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Five Ways Startups Can Impress Investors During Due Diligence

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Philani Mzila

By Philani Mzila

In 2023, with $3.5bn raised from 547 deals, African venture capital (VC) experienced a significant downturn. Year-on-year, total funding and deal count declined by 46% and 28% respectively. This downturn marks a significant phase in the nascent and turbulent African VC journey. From challenges such as the COVID-19 pandemic and the collapse of Silicon Valley Bank to opportunities like the 2021 VC bull run, these events have collectively influenced African VCs to adopt a more cautious investment approach, resulting in more detailed due diligence.

Due diligence represents a critical phase in the investment process, where investors examine various aspects of a startup to ascertain its investment readiness. Excelling in the execution of due diligence (considering that this is a two-way street) is pivotal for fast-growing, technology-enabled companies, as it determines whether the business can secure funding. The due diligence process can decisively make or break a startup’s funding prospects despite favourable macroeconomic conditions potentially easing the path to investment.  Doing it correctly means startups are well on their way to a crucial cash injection for the venture. But it’s easier said than done.

How can startups give themselves the best chance of successfully completing due diligence? What are investors looking for? These guidelines are designed to help startups prepare for and navigate the due diligence process, thereby maximising their chances of securing the necessary capital for expansion,

  1. First impressions matter

Generally speaking, there are three stages in the due diligence process: screening, business check, and legal business check. During the screening stage, investors will take a peek at your business before deciding whether they want to delve deeper.

If you want to get past this initial stage, you have to ensure that you’re making the best possible first impression. That means putting care and consideration into your pitch deck and initial documents but it also means ensuring that you’re making the best possible impression with your digital real estate (including your website, search, and social media presence).

Get all those things right, and you’ll be in a much better position to progress to the business check, where you’ll be asked to highlight your strengths and address any potential concerns, and the legal business check, where investors make sure that everything you’ve said is aligned with your books.

  1. Put your best foot forward 

A popular aphorism in the startup investment space is “back the jockey, not the horse.” While the technical fundamentals of a startup—such as its product, market fit, and business model—are indispensable, the ability of the founding team to articulate a clear vision, demonstrate deep domain knowledge, and exhibit proven management skills is frequently a more reliable indicator of a venture’s potential for success.

These characteristics not only reassure investors of the team’s capability to lead the venture to success but significantly enhance the startup’s attractiveness as an investment opportunity.

  1. Demonstrate market and product expertise

But that is not the only kind of expertise investors look for. Beyond the intrinsic qualities of the founding team, investors evaluate the team’s understanding of the market dynamics relevant to the startup. Demonstrating a deep grasp of the market environment—through analysis of demand, identification of unmet needs, and articulating a targeted strategy that distinguishes the business in the marketplace—is crucial. This approach to market analysis not only underscores the startup’s potential to capture and grow its market share but also significantly boosts confidence in the venture’s viability.

Founders must also leverage precise metrics to illustrate the product’s value proposition and fit within the market landscape. Ultimately it’s about effective communication of how the product addresses specific market gaps or customer pain points, supported by data-driven evidence of its appeal and utility.

  1. Prepare your business, financial, technical, and legal documentation

During the due diligence process, you’re going to be asked to demonstrate that your business model is solid, your finances are sound, the technology you use is robust, and that you’re on a good legal footing. The availability and readiness of documentation to support these aspects are crucial. Preparedness in this context not only involves having all necessary documentation organised and accessible but also being able to present it promptly when requested by potential investors. Timeliness and thoroughness in providing these documents significantly enhance your startup’s credibility. It demonstrates meticulous planning, operational efficiency, and a proactive approach to addressing investor inquiries.

  1. Treat potential investors like prospective partners from the start 

A good investor is so much more than the money they put into your business. They can also provide irreplaceable guidance and insight that could be crucial to the success of your business. In essence, once that money lands in your business account, they become partners in the startup.

Acknowledging this partnership dynamic from the outset and fostering an environment of transparent communication and constructive feedback is crucial. Such an approach lays the foundation for a trust-based relationship, essential for any successful collaboration. By actively engaging investors in discussions, seeking their advice, and valuing their input, startups not only benefit from the wealth of knowledge these partners offer but also affirm their respect for the investor’s contribution beyond financial support.

An ongoing process 

Getting these steps right will undoubtedly make it easier for you to successfully get through the due diligence process. It’s important to remember, however, that due diligence isn’t a once-and-done exercise. It’ll happen at every investment stage, from seed to acquisition or listing. It’s critical, therefore, that you constantly review and refine your due diligence readiness. Get it right, and you stand a much better chance of getting funding in even the most challenging fundraising environments.

Philani Mzila is the Investment Manager for Founders Factory Africa

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The Future of Payments: Key Trends to Watch in 2025

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Luke Kyohere

By Luke Kyohere

The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:

1. The rise of real-time payments

Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this. 

2. Cashless payments will increase

In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions. 

3. Digital currency will hit mainstream

In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain. 

The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability. 

4. Increased government oversight

As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.

5. Business leaders buy into AI technology

In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk. 

6. Continued AI Adoption in Payments

In payments, the proliferation of AI will continue to improve user experience and increase security.  To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent. 

When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.

7. Rise of Super Apps

To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills. 

8. Business strategy shift

Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble. 

As the payments space evolves,  businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.

Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq

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Ghana’s Democratic Triumph: A Call to Action for Nigeria’s 2027 Elections

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In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.

In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.

“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”

The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.

Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.

The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”

The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.

As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.

In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.

“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.

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The Need to Promote Equality, Equity and Fairness in Nigeria’s Proposed Tax Reforms

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By Kenechukwu Aguolu

The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.

One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.

A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.

In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.

The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.

The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.

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