A Venture Capital Investor, Dr. Ola Brown, has stressed the need for entrepreneurs in Nigeria and other countries in Africa to embrace venture capital financing to expand their businesses as well as to stimulate economic activities.
Brown, who is a Director at GreenTree Investment Company, said this during an interactive session on the theme: “Venture Capital Financing in Africa,” organised by Proshare Nigeria Limited, pointed out that beyond providing finance, venture capitalists also come along with technology as well as innovation.
Technology has a unique way of being funded, she stressed.
“The biggest companies on the various stock exchanges in America today are Apple, Google, Amazon, Facebook. But right now, if you look at African stock exchanges, you will see that the biggest listed companies are those that make cement, pasta, sugar and oil.
“But, if we really want to grow like other continents have grown, we have to embrace the software innovation,” the founder of the Flying Doctors Healthcare Investment Group explained.
Brown, explained that over the years, Nigeria had been operating a system for incubating companies, through the Igbo apprenticeship system models.
She likened the apprenticeship form of business model in the south-eastern part of the country, in terms of their capital infusion strategy, to the venture capital system.
“That system is what has been deployed at Alaba market that turns in about $4 billion yearly. So, you look at research reports, most of them would say venture capital was almost an American phenomenon, until about 2000.
“But I disagree because all over Africa there are very forms of venture capitalists, even if they were never institutionalised, but still bear a lot of resemblance with the venture capital that we see today,” she added.
She revealed that the biggest venture capital in the world is Sequoia Capital and a lot of tech companies such as Yahoo, Google, WhatsApp, LinkedIn, Apple, among others, came out of the entity.
“So, as much as we put emphasis on the traditional banking system, the traditional banking system wasn’t actually there from the beginning. These were all venture funded companies.
“So, what Sequoia Capital does is that it provides them with seed capital. And if you look at Sequoia Capital today, the companies it has invested in today, have total valuation of $3.3 trillion,” she added.
This amount, she said was more than the Gross Domestic Product of the entire Africa.
“And I think that venture capital didn’t just invest in these companies, they actually built an era of innovation and technology in America and without venture capital, a lot of the companies that make up almost half of the capitalisation of the American stock exchange would not be in existence,” Brown said.
She cited an example with Israel, which had successfully grown its economy through interventions by venture capitalists.
According to her, Israel has the highest amount of venture capital invested per citizen.
“There is a huge correlation between the amount of venture capital invested per person, innovation, technology and economic prosperity,” Brown said.
She stressed that venture capital has the capacity to transform the economy of any country.
“Meanwhile, while all these innovations were going on, while all these economies were being built, Africa was taking about $30 billion in aid. So, while Africa was largely depending on aid, other continents were using venture capital to build innovation and transform their economies into some of the largest trade hubs you see today,” she said.