Africa's venture capital scene has faced significant challenges in recent years, with a noticeable dip in investments in 2023. According to Satoshi Shinada, Co-founder and Director of Kepple Africa Ventures Inc., the ecosystem is still feeling the pressure of macroeconomic instability, slow GDP growth, inflation, geopolitical tensions, and climate issues. Despite these challenges, Shinada remains optimistic about Africa's potential, having backed over 50 startups across West and North Africa since 2019.

In an exclusive interview with Business Insider Africa, Shinada emphasized the importance of a strong local capital market for sustainable growth in Africa's tech ecosystem. He noted that the continent's venture capital landscape is distinct from other emerging markets, with a heavy reliance on development finance institutions (DFIs) from Europe. These DFIs often prioritize development agendas, such as job creation, over financial returns, which can shape the startup and VC ecosystem in Africa.

Shinada highlighted the success of India and Saudi Arabia, which have vibrant domestic capital markets that enable startups to fund locally and exit through IPOs. He believes that Africa needs to broaden its funding sources, including local capital markets, to unlock its growth potential. At Kepple Africa Ventures, Shinada is working to diversify the funding pool by bringing in capital from Japanese corporates and Asian strategic investors, as well as tapping into a local investor network through a joint venture with Veload Capital.

When asked about his core investment strategy, Shinada emphasized the importance of addressing Africa's most pressing pain points. He looks for startups that offer solutions that meet real, urgent needs, with a focus on monetization and scalability. Shinada's philosophy is driven by the need for businesses to focus on essential services and products, given the relatively low GDP per capita across the continent.

He identified three key layers in Africa's economic ecosystem: the social layer, which includes infrastructure such as payment systems and public transportation networks; the business layer, which empowers businesses; and the individual layer, which focuses on embracing new ways of living and working through technology. By combining these layers, Shinada believes that immense economic potential can be unlocked.

When evaluating startups for investment, Shinada looks for founders with a big vision, a solid business model, and a clear plan to monetize quickly. He also emphasizes the importance of operational efficiency, citing the example of Moniepoint, which has built a robust tech layer integrated with strong operations to manage agents across the country.

While Shinada acknowledges that the payments sector may be nearing saturation, he remains optimistic about the potential for founders who are willing to dream big, adapt their operations, and simplify technology for real-world impact. His insights offer a valuable perspective on the challenges and opportunities facing Africa's tech ecosystem, highlighting the need for a strong local capital market to drive sustainable growth.