Securing Seed Capital: Can You Pass the Napkin Test?

Full Transcript

(00:01)
Zachariah George: I had my “aha” moment about 12 years ago, saying, gosh, we can’t just keep draining Africa of its resources. If Africa becomes eventually a net consumer and not a net producer, you’d have to be living under a rock to ignore the importance of eventual venture capital investments in Africa. And that was a reason why I started building the venture industry about 10 years ago.

(00:33)
Darius Teter: Welcome to Grit & Growth from Stanford Graduate School of Business, the podcast where Africa and Asia’s intrepid entrepreneurs share their trials and triumphs with insights from Stanford faculty and global experts on how to tackle challenges and grow your business. I’m your host, Darius Teter, the executive director of Stanford Seed. Today’s guest is Zach George, who first appears on Grit & Growth way back in season one. Zach studied management science and engineering here at Stanford, and then he spent nearly a decade on Wall Street, including time at Lehman Brothers during the boom and bust. But a trip to South Africa in 2010 changed his course entirely. He saw Africa’s potential as a hub for innovation, but noticed that most funding was either philanthropic or focused on resource-heavy industries like mining and agriculture. He believed in a different path for growth by building up Africa’s tech ecosystem. So Zach set out to create Launch Africa Ventures, now one of the leading early-stage VC funds on the continent. Last time Zach and I spoke was about three and a half years ago, and I wanted to get caught up. So to kick us off, I thought I’d play the role of a fictional LP, a limited partner, with some capital to invest, and asking Zach to pitch me on why I should invest in his latest fund.

(01:55)
I wanted to start kind of a slightly different way. You’ve never met me before, but someone gave you my contact details and said, yeah, this guy’s a high-net-worth individual, seems to be interested in what’s going on in Africa. So can you pitch me Launch Africa Ventures II.

(02:13)
Zachariah George: How much time do you have? So essentially, if you bring it back to first principles, it’s a question of if you are a 100 percent individual, if you’re a family office, or even if you are investing money on behalf of a pension fund or an asset manager, it’s about how do you create the perfect diversification of high risk, high return within your portfolio. So creating a portfolio of stocks, bonds, treasuries, real estate, private equity venture. And until about 10 years ago, no one would’ve looked at emerging market venture as an asset class that they would have in their portfolio. The reality is: How do you create $100,000,000-companies in emerging markets? That used to be very wishful thinking as little as 10 to 15 years ago, and now we’ve seen this in three different ecosystems: Southeast Asia, India, and Latin America. So Africa has always been that sort of last frontier in terms of how do you extract value from the continent outside of just resources, which is predominantly private equity going into mining infrastructure, oil and gas, utilities, power, et cetera.

(03:22)
Venture capital as an asset class in Africa is about, I would say, 10 to 12 years behind India and about seven to eight years behind Southeast Asia and Latin America. One of the historic reasons why it has lagged is because of one primary factor, which is consumer purchasing power. So Africa has always been a very lucrative market because of its massive population. So if you would look at Africa as a continent, we’ve got 1.5 billion people, which is more than India and China. Individually, yes, of course we’re 54 countries, but Africa is a lot more homogenous than people understand.

(03:58)
Darius Teter: You mean in terms of people’s consumption preferences or unmet needs, work to be done, jobs to be done kind of stuff?

(04:06)
Zachariah George: Work to be done, jobs done, and purchasing power and interest in the digital economy. And then three very important things have happened over the last, I’d say, decade in Africa. I’ve been in Africa for 14 years now. One is the average age in Africa is only 18, and that’s something I cannot stress the importance of. So amongst these one and a half billion people, more than 800 million are under the age of 21. And that is the class or the sector within the economy or the part of the economy that is the most digitally savvy. They’re the ones that are making decisions around their health, their education, how they consume, how they travel through digital means. When I came to Africa for the first time 15 years ago, the average cost of data for one gig of mobile data, something that a lot of Americans couldn’t care less about, but is a huge problem in Africa, used to be around $50 for one gigabyte of mobile data.

