Investors Overlook African Tourism Start-ups

Over the past decade especially in the past five years Africa has experienced a start-up boom. More than 2000 new ventures have secured nearly US12billion 11billion in funding. However, the tourism sector has been largely left behind.

Speaking at WiT Africa in Cape Town last week, Ben Peterson , CEO of Purple Elephant Ventures, highlighted the gap. Despite tourism contributing 7 of Africas GDP, the sector has received just 1.54 of the funding it would expect if capital was allocated proportionally. Only 10 tourism start-ups have been funded in the past five years, receiving just US12.9million 11.8million, Peterson said. His company has raised US6million 5.5million 47 of the total despite being a small start-up.

This is a massive, untapped opportunity, said Peterson. He admitted that, as a former venture capitalist, he too would have overlooked tourism start-ups. The reality is that most investors have strict sector mandates that exclude tourism but that needs to change.

Lack of investment is surprising, given Africas enormous potential. By 2030, one in four consumers worldwide will be African, Chris Hemmeter , MD of Thayer Ventures, pointed out. The continent has a young population, a strong culture of entrepreneurship and a thriving mix of inbound, domestic and business tourism. You would think these factors would lead to more start-up activity but its just not happening, he said.

One reason, according to Zachariah George , Co-Founder of Launch Africa Ventures, is that tourism isnt seen as a need-to-solve problem. In Africa, venture capital goes where the biggest challenges are: financial inclusion, e-commerce and healthcare, he said. Tourism and travel arent dominant in the venture ecosystem not by a long shot.