Social Capital Hedosophia is Going to Change the VC Game, But Will It Really?

Several weeks ago, Chamath Palihapitiya did an interview with Kara Swisher on Recode/Decode that really got my attention. He was talking about how the venture capital industry was overdue for a shakeup to meet the needs of technology startups. He talked about using data science to identify investment opportunities and scale companies, similar to what he did while he was at Facebook to provide in depth services to these startups.

Further, rather than there being a ton of pressure for these companies to go scale quickly, they would have an investor that would be with them for the long term from the beginning. This sounded really interesting, particularly when he posited that this new iteration of Social Capital was going to surface founders who would typically be overlooked because of the way in which they will be looking at data.

One question that comes to mind is how would they overlooked founders get on his radar. What’s his plan to get data across a wide enough geography in order to capture these overlooked startups?

Admittedly, during Chamath’s conversation with Kara, I was unsure of what this new iteration of Social Capital would look like. Well, I got my answer a few weeks ago when Social Capital partnered up with Hedosophia to list on the New York Stock Exchange, forming Social Capital Hedosophia.

What is Social Capital Hedosophia? This is a publicly traded holding company that is designed to take unicorns public without them having to go through the traditional process of going public – roadshows, lockup period, etc.

Initially, I thought that this new model Chamath was talking about could be a game changer for startups run by black people. Perhaps, this new iteration of Social Capital could do like Chamath said and reduce the exclusion of underrepresented groups from taking the next step in building technology companies. But, I’m not sure that Hedosophia has the people it takes to address the pipeline issue.

Beyond using data science, Chamath cannot cut out the human component of how he builds out this new company. He’s got to build a team that has a global worldview that can see into the worldview of folks in Jamaica Queens, Kansas, Lagos, and Bogota. Layer the machine learning on top of that and you’re cooking with grease.

If Social Capital Hedosophia (I’m going to get carpal tunnel if they don’t come up with shorthand for this.) doesn’t do this important work, the company will just do what the rest of Silicon Valley has done, just more elegantly. Removing bias doesn’t matter if you’re pulling from the same pool of folks.

How Does Africa’s Innovation Economy Tap Into Africa’s Wealth?

Yesterday, I had lunch with a friend who is raising a fund for her Lagos-based startup. At one point in our conversation, she shared the effort she has had to go through to get people she has met with in Silicon Valley up to speed on what is happening in Nigeria’s tech space.

This has been a refrain from a number of entrepreneurs and investors who are already tuned in on what is happening in Africa’s innovation economy. Fortunately, the tide seems to be trending towards Silicon Valley getting more hip to what is happening in Nigeria, Kenya, and to a lesser extent South Africa (Cape Town-based Naspers has led some massive investments that I am sure Silicon Valley investors have noticed.)

While we chatted, my mind went to some research I saw this weekend on Africa’s high net worth individuals. Capgemini’s annual World Wealth Report pegs the wealth of the 150,000 high net worth individuals across Africa at $1.4 trillion for 2016. These are people who have at least $1 million in investable assets, excluding primary residence, collectibles, non-durable goods like sweet potato pie, and durable goods like automobiles.

This is serious capital. I wonder what percentage of this wealth has gone into Africa’s innovation economy since 2009. The Capgemini report highlights three industries that are going to drive wealth accumulation globally through 2025 – financial services, technology, and healthcare. There are startups across Africa doing interesting things in all three of these areas, yet the challenges of getting Africa’s wealthy to invest in the continent’s startups has been a conversation for several years now. I think we’re trending to those conversations being fewer and fewer.

There are several people working to build a critical mass of wealthy investors across Africa committed to investing in Africa’s innovation economy, and these initiatives are gaining real traction. Further, some African governments have developed initiatives to support innovation economies within their borders. Two years ago, I watched Something Ventured, and it really got me thinking about how African governments could level up their involvement in Africa’s innovation economy. I’ll share where I’m at on that at some point.