(05:07)
So it literally became a cost-prohibitive thing. You are excluded from the economy and any form of commerce because you couldn’t be online. Today, 14 years later, in 2024, the average cost of data is below $2 across the 54 African countries. So you have a huge surge in people being able to transact online, and that is super, super, super important from a purchasing power standpoint. When I left New York City, I used to be an investment banker most of my 20s. This is in 2010. There were more mobile phones in Manhattan than the whole of Africa. True story. Sit with that for a minute, right? And today in Africa, you’ve got more mobile phones in Africa than the whole of North America. That’s including Mexico, by the way. So you’ve gone from this massive increase in mobile phone usage. I think we’ve got close to 800 million mobile phone lines in Africa today. So that, together with the low cost of data, a huge surge in smartphone penetration, and becomes extremely affordable. And therefore more people are online and transacting at a lower cost of data. And that, together with the high increase in population, is the perfect storm for people to be able to consume more.

(06:28)
Darius Teter: When Zach and I last spoke, Launch Africa’s first fund was still just in the works. Only a handful of investments had been made. Fast forward to today, and they have far exceeded their initial goals. Originally aiming for $10 million to $15 million to support about 30 tech companies, they actually raised more than $36 million, making it the largest early-stage fund in Africa. But here’s what’s different. Almost every private equity and venture fund in Africa traditionally raises money from development finance institutions (or DFIs), which means big institutions like the IFC [International Finance Corporation] or the African Development Bank. But early-stage start-ups need more than just capital. They need mentorship, they need industry connections, intellectual capital that big institutions often don’t or won’t provide. So instead, Launch Africa focused on building a supportive ecosystem through partnerships and investors with expertise, a willingness to provide hands-on support and a specific interest in Africa.

(07:22)
Zachariah George: I’d say a good third of our LPs and our fund are former founders. Another third of them are C-suite executives at major banks, institutions, retailers, insurance companies across the world that will help insurtechs, fintechs, and marketplaces get access to pipeline and distributions.

(07:42)
Darius Teter: So when I went back and reviewed LAV [Launch Africa Ventures] one, I remember, and when we talked, I remember you talked about how it was not just the money, it was the advice was almost more important than the initial investment. We’re talking about seed, pre-seed funding, right? Where these are companies that you hope are going to get to a series A soon. I didn’t understand that that support, that advice was actually coming from the LPs. I totally misunderstood. I thought it was something Launch Africa was providing.

(08:08)
Zachariah George: We’ve got now 20 people that work across fund I and fund II, but there’s only so much we can do as ourselves. So we’ve got partnerships with all the major incubators, the accelerators and venture builders across Africa. But in terms of specific expertise, we absolutely leverage on our LP backgrounds and experiences to help our portfolio companies. I mean, I’ll give you a couple of examples. So one of our prominent LPs is an individual from the East Coast in the U.S. that used to run one of the largest asset managers in the U.S.: T. Rowe Price. He has a specific interest in asset management solutions for obvious reasons. So any of our fintechs that do asset management, credit savings, even lending, that need an advisor or mentor to help them with market expansion and just understanding regulation compliance, et cetera, this particular individual is very happy to be on the advisory board of these companies in exchange for some advisory equity,

(09:09)
in addition to him just being an LP in our fund. One of our other LPs was the head of innovation at DHL in Europe for many, many, many years. And he loves and lives and breathes e-commerce and logistics. So his words to us was, listen, I’d love to be an LP in your fund, but please, I’d love to mentor any logistics for mobility start-ups, especially with last-mile delivery and solutions. So he’s on the advisory board of a few of our companies. Now imagine doing that with 30 to 40 people that are experts in particular regions, products, or sectors sitting on the advisory boards of a handful of our companies.

(09:50)
Darius Teter: These are the kinds of people that NGOs approach and say, would you like to make a donation to support such and such a project? And they want to do something helpful, but they don’t want to just do a donation. So I can see the win for the investor too, because they’re $100,000. They’re not expecting to get rich off of their buy-in to the fund. I mean, if it makes money, great – skin in the game. But it sounds like the more rewarding piece for some of your LPs is to be part of that transformation story.

