Trends in Venture Capital: What Investors Are Looking For
Start your search here! 🔎🧐
Guten tag Dear Innovator 👋
How does the last Saturday in July feel like from your side of the world?
Awesome, right? 😎
Yeah. Same same.
If you’ve been thinking on your feet all week, you deserve this break. So sit back, relax and enjoy….
Making Moves That Make Money 💸💸….
Regular chess players all agree that chess ♕♛ is a high-stakes game because each move can drastically change the game's outcome.
Good chess players are required to be strategic, to have foresight, patience, and a keen understanding of the board. It’s a game that engages you so much that you need to think several steps ahead, anticipate your opponent’s strategy, and adapt your plan on the go as the game unfolds.
In the world of investors and venture capitalists, although they are not the “opponents” in that sense 😅, thinking far ahead into the game plan is where you’d be right on the nose.
Dear Innovator, what’s a better way to test your strategic prowess and foresight than by looking into the investment trends of venture capital companies, as you prepare for where you can fit in? 🤔🤔
Oh and by the way, if this newsletter was forwarded to you, subscribe below to get your bi-weekly dose of our awesomeness 👇👇 straight to your inbox!
Back to it…
Venture capitalists that invest in African tech solutions are increasingly drawn to tech solutions that address significant societal challenges, like improving financial inclusion 💼, enhancing access to education 💻 and providing healthcare solutions ⚕
This approach, especially in fintech, improves financial inclusion and enables millions of Africans to participate in the global economy.
Blockchain is also a major draw for investors. This is because it facilitates faster and cheaper cross-border payments, demonstrating its transformative potential in an Africa that is still exploring the depths of financial innovation.
Coming in hot 🔥🔥, startups in artificial intelligence and machine learning are also in high demand because these technologies streamline operations for small retailers, making inventory management easier and reducing costs. For example, AI-driven analytics tools help optimize supply chains and predict market trends, offering small businesses a competitive edge.
Earlier this year, two separate reports1 foretold what to expect in 20242. Given the state of the economy, although the outcomes haven’t exactly been like the predictions (no prediction ever is 🫣) it’s not been far from the mark either.
Africa’s investment landscape continues to evolve in fascinating ways, Dear Innovator, so if you do hope to get (and stay on the radar), following the flow of the money won’t hurt anyone, especially if you have something new to bring to the scene 🌱.
While you prepare, please look out for the following too:
Customer Acquisition Cost (CAC): This metric measures the cost of acquiring a new customer. Keeping this cost low while attracting high-value customers is crucial for any solution.
Life time Value (LTV): This measures the total revenue expected from a customer over their lifetime. A high LTV to CAC ratio indicates a profitable and sustainable business. Jumia, Africa’s leading e-commerce platform, focuses on increasing its LTV by offering a wide range of services and products to retain their customers.
Customer Retention: High churn rates (the rate at which customers stop doing business with you) can signal problems 🚩. Investors prefer businesses that can retain their customers, as this indicates satisfaction and loyalty. M-Pesa, a mobile money service in Kenya, boasts of its low churn rates due to its reliable and essential service.
Burn Rate: Your burn rate shows how quickly you’re spending money. Keeping this in check demonstrates your ability to manage finances and sustain operations, even before turning a profit.
Monthly Recurring Revenue (MRR): For subscription-based models, MRR is a critical metric. It indicates predictable and stable income, which is highly attractive to investors.
Aligning Your Business Model with Investor Expectations
Whether it’s user growth, revenue milestones 💰, or strategic partnerships 💰, demonstrating traction shows that your business has momentum and the potential to grow. Maintaining detailed financial records is also a win for everyone. Investors want to see that you can manage funds wisely and sustainably, and nothing says it better than financial records that pass the vibe check ✅.
Product market fit isn’t just a fancy concept—it’s essential 💡 Ensure that your product meets market needs and has a clear value proposition. Validate your solution with real customers and iterate based on the feedback that you get.
At the risk of stating the obvious, investors are constantly on the look out for: solutions that are profitable, solutions that are driven by data (for proof of scalability) and clearly defined key performance indicators (KPIs) and metrics that track progress and provide transparency
Whatever solution that you’re building (or intend to build), if you keep these three in mind, getting funding will happen eventually.
What do you think? Which of these last three metrics does your solution have to its name? 🧐🧐
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Is the customer always right? What could go wrong if you stop taking feedback from your users???
We have it covered. Be back here on Wednesday to find out
Now drop a well deserved ❤️ on this one. Thanksssss