Marlon Nichols took the stage at AfroTech last week to discuss the importance of building relationships when it comes to entering into a new market. “One of the first things you do when you go to a new market is you’ve got to meet the new players,” he said. “Like, what do people need? What’s hot right now?”
Nichols is the co-founder and managing general partner at MaC Venture Capital, which just raised a $150 million Fund III, and has invested more than $20 million into at least 10 African companies. His first investment in the continent was back in 2015 before investing in African startups became trendy. He said that investment helped him grow his presence in Africa.
African startups raised between $2.9 billion and $4.1 billion last year. That was down from the $4.6 billion to $6.5 billion raised in 2022, which defied the global venture slowdown.
He noticed that the biggest sectors ripe for innovation in Africa were health tech and fintech, which have become two of the continent’s biggest industries due to the lack of payment infrastructure and health systems that lack funding.
Today, much of MaC Venture Capital’s investing happens in Nigeria and Kenya, helped in part by the robust network Nichols’ firm has been able to craft. Nichols said that people start making connections with other people and foundations that can help build a network of trusted advisers. “When the deal comes my way, I look at it and I can pass it to all these people that know from a firsthand perspective,” he said. But he also said that these networks allow one to angel invest in budding companies, which is another way to enter the market.
Though funding is down, there is a glimmer of hope: The funding dip was expected as investors retreated, but, at the same time, it was accompanied by investors looking beyond the four major African markets — Kenya, South Africa, Egypt, and Nigeria — and spreading capital in Francophone Africa, which started to see a surge in deal flows that put it on par with the “Big Four.”
More early-stage investors have started to pop up in Africa, too, but Nichols said there is a bigger need for later-staged firms that invest from Series A to C, for example, to enter the market. “I believe that the next great trading relationship will be with countries on the continent of Africa,” he said. “So you got to plant the seeds now.”