The African innovation ecosystem is thriving, yet narratives of war and famine still dominate headlines about the continent. Hans Otterling, Founding Partner of Norrsken22, shares his insights on prevailing misconceptions, the impact of recent economic trends, and the role of startups in driving economic growth.
Interviewed by Klara Marie Schroeder
If we look at international news about Africa, it’s primarily negative, focusing on war and famine, all labeled simply as “Africa.” To draw an analogy to Europe, one might believe there’s war all over Europe due to the conflict in Ukraine. I believe every country in Africa needs to share more about its activities. We need to educate people that Africa is a vast continent with a rich multicultural landscape and significant regional differences. It’s important to highlight the positive developments happening in many African countries, particularly in tech and entrepreneurship. Perhaps there’s an opportunity for an African perspective similar to that of the EU.
Jamie Diamond, CEO of JP Morgan, recently visited Africa. He travelled around the continent, saying that JP Morgan needs to establish a presence here and that they are going to start doing business in the region. Messages like this give others the confidence to think, “Wow, maybe I should look into this too.”
Microsoft has also announced another commitment to invest heavily in data centers and technology in Kenya. So things are moving in the right direction, but of course, we want them to progress even faster.
We don't believe in aid, nor do we support macro, top-down solutions where large entities simply throw money at a problem. We firmly believe that sustainable growth must be driven by thousands—hopefully millions—of local entrepreneurs who create services and jobs. That is our focus: supporting, financing, aid helping primarily local tech entrepreneurs build their businesses.
In the long run, we also want to show that investing in Africa is profitable. Global investors are motivated by profit; when they see they can make money, they quickly allocate funds to that asset class. If we can show that it is profitable to invest, more capital will be allocated to African companies.
There are plenty of investment opportunities in Latin America and Asia. Latin America has the advantage of Spanish and Portuguese being the dominant languages, which gives them an edge. In Africa, we have more than a thousand languages, which presents a challenge.
However, the demographic trends in Africa speak for themselves. Africa already has a population of 1.4 billion people, that number is projected to reach 2.5 billion in 25 years. Most of these people are young, ambitious, and have a bright future ahead. They also all have a mobile phone in their hand and are connected to the internet. This generation is more digital, more efficient, and better equipped todo business and educate themselves than any previous generation.
The entire VC world went into a recession. I’ve seen this before - I’ve been around for such a long time, I’ve witnessed the ups and downs. Africa was obviously included in that. Many international investors flew in, made investments, and then left. They didn’t have a presence on the ground and many were not actively involved in the companies. So when things got a little tougher, they stopped flying in and focused on their core businesses.
What we are doing at Norrsken22 is to remain very local. We have offices in Lagos, Nairobi, Johannesburg, and Cape Town, which allows us to walk over to the companies we have invested in and ask them what is actually going on. We have not held back our investment pace; we’ve kept going as planned, and lately we’re seeing an uptick in the market.
I believe more capital will flow into Africa, and that it will increase more rapidly compared to the rest of the world. China currently faces its own challenges, and while India is a very interesting market, it already has a significant amount of capital. Africa remains a blank spot when it comes to venture capital and startup funding.
We have a few companies where one of the founders is from the US or Europe, while the other is African. However, we would never invest in a team that just flies in and says, “Now we’re going to start a business in Africa,” because we believe the cultural differences are significant. You need to understand the market and be present there.
I am not making investment decisions in Africa on my own. Our team provides different investment opportunities, and I can add value in the process from both a tech and deal perspective. However, I would never independently decide to invest in a company, as it is crucial to know the local team that is driving the startup.
It’s going to be very interesting to see what happens with the startup scene in Kigali, which is very vibrant. However, Kigali only has around 1million inhabitants. If you want to build a company as an entrepreneur, you need three things: an idea, funding, and talented coworkers.
Hiring talent is crucial. In a small village, you might have just a couple of people who know something about tech. If you want to hire a third person, you might have to move to a metropolitan city. If you’re a talented person, you want the option to change employers and to be in a vibrant ecosystem. This creates a virtuous cycle where entrepreneurs look for talent, and talent looks for opportunities centering in larger cities. In Europe there are tech hubs like Berlin, Paris, Stockholm, Barcelona, and London. We will most likely see the same trend in Africa.
There are many things that need to be addressed to create a better business environment. The legal system is not transparent enough, and there is still too much red tape and regulation.
In addition, there should be a focus on infrastructure—not just fiber optics, but everything: electricity, water, sewage, and roads. If the public sector prioritizes infrastructure, a lot can be accomplished by the private sector on top of that.
I believe there is a positive shift happening in many countries, whether in South Africa, Kenya, or Nigeria. Just yesterday, I met a political delegation from Nigeria. It was more than the usual meet-and-greet; it was a full day of bilateral discussions focused on how Sweden can benefit from collaborating with Nigeria and how Nigeria can grow through partnership with Sweden. This was not a discussion about aid; it was about how we can do business together.
I am optimistic. If you look at the history of Africa, many leaders established dynastic power structures after the colonial powers left – almost dictatorial in nature. However, now there’s a new generation emerging. Young people are saying, “I’m fed up with this; we need change.” There’s an underlying pressure on the political system to reform.
I could say that artificial intelligence will change everything and that the big fives will dominate the world. But I remember in the 90ies, Microsoft and Intel, owned the tech scene and was totally dominant. And look where they are today.
For many decades, IBM was the place to work. Now they are struggling and change CEOs every other year. You know why they cannot turn it around? Because if you are a 25 year old, you don't want to work at IBM. They cannot attract talent. And if you cannot attract talent, you are on a long-term downward spiral. That is going to be the challenge for these giant companies. Who wants to work in a corporation when you can work for a dynamic, fun startup, instead. If you are young and smart, you are probably going to choose that.
True, and that’s where we come in—we can help fund companies so they can pay salaries and compete effectively.
We have a company in South Africa, Tyme Bank, that targets low- to middle-income customers and is now the fourth-largest bank in the country. They are also launching in the Philippines and doing phenomenally well because their business model works perfectly in emerging markets. So, I believe we will see new business models emerging from Africa.
Many European and US companies will face challenges entering African markets because their business models are built on customer acquisition costs and metrics that do not translate well to the local context. I believe African companies are going to grow and when large European, American, or Asian companies want to enter the market, they will acquire them.
Hans Otterling is a Founding Partner of Norrsken22, a $205m fund providing growth capital for Africa’s future unicorns. Prior to Norrsken22, Hans Otterling was a partner of Northzone since 2006, one of Europe’s top-ranked venture capital funds with $1.5B under management and a portfolio of more than 60 tech companies .
Northzone's track record includes 2 Decacorns, Spotify and Klarna, and 14 Unicorns. Before moving into venture capital, Hans was a successful serial entrepreneur, founding, scaling, and exiting three market-leading media and tech businesses.