(10:18)
Zachariah George: And not just that. I mean, you could do $100,000 to $500,000 as an LP, and yes, you could make two times your money over five years. But two things. One is the mentorship and advice and the advisory equity in select portfolio companies of their choosing. But number two, and this is one of our USBs [unique selling benefits], is if you are an LP in our fund for as little as $100,000 or as much as a couple of million dollars, we’ll allow you to co-invest directly into the capital of these companies. And we don’t charge you any fees or carry. And that is where you make the real Alpha. Our first fund, we invested $31 million into 133 companies. And guess what? We had a further almost $20 million in co-investments directly from our LPs into more than 50 of our companies. And on that they could stay in as long as they liked, they could ride it all the way to IPO or a trade sale. They don’t pay any fees or carry. And yes, are we leaving some money on the table? Yep. But as the saying goes, a rising tide lifts all ships.

(11:27)
Darius Teter: Three years ago, Zach highlighted major improvements in Africa’s venture landscape. There was more capital, fairer valuations, and increasingly sophisticated entrepreneurs. So I wondered if that ecosystem is still on the upward path as he gears up for Launch Africa’s second fund.

(11:45)
Zachariah George: There has been a bit of a market correction, as there has been across the world, about 18, 24 months ago when we had that massive market correction across the world. Africa was affected to a much lesser extent because valuations in Africa as little as two years ago were still a good 30 to 40 percent lower than global averages. So a company doing a million dollars in ARR, let’s say, doing payments in the Valley or in India or in Israel or in Berlin, would typically be trading as much as 20 times …

(12:20)
Darius Teter: ARR stands for annual recurring revenue. It’s the yearly income a business expects from its subscriptions or recurring contracts, and the key metric for understanding predictable long-term growth.

(12:32)
Zachariah George: But an exact similar company doing payments in Nigeria would be trading at a 10 times multiple, so a 50 percent haircut. So when that market correction happened and you had these incredible companies like Klarna for example in Sweden, the BNPL company, or Stripe, where their valuations went from $60 billion down to a couple of billion, or $90 billion down to a few tens of billions, you did not have that big of a market correction in Africa because valuations were a lot more fair. So there definitely was a fair value adjustment in valuations with the market correction, but it was far less than what you saw in the U.S., in Western Europe, and Asia.

(13:16)
Darius Teter: So what’s changed? Well, valuations are no longer “one size fits all.” Digital banks are valued by active users, retail tech by gross merchandise value, and e-commerce by customer retention. But while capital is still flowing, it’s going to fewer companies. Those managing their cash flow and proving resilience are seeing more funding while others face consolidation or failure. It’s truly survival of the fittest, especially in markets with high competition and costly customer acquisition.

(13:43)
Zachariah George: I mean, in Nigeria, you can get away with it because, I mean, the Nigerian population is what, like 70 percent of the U.S. population, maybe 60 percent, give or take a few percent. But let’s take fintech. If you’re saying, hey, I’m doing SME lending and there are 15 other companies doing the exact same thing. At some point, everyone’s pitch deck wants to get 10 percent of the market. That math doesn’t work out. So you’ve got to be able to have multiple forms of revenue, and you can’t expect to capture and tie market shares just by literally handing over money to AWS, Meta, and Google, which is another point that I think a lot of African founders have struggled with. I mean, one of the hardest things in Africa, and I learned this the hard way about 10 years ago, is the cost of customer acquisition is very, very high compared to the U.S. or Western Europe. It’s gotten better, Darius, but it’s still …

(14:39)
Darius Teter: And what about lifetime customer value? Is the churn higher too?

(14:41)
Zachariah George: No, it’s not. So this is the advantage and almost the irony of doing business in Africa, is your CAC is very high.

(14:50)
Darius Teter: CAC stands for customer acquisition cost. It’s essentially what a business spends on marketing, sales, and other efforts to gain a new customer. CAC is a critical metric for start-ups to measure how efficiently they’re growing and if their strategies are cost effective.

(15:05)
Zachariah George: You can’t just throw Facebook, Google, Instagram, TikTok advertising and acquire customers. You have to go down the old school route of – I’m saying really old school: television, radio, newspaper ads, word of mouth. So your cost of acquiring customers is very high, but customer stickiness of revenue, your LTVs, your lifetime values? Very high.

(15:27)
Darius Teter: Why is that?

