The adverse impact of covid-19 continues to be prevalent in social and economic aspects of our lives across the world. As cases surpassing 3 million with more than 220,000 fatalites globally, Tanzania is only grappling with increased cases currently at 480 with 16 deaths (as at 30thApril 2020).
We hope that we will manage to contain the further spread and protect more deaths, by taking all necessary precations and aggressive measures, as we have seen in other markets where the curve is relaively flattening now.
The pandemic has seen the huge decline of international trade,which is expected to decline up to 35% by end of 2020, global arlines are expected to suffer losses of up of USD 113bn (IATA), and ILO predicts global job losses to reach 25m due to pandemic
The graph below shows what would happen to GDP growth if governments fail to respond appropriately in the fight againt the pandemic
While venture capital tends to attract the bulk of the attention from policy makers, the primary source of external seed and early-stage equity financing in many countries is angel financing not venture capital. In addition, angel investors tend to be less sensitive to market cycles than venture capitalists, although a “wealth effect” could impact how much they are willing to invest when markets fluctuate. However, in the current market environment, the lack of exits (whether through an IPO or M&A) has put a strain on both angel and venture investment. At the same time, the internet has created opportunities for the creation of firms with smaller amounts of initial capital than more traditional technology and science sectors. These firms have been termed “lean startups” as they allow greater capital efficiency and more rapid testing and adjustment of products and/or business models.
Angel investors have been able to invest in this space and support companies through an “early exit” (usually M&A) without needing VCs to come in for later rounds. Angel investors support a much wider range of innovation than VC firms as they traditionally invest locally and in a wider range of sectors than venture capitalists. This means there is broader investment coverage both in terms of industry sectors and geography (angels live everywhere, not only in areas where VCs have offices, which tend to be concentrated in a few technology or science hubs). However, it also means that angel investors can also be involved in companies that are not necessarily technology intensive or high growth as well as companies in later stages of development. Like VCs, angel investors tend to invest in a portfolio of companies, not just in one or two. Universities are often highlighted as an important potential source of start-ups, however, often these companies are more research rather than commercially focused and therefore do not succeed as often in securing angel or venture capital as often as assumed. This example points to a potential disconnect between innovation policies, which tend to focus on R&D rather than commercialisation, and entrepreneurship policies which focus on the translation of innovation into firms.
OECD (2011), Financing High-Growth Firms: The Role of Angel Investors, OECD Publishing.