Tommaso Porzio, from Columbia Business School, will present "Startups in Africa"

We document a drastic increase in the flow of high-growth (venture) capital to “startups” in Africa over the past decade. We build a new data infrastructure to characterize the features of this new and growing entrepreneurial ecosystem. Startups are digital, have highly educated founders, and cluster around high-density high-human capital hubs. While several of these facts are common to other emerging markets, one feature stands out as unique to Africa: the role of foreign influence. We show that the bulk of investment flows to white entrepreneurs who studied or worked outside of Africa, primarily comes from foreign investors from rich countries, and displays homophily patterns based on common language and past colonial linkages. To disentangle between a demand and supply channel of foreign influence, we conduct a real-stakes, large-scale field experiment in collaboration with the International Finance Corporation to identify the preferences of Africa’s high-potential startups using incentive-compatible surveys. Entrepreneurs do not care about the source of capital (foreign or not) and place nearly zero value on forms of non-financial support. Instead, they display a strong preference for equity investments coming from investors with local experience, but do not want to give up control of the firm. Our findings point to a “missing” local equity financing market for startups in Africa leading to a dominance of foreign investors’ influence on Africa’s entrepreneurial ecosystem.