(15:28)
Zachariah George: Actually, I say this often, VC funds in Africa should be hiring behavioral psychologists and consumer psychologists on their team simply because the African consumer has a sense of brand loyalty that very few Americans or Europeans or even Asian customers have. And it comes from culture. People take a very long time to say yes to someone, and once they say yes, they stick with them for a much longer period of time unless they’ve been defrauded or …

(16:00)
Darius Teter: Right. So I thought you were going to tell me that the reason customers are sticky is because there’s friction in switching. The switching costs are higher than in …

(16:09)
Zachariah George: Switching costs are higher because of regulation. But it’s also a question of this particular brand, this telco, this retailer, this bank, this fintech, has provided, has made my life quicker, faster, easier, or smoother. Why would I ever switch? So when we construct our portfolio at Launch Africa, we are very deliberate about how we choose companies. We’ve got more than 150 portfolio companies across both our funds. So when we pick companies, we pick companies not just based on their individual IRR [internal rate of return] prospects, but on the portfolio IRR. Why is that important? So, for example, we’ve got a lot of companies in our portfolio that are lenders. Fintech’s a massive sector here. So we’ve got a lot of digital banks that do consumer lending, SME lending, but all these fintechs that do lending have a massive problem of collections. How do you collect? Is it call centers?

(17:04)
Is it physical collections? So we decided proactively in our first fund that we would invest in a digital debt collector that used AI to determine the difference between someone’s willingness to pay versus your affordability. And not everyone that defaults on a loan, individual or institution, is defaulting because they don’t want to. It’s because they may not have the means to. So it’s a question of, well, do I give you a greater moratorium? Do I reduce your interest rate? Do I increase your maturity? But unless you ask these questions of your clients, you can never figure it out. So this question of consumer stickiness was one of the things that led us to say, let’s invest in a debt collector that uses AI to figure out the difference between someone’s ability to pay versus their willingness to pay.

(17:55)
Darius Teter: You’re actually going into a place I want to go to, which is, I want you to describe the investment thesis of fund I and then whether fund II is different by answering this question: What’s the company you want to see walk in your door and pitch to you?

(18:08)
Zachariah George: Oh gosh, I love these questions. So you’d be amazed, Darius, and I think this is true in the U.S. as well, and most of Western Europe and Asia, founders of companies are so laser focused in what they do. So they’re predominantly product people with a bit of tech and some understanding of markets, but it is almost impossible to find founders that can put themselves in your shoes as the investor. So the ideal founder, and this rarely happens, and if it does, it’s literally a win-win on our investment committee in a matter of days, is they walk into our offices – well, virtually or physically – and they, like, before they talk to us about what they do, they’re like, listen, I know that you’ve got a stake in A, B, and C. I know that company A that you backed a year ago is struggling with customer retention.

(18:59)
I know that company B that you backed a few months ago is struggling with access to the Ghanaian market. And they literally will give us a list of five of our companies that we’ve backed. They know more about them than sometimes even people in the public markets. And they’re like, guess what? We are so-and-so. This is what we do, and we can solve these problems with these five of your portfolio companies. And by the way, this is our traction. And I’m sitting there with my jaw on the floor saying, how the hell do you know all this about us? Well, duh, it’s on your website. But they’ve made the effort to go and look at these companies. They’ve done thorough DD on us as a fund and our portfolio companies, and they can convince us how our portfolio companies can be better off because of what they do. That for me is a no-brainer.

(19:49)
Darius Teter: So that’s criteria one. How many of the hundreds, thousands of pitches you’ve heard, how many have walked in and started or had any inkling of those attributes of your fund?

(20:00)
Zachariah George: It’s not even a percentage, it’s five. Five or six founders have done that. And needless to say, all of them have gotten money from us.

(20:09)
Darius Teter: So I love that one. They’ve done as much due diligence on you as they’re expecting you to do on them.

(20:15)
Zachariah George: Number two, I mean, the companies that we absolutely love are companies that have this very delicate balance between being too ambitious – I call them the cowboys that want to take over the world – and being too meek and coy and shy. I would call them assertive founders versus arrogant founders and founders that are mentorable and coachable. Ultimately, if you’re taking money from a pre-seed or a seed fund, we will likely be on your board post-investment, right? Because our typical equity stakes are between 5 and 20 percent. So call it 10 to 15 percent is what we’d look at as an equity stake. And at that stage, we are likely joining your board. So we are going to have veto rights. We are going to have control in what the company does without being too restrictive.

