The lessons of Silicon Valley to nurture a model outside Africa
Solomon the Wise says that every business is built by careful planning, just like the engineers who started out in Silicon Valley weren’t looking for personal gain, as they were more concerned with making things possible that had never been done before. This included big goals like space travel, among other inventive works, which won the hearts of government (which provided grants) and venture capitalists who have continued to fund good companies to this day. .
One name that comes to mind is Arthur Rock, who started his career in 1951 as a securities analyst in New York. He was an early believer and investor in Intel, Apple and Scientific Data Systems. He joined the corporate finance department of Hayden, Stone & Company, where he focused heavily on fundraising for small high-tech companies. In 1961 he moved to California with Thomas J. Davis Jr., where they established the San Francisco venture capital firm Davis & Rock. Rock was a member of Apple’s first board of directors when Steve Jobs was removed from office in the 1985s. In 2003 alone, he donated $25 million to Harvard Business School to establish the Arthur Rock Center for Entrepreneurship.
The above reveals passionate and experienced people who were willing to make sacrifices to create a lasting legacy in the institutions and corporate space made possible in Silicon Valley. It is obvious that knowledge is central to any truly sustainable achievement and the Valley is no exception. Today, Silicon Valley is at a point where it’s seen as a rich ecosystem where anyone with an idea can pitch in because, in that space, people could literally sit in a coffee shop and form a team. commercial, raise funds and start their adventure almost in the snap of a finger. Some accelerators, like Y Combinator (with 4,294 investments made) and Sequoia Capital (with 1,638 investments), and their headquarters, enable startups and growth-stage companies to do a lot of good for humanity. New technologies like Amazon Web Services (cloud-based infrastructure) and software development tools and frameworks have further improved the ease of doing business with a good number of tech startups and scale-ups taking advantage of it. So much can be learned from Silicon Valley’s successes, most of which revolve around shared knowledge and resources, a willingness to sacrifice, a culture that wants to contribute, and many other virtues.
I strongly believe that now is the time for countries outside of Africa to deliberately build leverage and sustain it to build the momentum that drives the desired narratives out of the African space. Africa has a population of over 1.3 billion (2020), a total area of approximately 11,724,000 square miles (30.365 million square kilometers), which could easily be juxtaposed with the United States of America with a population of 329.5 million (2020) and one that spans 3.8 million square miles (9.834 million square kilometers) – making it the third largest country in the world. Figures show that Africa (a continent considered a country) is 4 times larger than the United States in terms of population and about three times in area, meaning Africa has the potential to reproduce 4 times what America has demonstrated to the world.
When it comes to productivity, the United States alone accounts for about a quarter (24.67%) of global GDP, and that’s valued at $20.89 trillion (more than 168 countries combined made – 16.04%). This means that Africa has enormous potential, in our estimation, taking similar paths (keeping in mind the population of over 1.3 billion) while relying on a system of credit at democratized consumption.
Consumption (also known as demand) is the basis of the dynamic that gave rise to the huge American economy (and such magnanimity in demand is the basis of all great business). From the 1920s to the 1950s, the modern consumer credit system was created. These decades saw the invention of installment credit, long-term mortgages and revolving credit. However, the foundation of the modern American consumer credit landscape has been formed. It covered lease-to-own solutions and touched on all facets of American life. What if entrepreneurs and policy makers work in synergy to make this possible for Africans? Letting people buy on credit and live the life of their dreams could completely transform Africa as we know it today. The amount of disposable income and potential purchasing power of the African consumer (with democratized debt) is reaching astronomical levels, enabling more businesses and entrepreneurs to create premium products and services as the demand side of the moving balance is settled.
It is important to note that Nigeria alone has over 17 million housing deficit; and if we imagine that half of this population (8.5 million people) became homeowners overnight with leveraged finance for their homes payable over a period of 5, 10 or 15 years, say $300 per month (that’s now $2.55 billion on the monthly table for smart investment money already guaranteed). What a boom this will cause on Nigerian GDP if we hit full swing on the full $17m needs-based set (that’s a whopping $5.1bn on the minimum table to be entered monthly by our estimate – less d one-tenth of a population over 206.1 m). All of these are money created from secured debt. Considering more areas of human need around Maslow’s hierarchy, which enable a better life and a truly dignified humanity, what could happen on the demand side to the Nigerian bottom line, and by extension to the African space?
Let’s not forget, Silicon Valley was built by people and nurtured by companies, and some of the contributors to business development startups in this space are:
1. Bessemer venture capital partners: They invest in consumer, enterprise, healthcare, SaaS and e-commerce companies. They have raised a total of $9.5 billion across 11 funds, the latest being Bessemer Venture Partners India Fund. This fund was announced on November 29, 2021 and has raised a total of $220 million. The company begins funding from seed stage to Series A investments and stays with funded companies through every stage of their growth. They have made 1,214 investments, and the most recent investment was on February 17, 2022, when Arcion (via a type of convertible note financing) raised $13 million. With an investment range of $4-15 million, some early-stage companies they invested in include Pinterest, Skype, Twitch, Twilio, Yelp, LinkedIn, Shopify, Wix, and Peris.
2. TDK Companies: The company works with technology-related companies and actively seeks solutions to difficult problems, while providing seed-stage funding in wellness technology, mechanical technology and augmented reality. They raised a total of $200 million across 2 funds, the latest being TDK Ventures Fund II. This fund was announced on April 12, 2021 and has raised a total of $150 million. With roots dating back to 1935, TDK Ventures also invests in equipment arrangements such as dielectrics, magnetics, and semiconductors, among others. With a typical range of $250,000 to $5 million at the start, they have made 28 investments, and the most recent investment was on February 9, 2022, when Verdagy raised $25 million.
3. Pegasus Tech Ventures: They provide venture capital to tech startups around the world and specialize in helping with global expansion. The venture capital firm offers a unique venture capital-as-a-service model for large global corporations looking to work with smart tech startups. They have raised a total of $751.8 million across 16 funds, and the latest is the Corporate Venture Capital Fund. This fund was announced on March 9, 2021 and has raised a total of $50 million. With funding in the range of $100,000 to $1 million, they have made 229 investments, and the most recent investment was on January 31, 2022, when MedHyve raised $407.5,000.
Note that venture capitalists also raise funds, as do other entrepreneurs and governments, and while everyone wants to multiply wealth while improving lives, there are different types of funding as well as investor preferences. That’s why it makes sense to invest headfirst as a serious entrepreneur with a genuine passion for creating change in our world.
Worth mentioning before the round is Flutterwave’s recent fundraising of USD 250 million (to make it Nigeria’s largest financial institution, valued at over USD 3 billion) from Capital B Group (with 136 investments in total and by February 16, 2022 – Flutterwave), which on April 1, 2021 announced a Group B Capital – New fund and raised a total of $415 million. The financial space is interesting and playing it requires determination, tact as well as solid know-how to keep currencies circulating. I’ll end with Julia Cameron saying that what we really want to do is what we’re really supposed to do. When we do what we are supposed to do, money comes to us, doors open for us, we feel useful, and the work we do seems to matter to us.
The future of money is the creation of value!
I am open to conversations that expand on the above and thank you for your investment of time. Yours in technology, Olufemi Ariyo. E-mail: [email protected]