In the meantime, what is your assessment of Africa’s wealthy investing in Africa’s innovation economy?

Eric Osiakwan Pushing the Growth of Africa’s VC Space

I thoroughly enjoyed interviewing Eric Osiakwan about his experience building internet infrastructure in its early days in African countries, and the transition to investing in African startups. On top of that, he is pushing to get more Africans in the investing game to support the growth of the technology industry across the continent. Here’s the transcript of our conversation.

New VC Firm To Fund Women-Led Startups

I was glad to see the news about the launch of Valor Ventures, a VC firm led by women and focused on finding women founders. 

Another firm that excites me is the Impact America Fund. Here’s a good interview it’s founder, Kesha Cash, did with the Andreesen Horowitz team. 

Some time ago, I posted First Round Capital’s findings from its 10 years investing in startups. One of its findings was that women-led startups outperformed those led by men. You wouldn’t guess that by the looks of all the startups getting funding for their ideas. 

The VC landscape is dominated by white men, leading to white men getting the lion’s share of funding. As the debate on diversity in the technology industry continues to heat up, firms like Valor and Impact America getting traction is huge.

I was disappointed to see that Valor’s team was all white women. That’s another ongoing debate as the tech industry tries to figure out its diversity problem. 

Nonetheless, this is exciting news and I look forward to seeing what companies Valor funds.   

Marc Andreessen and Jean-Yves Ollivier Could Have a Lot in Common

Marc Andreessen’s frenetic pace on Twitter has fascinated me for the past year. He seems to devour a ton of information and makes nice connections between the current technology landscape and the history and theory that got us to this point. The New Yorker did a helpful profile on him – the kind that makes more human a titan some may worship.

Jean-Yves Ollivier is a new name to me, but one that I will be keeping track of after reading this Bloomberg piece on his energy sector dealmaking in the Republic of Congo. Apparently, he is trying to shape his brand through the media. Perhaps he should get on Twitter and fire off some Tweetstorms like Mr. Andreessen.

There’s a BBC piece on a lake in Mongolia made up of extremely toxic waste from rare earth minerals largely used in our smartphones and renewable energy sources like wind turbine engines and electric vehicle batteries. While the majority of these minerals are mined in Asia, some African countries like Malawi are exploring their potential to produce these minerals. South Africa was a leading producer half a century ago.

The unicorns (companies with $1 billion valuations) for which Marc Andreessen spends his time looking, largely rely on the smartphone. In defending against concerns that we are in a bubble due to the massive amount of money going into funding startups, he points out that the technology sector of 2000 did not have a conductor like the smart phone to enable the growth of the industry, hence the bust. We have the smartphone now and he believes that the software on those phones is eating the world, and the technology industry’s growth is here to stay for quite some time.

The robots that Mr. Andreessen envisions taking over menial jobs, freeing us up to do what we want, will most likely need parts from minerals in parts of the world like Mongolia and Malawi. Unless we come up with clean ways to source these materials, we could see lakes like the one in Baotou pop up in southern Malawi. Brokers like Mr. Ollivier are helping make these deals happen, enabling the creation of the smartphones, robots, and other tools that people like Mr. Andreessen believe will drive our future world. Two men. Two different worlds. Perhaps.

Kenyan Social Enterprises Attract Impact Investors Because of a Focus on Sustainable Growth

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Kenya has garnered lots of attention for Nairobi’s tech scene and the pending completion of Konza City – enticing talking heads to debate Nairobi’s status as the Silicon Valley of Africa. Yet, the technology space is not the only sector sector seeing exciting growth.

Participants in the Geeks Gone Global’s 2013 Africa Innovation Excursion witnessed the impact social enterprises are having in Kenya. Startups like Soko Kenya are providing a platform for Kenyan clothiers to sell their products globally. Soko recently landed $700,000 to continue the growth of its business.