(21:07)
Darius Teter: Striking that delicate balance between assertiveness and arrogance is not enough. Founders need to be open to advice.

(21:13)
Zachariah George: I always say founders should get VCs as coaches, not captains. We don’t run the ship, but we coach you, right? Now, if as a founder you’re not coachable, then that is an immediate red flag. So a lot of, I often say when you’re investing at the seed stage, investing is more of an art than a science. So psychometric tests on founders’ understanding, we often ask other founders what they think of those founders in the community. I mean, the African tech, VC tech industry, is only about$5 billion to $6 billion a year in total capital. And at best, there are close to 400 or 500 truly investible founders on the continent in any given year. So everyone kind of knows everyone. So in our diligence calls with founders, we are making reference calls left, right, and center before we take a deal to YC. So if you are a bit of a jerk in the community, no matter how much revenue you have, ultimately you’re not coachable, which means there’s going to be founder fallout.

(22:20)
Darius Teter: For Zach, the ideal founding team has three people, one focused on sales, one on operations, and a CTO. Solo founders are a rare investment for them because it’s about building a balanced team that can handle multiple facets of growth. So the last thing about what is a good founder? What does a good founder look like? When you and I talked three years ago, we were talking specifically about your investment in an insurtech.

(22:52)
Zachariah George: Yeah, not for direct …

(22:54)
Darius Teter: In Alpha Direct. And you talked about, you called it the napkin test, and I love that so much. Could a founder pass the napkin test? So lay it out for us. You’re at a restaurant, they’re pitching you informally, you pull out a napkin and a pen and you ask them what?

(23:09)
Zachariah George: Yeah, I mean, so one of the biggest challenges that founders struggle with is market sizing. And by the way, with all due respect, I mean, listen, I mean the people know here that I went to Stanford, so I love business schools and all they teach, but the reality is business school graduates often are over-mentored and over-taught. But running a start-up is not based on Porter’s five forces, but all due respect to Michael Porter or SWOT analysis. So you can build a fancy five-year financial model and pitch to a VC or an angel, but the reality is you should be able to explain that to an investor on back of the envelope.

(23:46)
Darius Teter: Market sizing is a common challenge for founders and even for established businesses. As Zach says, flashy models and frameworks just don’t cut it. Investors need a clear, real-world vision grounded in data and research. Founders need to know their numbers, unit economics, market sizing, and willingness to pay. Investors want a clear path to revenue and proof that customers see real value in your product. It’s not just about projections. It’s about understanding how your business actually works down to every margin and customer touchpoint.

(24:18)
Zachariah George: One of the hardest things to do, I mean, retaining customers is a lot easier than getting new customers. So if that simple equation makes sense, why aren’t you incentivizing your existing customers to refer you to other customers? So understanding unit economics is super, super, super important. The tech is, I wouldn’t say irrelevant, but is almost irrelevant if you don’t understand your customers.

(24:42)
Darius Teter: So what are some of the other key mistakes that founders make when they walk into Zach’s office?

(24:47)
Zachariah George: Another big one is overstating interest in their company. In a market like the U.S., you can get away with it because there are tons of investors. In Africa, without being cocky here, there are about maybe 35 to 40 credible VCs on the continent, and we know most of them. So if someone walks into our room and says, oh, I’ve got a term sheet from this VC or this investor and this investor is very interested in me, and yeah, our round’s almost closed … people overstate interest, which is okay, it’s confirmation bias. It’s a very natural thing to do, but the reality is I’m going to WhatsApp the GPs of those funds almost immediately. And I’m almost certain that those folks will say, well, I had one call with them. Oh, I had one email with them. And that’s absolutely not true. Number two, just understanding how difficult it is to scale into other markets in Africa.

