign accounts to send and receive international payments.

• Femi Aluko and Olumide Ojo, founders of Chowdeck, which recently joined YCombinator

But it’s not just talent that’s compounded - it’s also capital.

Both founders of Paystack have gone on to be prolific angel investors, investing in the Paystack Mafia companies and many others.

And the acquisition brought a new set angel investors to Africa.

Joe Kinvi is co-founder of HoaQ Club, a community that invests in African startups. He saw the increase in available capital first hand in October 2020 after Paystack's acquisition was announced.

‘We saw 3x growth of our mailing list - everyone wanted to know how to invest in startups in Africa.’

We can see the impact of just one acquisition on Africa’s tech ecosystem. These will compound into the next set of success stories, which will compound into the next.

And Joe thinks the same:

Does India tell us Africa's future? 🔮

India’s growth is a case study of what happens when the underlying conditions are met for technology to grow and uplift a country.

Africa’s tech growth is following the same trajectory. But for this to come through, we need continued mobile and internet penetration, cheaper internet, more digital and physical infrastructure.

And we need more wins like Paystack for the scene to compound.

Do you think Africa will follow India’s trajectory?

Let me know below 👇🏾

p.s. - if you want to score a 'Future is Africa' tee, invite your friends to Prox Weekly.

Catch you next week!

Caleb