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Investments in African Entrepreneurs
Managing Risk and Failure
Jon Gosier
jon@appfrica.com
June 25, 2014 | Yale
“To be a successful entrepreneur you can’t fear failure.
You have to love it. You have to chase it.”
- Jon Gosier (CEO, Appfrica)
80% 15%
Fail Break
Even
5%
Knock
Outs
Source: The Appfrica Fund
STARTUP INVESTING
80% 15%
Fail Break
Even
5%
Knock
Outs
0x 10x or less 20x or more
US/EUROPE RETURNS
Source: The Appfrica Fund
90% <9%
Fail Break
Even
>1%
Knock
Outs
0x 10x or less 20x or more
AFRICA RETURNS
MACROECONOMIC TRENDS
-7
-3.5
0
3.5
7
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (f)
Africa Sub-Saharan Region USA Europe World
REAL GDP GROWTH (Percent Change)
Despite the economic downturn, African GDP seems to be recovering,
the Sub-Saharan region has been noticeably stable since 2010.
WHY AFRICA? WHY NOW?
!
Currently, the global social sector spends around $200 billion in
Africa. Total foreign direct investment (FDI) in was $45.8 billion in
2011.1 In comparison African consumer facing businesses are
projected to generate $400 billion in revenue by 2020.
!
“Recent estimates put the size of the middle class in the region in the
neighborhood of 300 to 500 million people, representing the
population that is between Africa's vast poor and the continent's few
elite. Africa’s emerging middle class comprises roughly the size of the
middle class in India or China.”
!
- The Middle of the Pyramid: Dynamics of the Middle Class in Africa
!
!
AFRICA’S GROWING MIDDLE CLASS
!
327 million Africans have moved into the middle
class* (34% of the continent’s population). Of
that group, 128 million belong to a more stable
middle class while 44 million are in the upper
class.
!
Africa’s middle class has grown 183% since
1980.
!
* In this context, middle class is defined as being individuals who have an
average daily per capita expenditure of between $2 and $20 per day or
an annual income exceeding $3,900. The middle class is projected to
grow to 1.1 billion (42% of the population) by 2060.
34%
66%
African Middle Class
0
200
400
1980 1990 2000 2010
198.7 million are considered to be ‘floating’ and are at risk of falling out of the middle class and back into
poverty. Combined with the stable middle class, they make up the current 326.6 million.
!
0
200
400
1980 1990 2000 2010
326.6
204.4
157.5
115.3
127.9
98.6
83.9
64.2
44.738.130.522.7
83.2
60.553.4
41.4
198.7
105.8
73.5
51.1
Floating Class Lower Middle Upper Middle Stable Middle Class Less Stable Middle Class
AFRICA’S GROWING MIDDLE CLASS (In Millions)
AFRICA’S GROWING MIDDLE CLASS (cont’d)
!
“Recent estimates put the size of the middle class in the region in the
neighborhood of 300 to 500 million people, representing the
population that is between Africa's vast poor and the continent's few
elite. Africa’s emerging middle class comprises roughly the size of the
middle class in India or China.”
!
- The Middle of the Pyramid: Dynamics of the Middle Class in Africa
!
AFRICA’S GROWING MIDDLE CLASS (cont’d)
!
600 million Africans are mobile phone users. By the end of 2013, this
number is expected to grow to 735 million.
!
African consumer spending is projected to reach $1.4 trillion by
2020.
!
African productivity is growing by nearly 3% year on year.
Investments in African Entrepreneurs
Managing Risk and Failure
Jon Gosier
jon@appfrica.com
June 25, 2014 | Yale

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Investments in African Entrepreneurs: Managing Risk and Failure

  • 1. Investments in African Entrepreneurs Managing Risk and Failure Jon Gosier jon@appfrica.com June 25, 2014 | Yale
  • 2. “To be a successful entrepreneur you can’t fear failure. You have to love it. You have to chase it.” - Jon Gosier (CEO, Appfrica)
  • 3. 80% 15% Fail Break Even 5% Knock Outs Source: The Appfrica Fund STARTUP INVESTING
  • 4. 80% 15% Fail Break Even 5% Knock Outs 0x 10x or less 20x or more US/EUROPE RETURNS Source: The Appfrica Fund
  • 5. 90% <9% Fail Break Even >1% Knock Outs 0x 10x or less 20x or more AFRICA RETURNS
  • 7. -7 -3.5 0 3.5 7 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (f) Africa Sub-Saharan Region USA Europe World REAL GDP GROWTH (Percent Change) Despite the economic downturn, African GDP seems to be recovering, the Sub-Saharan region has been noticeably stable since 2010.
  • 8. WHY AFRICA? WHY NOW? ! Currently, the global social sector spends around $200 billion in Africa. Total foreign direct investment (FDI) in was $45.8 billion in 2011.1 In comparison African consumer facing businesses are projected to generate $400 billion in revenue by 2020. ! “Recent estimates put the size of the middle class in the region in the neighborhood of 300 to 500 million people, representing the population that is between Africa's vast poor and the continent's few elite. Africa’s emerging middle class comprises roughly the size of the middle class in India or China.” ! - The Middle of the Pyramid: Dynamics of the Middle Class in Africa ! !
  • 9. AFRICA’S GROWING MIDDLE CLASS ! 327 million Africans have moved into the middle class* (34% of the continent’s population). Of that group, 128 million belong to a more stable middle class while 44 million are in the upper class. ! Africa’s middle class has grown 183% since 1980. ! * In this context, middle class is defined as being individuals who have an average daily per capita expenditure of between $2 and $20 per day or an annual income exceeding $3,900. The middle class is projected to grow to 1.1 billion (42% of the population) by 2060. 34% 66% African Middle Class 0 200 400 1980 1990 2000 2010
  • 10. 198.7 million are considered to be ‘floating’ and are at risk of falling out of the middle class and back into poverty. Combined with the stable middle class, they make up the current 326.6 million. ! 0 200 400 1980 1990 2000 2010 326.6 204.4 157.5 115.3 127.9 98.6 83.9 64.2 44.738.130.522.7 83.2 60.553.4 41.4 198.7 105.8 73.5 51.1 Floating Class Lower Middle Upper Middle Stable Middle Class Less Stable Middle Class AFRICA’S GROWING MIDDLE CLASS (In Millions)
  • 11. AFRICA’S GROWING MIDDLE CLASS (cont’d) ! “Recent estimates put the size of the middle class in the region in the neighborhood of 300 to 500 million people, representing the population that is between Africa's vast poor and the continent's few elite. Africa’s emerging middle class comprises roughly the size of the middle class in India or China.” ! - The Middle of the Pyramid: Dynamics of the Middle Class in Africa !
  • 12. AFRICA’S GROWING MIDDLE CLASS (cont’d) ! 600 million Africans are mobile phone users. By the end of 2013, this number is expected to grow to 735 million. ! African consumer spending is projected to reach $1.4 trillion by 2020. ! African productivity is growing by nearly 3% year on year.
  • 13. Investments in African Entrepreneurs Managing Risk and Failure Jon Gosier jon@appfrica.com June 25, 2014 | Yale