(25:45)
If you’re in South Africa or Nigeria, or, to a certain extent, Egypt, you can get away with just being in those markets up to your series A. But if you’re in Uganda or Rwanda or Senegal, you really have to be thinking about cross-border expansion prior to series A. And not having a roadmap for that is also, I wouldn’t call it a red flag, but it’s a yellow flag to us saying, why haven’t you thought about it? And the wrong answer is always, “It’s not relevant. I’m not there yet.” No, if you’re the CEO, you better have a plan for how you’re going to expand to multiple markets. And akin to that is your IP needs to be in an investor-friendly jurisdiction. So usually Delaware or London, the Netherlands, or recently Singapore, very popular. And you’ve got to have your house of cards. You’ve got to be clean from a legal and tech perspective. So the most common structure, Darius, is you have a holding company in Delaware and you have multiple local operating subsidiaries. And the Delaware holdco owns 100 percent of all the African subsidiaries, and you have either service level agreements or royalty agreements or license agreements with all your different opcos, and the investors only invested the holdco. You’ve got to have that set up before you talk to a VC. I’m sorry if you don’t, that’s another red flag, yellow flag, whatever you want to call it.

(27:10)
Darius Teter: So let’s talk a little bit more. So we were going through this list of things you look for in potential investees. You just mentioned monthly recurring revenue. So when somebody’s coming in the door, how much traction – do they need to have traction? Are we talking about an MVP? What are you actually looking for as a sort of minimum buy-in before you’ll even look at the second slide?

(27:32)
Zachariah George: No, of course, of course. I love that. So we typically look at businesses that are doing at least $25,000 in monthly revenue. Remember, I used to run one of the biggest accelerators in Africa – Startup bootcamp. So I’ve been used to looking at businesses that are pre-revenue with an MVP, and that’s what accelerators should do. I mean, the Y Combinators, the Techstars, the startup bootcamps, seed camps, and the Antlers of the world, that’s what they’re really good at. Take a post-MVP business and back them with a lot of support and get them to post revenue. And that’s when typically angels fund them on demo day. We’re the level right after that. So we are post-angel, post-accelerator, but pre-series A. That’s often the value of wealth where your product market fit alone doesn’t get you to sustainable scalable revenue. So we’re typically looking at companies that are doing $25,000 to $100,000 in monthly revenue.

(28:30)
And then with our capital, our mentors are LPs and our networks across the continent. We are hoping to get you to half a million to a million dollars in monthly revenue. Monthly revenue, at which point you are way more than ready for a series A. And that’s when we’ll typically look at selling either partially or a full secondary sale and pass the baton over to the later stage investors. Almost 90 percent of our investments are SAFEs and convertible notes. We very, very rarely invest equity that early on. I mean, there’s no way you can tell me what your business is truly worth when you’re doing $25,000 in monthly ARR. I mean, cry me a river. No, it’s just not going to happen.

(29:19)
Darius Teter: A safe or simple agreement for future equity is an investment tool that allows start-ups to raise money now in exchange for equity later, typically in the next major funding round. SAFEs don’t set an immediate valuation or issue stock. Instead, they promise investors future shares, often at a discounted rate or with a valuation cap, meaning investors can buy in at a favorable price when the company officially sets its value. Unlike loans, SAFEs don’t collect interest or require repayment, making them a more flexible, founder-friendly way to fund early-stage growth.

(29:52)
Zachariah George: When we invest in companies, we negotiate with our founders that if there’s a part of capital available to our LPs for the co-investments that I mentioned before, that our LPs get the same cap as us. And that’s something an LP would never get if they went directly on the deal, even if they could get allocation themselves. And I would say our caps are usually 20 to 40 percent lower than all the other caps on a round, and the LPs benefit from that. And then when we flip the company at series A or series B, that difference could be the difference between a 10 percent IRR and a 40 percent IRR. But it’s important to note that we are not investing in these companies for them to get to IPO or trade sale in 10 years. We are holding onto these investments for a maximum of five to seven years because we know that once you get to series A, there are more stage-appropriate funds that can do what they do best. I don’t claim to be someone that knows how to run a $50 million annual revenue company. There are the indexes, the Sequoias, the Accels, the Lakestars, the Bessemers that can do it better, right? But we’re helping you get to that point in as quickly and efficiently with them as possible. And for that, we’re going to sell our stake and get you your liquidity and IRR.