Johnni Kjelsgaard, Co-Founder of The GrowthHub, provided interesting insights on the social entrepreneurship space in Kenya. The GrowthHub is a startup incubator in Nairobi that helps East African start ups position themselves “to deliver sustainable business growth, create employment, and contribute to social progress. According to Johnni, social entrepreneurship is not really a concept in Kenya. A number of the entrepreneurs he has encountered do not consider themselves as entrepreneurs in the first place.

Because of this, The GrowthHub does not use the term social enterprise in the majority of its work with entrepreneurs. It hones in on building a strong and sustainable business model. The GrowthHub sees social benefit pouring out from that. Startup founders like Stefano Carcoforo at iProcure and Melissa Menke at Access Afya are hyper-focused on creating a great product that also contributes to the good of their customers.

Johnni and The GrowthHub team are busy with Village Capital/GrowthAfrica2: Innovation to Impact which just launched on September 13 and will run until December 6. Started in 2012, in partnership with Atlanta-based Village Capital, the accelerator equips social enterprises with the tools to take their business to the next level. One of the 2012 winners, iProcure, recently secured a portion of a $500,000 funding round by 88mph, another VC/incubator that operates in Cape Town and Nairobi.

Are you an investor, looking to place funds in a startup that knows its market, is focused on sustainable growth, and has plans to create positive social change in Kenya and beyond? Join the Geeks Gone Global 2014 Africa Innovation Excursion.

Entrepreneurship and Venture Capital: Brazil v. African Countries

Entrepreneurs across the African continent are developing highly innovative technologies that are meeting real needs and improving the ease of life for people from all walks of life. At this year’s MIT Venture Capital (VC) Conference, I sat in on a panel that covered Brazil’s VC space. Two things struck me as very different from how entrepreneurship is developing on the African continent and present a case for investors to pay more attention to entrepreneurship in Africa.

I was surprised to learn that Brazil’s entrepreneurs are more active in meeting the needs of the middle class by providing some of the technologies already available in the US like Groupon copycat, Peixe Urbano. In a year and a half, the company has expanded from Brazil to Argentina, Chile, and Mexico. Another Brazilian company, Vostu, is locked in lawsuits with Zynga which is arguing that the company is committing copyright infringement of its games including Farmville, a Facebook favorite.

In Africa, we are not seeing a lot of “copycat” or “geographic innovation” technologies as one of the panelists preferred to call them. We are seeing technologies like Paga in Nigeria that enables mobile bankers to use any bank they choose. We see Sproxil, a company that has developed technology which uses text messaging to confirm that the drugs you are taking are not counterfeit. These creative innovations are exciting developments and ones that increase the fundability of entrepreneurs across the continent from investors both inside and outside the Africa

The second observation that struck me was the presence of VCs encouraging entrepreneurs to try new things in bringing various technologies to Brazil – providing entrepreneurs with mentorship that can help them increase their success rates in the country. Earlier this year, Ndubuisi Ekekwe, an entrepreneur and scholar wrote a nice article on African entrepreneurs’ need for nurturing. Mentoring fell under this bucket. As entrepreneurs learn from the mistakes of their mentors to avoid those same pitfalls, stronger products enter the market. I am extremely happy for Tayo Oviosu, CEO of Paga and the access he has to a mentor like Tim Draper. I think we will see more mentorship as time elapses but the involvement of Brazil VCs in the growth of their companies bolstered my understanding of the importance of mentoring.

Two takeaways came from the panel – the African entrepreneurial market is more disruptive than the current Brazilian entrepreneurial market, while more African entrepreneurs are going it alone as Brazilian entrepreneurs more readily have access to mentorship. Both are interesting phenomena and ones whose evolution I look forward to tracking over the next few years as I believe the presence of venture capitalists and mentors will grow rapidly over the next two or three years.

The following are recent CNBC Africa conversations on entrepreneurship in South Africa and Africa as a whole:

Photo Credit: Afrinnovator