The IFC wants venture capitalists to take a close look at these opportunities

“I sell drugs in Africa,” Gregory Rockson, co-founder and chief executive officer of mPharma, said to a room of Silicon Valley investors. The Ghana-based founder of the e-prescription startup, who wore a dark sweater with a gold print of Africa growing from roots, grabbed the attention of the venture capitalists before pitching his opportunity. The value of pharmaceutical spending in Africa will reach $45 billion by 2020, he said. mPharma was one of several for-profit companies featured at the recent Emerging Markets Venture Forum, hosted by the International Finance Corporation of the World Bank Group in Napa, California, on June 14-15. "We try to organize this event to work with private sector players in Silicon Valley and people who have that Silicon Valley mindset to look at: How can we use technology, and investments in technology-driven businesses, to really address some of the issues of the world in developing markets?” Nikunj Jinsi, global head of IFC’s venture capital group, told Devex at the forum. Building on the World Bank’s Billions to Trillions initiative, the venture arm of the IFC convened investors in wine country as part of an effort to crowd in the private sector. The third annual forum brought together founders, investors and executives to discuss global technology trends and promising innovations ranging from blockchain to artificial intelligence. They discussed how venture capital can catalyze impact in emerging markets in areas including access to energy, health and education, as well as financial inclusion. Chika Nwobi, a mobile tech pioneer turned investor, used two words to capture his experience as an entrepreneur: Hard and lonely. He spoke on a panel of investors in Africa, a continent with the fastest-growing young population in the world, high urbanization rates, and massive smartphone penetration. While the opportunity is huge, most consumers are spread thin on what they can spend, panelists explained, so the most successful models reduce cost and increase access, putting money into pockets rather than taking it out. Three areas investors highlighted as key opportunities for venture capital included payments, energy access — solar in particular — and e-commerce. Nwobi founded Rise Capital, a Nigeria-based venture capital fund focused on early-stage investment opportunities in emerging markets, to ensure that other entrepreneurs did not face the same challenge he did in having no one to turn to. He said he welcomes the growing interest of Silicon Valley investors in Africa, in part because it helps to drive the trend of more entrepreneurs launching local solutions to local problems. Development finance institutions such as the World Bank also play an important role, he said, not only in their direct investments but also via their investment in funds. But where there is sugar, there will be ants, said Lexi Novitske, principal investment officer at Singularity Investments — referencing a common expression in Nigeria, where she is also based. Too much capital too soon can be detrimental, she told Devex. One of the challenges for the early-stage tech scene has been low-cost capital going to impact-focused business models in areas such as agricultural technology and clean water; now, she is seeing a phenomenon of new business models that are built to chase this money rather than sustainable business models with commercial returns. One of the ways the IFC is addressing this dynamic is by hiring people closer to the companies and funds in which they are investing. One example of this is Olawale Ayeni, who moderated the African investors panel, and recently moved from the United States to Lagos, Nigeria. Together with his team at the IFC, he determined that if he was going to invest in Africa, he needs to be in Africa. “Venture capital is a local business,” he said. “You need to be close to your customers because you need to be able to read the market signals.” There are a number of asset classes, or types of investments, that entrepreneurs can consider — from angel investors to private equity to hedge funds — but venture capital captures the attention and imagination of so many because it is the only asset class where you can say you are investing in the future, Ayeni said. “The future of the world is in emerging markets. So if you're saying you invested in the future, [and] you're not having a sense of what is happening in emerging markets, you're losing out,” he said. “At the end of the day, all we're trying to do in venture capital is to create new markets. We're trying to create the future, and the way you create the future is to get insights that other people cannot see; and the best way to get insights is to go to the source.” In a separate session on exponential technology and global impact, one of the statements that resonated with the room was that we cannot live in a world where a company has to be a Delaware corporation — a reference to the small state that serves as a corporate tax haven in the United States — in order to be successful. Even when an emerging market entrepreneur is fortunate enough to get on the radar of Silicon Valley investors, they struggle to find local sources of capital, as well as the networks that come from nearby investment. Because of this dynamic, founders of companies based in emerging market economies often move to San Francisco, or split their leadership between the area where they work and the area where they fundraise. But as funding ecosystems develop in emerging markets, funders stay, sell their companies, become investors themselves, and thereby strengthen those funding ecosystems further — and this is the kind of virtuous cycle the IFC hopes to facilitate. “For me, money is money. It doesn't matter where it came from. The only difference in money that comes from Silicon Valley or locally is the other support you get,” Rockson, of mPharma, told Devex. He said he decided to go for venture capital financing because he knew it would be capital intensive for his team to reach such ambitious targets. He applied and was selected for the Alchemist Accelerator in San Francisco. Representatives from Social Capital, a firm that invests in technology that addresses global challenges, were in the audience and went on to invest in mPharma. "Not every consumer segment can be addressed profitably, so you need nonprofits to come in to serve those populations,” he said. “I think the challenge is when we try to take consumer groups that can actually pay for services and we service them through a nonprofit.” This failure to properly segment consumers in Africa is the biggest challenge facing health care on the continent, he said — before cutting the conversation short to talk with an investor who approached them, and to a group positioned to work with him on that challenge. Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you free every business day.