(31:19)
Darius Teter: I didn’t want to end this conversation without bringing up artificial intelligence. As AI tools become more prolific, accessible, and powerful, I wanted to ask Zach if he thinks that this will replace jobs or maybe unlock new ways to upskill and empower the workforce in Africa.

(31:41)
Zachariah George: I think a lot of people come to us and say, gosh, is AI going to take away jobs in Africa? I mean, Africa has a huge unskilled population. Are we going to take away jobs for the average person in the street? And my reply to that is very simple. AI has the opportunity to upskill people a lot quicker than any school, university, or curriculum. It’s as simple as that. So one of the reasons why coding is so important and teaching people the fundamentals of robotics, for example, is the cost of educating people, especially youth, has been driven down so dramatically because of AI. I mean, I’m not here as a big fan of ChatGPT or Open AI, but the average African kid out of high school and university that understands the power of AI is able to get a job not just at a large corporate, but start his own company or join a start-up with minimal formal education.

(32:41)
And with a continent with 800 million young people, there is no better solution than using AI to help people upskill themselves. And it’s not just upskilling in building a robot, it’s upskilling yourself in the basics of simple things. Carpentry, electronics, plumbing, mechanical engineering. I mean, these are things that ordinary people would never have the ability to access. But using AI, you can upskill yourself in Africa at a minimal cost. And what’s interesting, Darius, is the telcos in Africa that are very powerful. The MTNs, the Airtel, the Oranges of the world are now understanding how important it is to zero rate data if it comes to educational content. So you could get an M-Pesa or Vodacom phone, and you could be skilled on the basics of coding through the telco. Banks are jumping onto it. Insurance companies are jumping onto basic financial literacy. And by the way, doing this for free. And that is something that is super, super important that could not have been done before AI because you would need physical human beings to teach this. So yes, we may have a few less teachers, granted, mea culpa, but you’re going to have so many more young people that can do shit.

(34:10)
Darius Teter: As we wrapped up our conversation, I wanted to know what else needs to happen in this ecosystem to better support entrepreneurs? And what’s next for Zach and Launch Africa Ventures?

(34:20)
Zachariah George: One of the things that I often get asked is, what is your long-term vision beyond just a second or a third fund? And yes, we are raising a $75 million fund II, and we are getting there, and we are looking for more LPs and partners. But the reality is not everyone on the continent needs equity. Equity is the most risky form of capital and meant for only the chosen few that understand how to build tech companies in a very short period of time. But there is a huge need for blended capital, be it revenue-based financing, venture debt, working capital, and my ultimate dream is to be able to build a holding company where you have different stages of capital based on sector, business performance, and relevance, asset liability matching, for lack of a better word. So working capital, revenue-based financing, bridge financing, mezzanine financing, equity where required, and you build an entire value chain of funding that could take the content forward. So to the extent that we could fund a business that makes paper as well as we could fund a business that builds robots, but stage and sector and capital, and building a capital stack that’s relevant, that is what I think would be my long-term goal. And to change perceptions about Africa in the global media.

(35:54)
Darius Teter: Launch Africa’s portfolio showcases how tech startups are tackling some of the continent’s biggest challenges. They’re reducing friction in the economy by taking on logistics, food delivery, ride hailing, e-commerce, and generating thousands of jobs in the process. In health care, one start-up developed technology to combat counterfeit medication, ensuring drug authenticity and protecting patients. Another company is using helium balloons to deliver medical supplies, food, and vaccines to remote areas unreachable by traditional means. These investments highlight how targeted innovation and investment reshapes industries, addresses real world problems, and creates ripple effects of economic and social progress. So I want to thank Zach for sitting down with us again. Not only is he an enthusiastic, passionate, and successful evangelist for African start-ups, but he’s also a musician and a singer, and an all-around cool guy. It was such a pleasure to catch up with him again. Erika Amoako-Agyei and VeAnne Virgin researched and developed content for this episode. Kendra Gladych is our production coordinator, and our executive producer is Tiffany Steeves, with writing and production from Nathan Tower and sound design and mixing by Ben Crannell at Lower Street Media. Until next time, I’m Darius Teter, and this has been Grit & Growth. Thank you for listening.