There is an old joke about a man searching for his missing keys under a streetlamp.

A passer-by stops to help. After several unsuccessful minutes, he asks the man if he is certain he lost the keys there. “No,” the man replies. “I lost them farther down the street.”

“So why are you looking here?” he’s asked.

“Because this is where the light is.”

The story has been told in different forms by economists, scientists, and psychologists. It even has a name: The Streetlight Effect. In summary, it means that we tend to search for answers where the information is easiest to see, rather than where the answer is most likely to be found. That is, where the light is brightest, or in the case of a poorly lit street at night, where the streetlamp still shines

And in Africa as everywhere else, venture capital has its own poorly-lit streets.

They are the markets investors already understand, the sectors that have produced large outcomes, the founders who arrive through trusted networks and the business models whose paths to scale can be explained in familiar language.

This is not necessarily a bad thing. And there are, of course, sensible reasons for this. Not least is the fact that investing in young companies means making consequential decisions with incomplete information. The customer data may be thin. The market may still be forming. The product could change three times before it works. The pitch decks and accompanying financial projections tend to sit somewhere between educated ambition at best and speculative fiction, at the extremities. So patterns come in handy here, helping investors find their footing amid all this uncertainty.

However, the more closely investors rely on what worked before, the easier it becomes to recognise only what they have seen before. How can we create or even hope for progress when we become extremely good at recognising only what we have seen before?

When the map becomes the territory

Every investment pattern begins as an observation that usually begins when a particular business model works or is repeatedly successful by some measure. The pattern calcifies into selecting founders with a certain background because a couple of similar profiles have built an important company. Or when a category produces several attractive returns. 

Investors study these successes, identify what they appear to have in common, and carry those lessons into the next set of decisions. 

Over time, observations acquire the authority of rules. Software scales. Assets slow companies down. The best founders possess a particular profile. Some markets are too small. Some sectors are important, certainly, but not “venture-backable”.

The map which our collective intelligence created over time to help investors navigate the territory gradually begins to determine which parts of the territory are worth visiting.

Pattern recognition is necessarily and inherently backward-looking. Its evidence comes from companies, markets and outcomes that have already become visible. It can help an investor identify the next version of something familiar. But it is less reliable when an opportunity has no obvious precedent or follows a path that previous successes have not made legible.

Eventually, our learned familiarity begins to influence judgement more than investors or even founders realise. One opportunity feels credible because its shape is recognisable. Another requires the entrepreneurs to explain how the market works, why the problem persists, and why the company has been built in a way that might seem unnecessarily complicated elsewhere. One company comes to the table already translated into the language of venture capital, especially given the enormous attention and effort that goes into making founders "investment ready."

Meanwhile, some of the best opportunities slip through the cracks on the table because they do not look like what hundreds of pitch deck man-hours have trained the venture capital industry to see. 

Naturally, the pattern-matching founder tends to get more attention, while the rough uncut diamonds tend to be left out on the street.

Africa is not short of unfamiliar things

Across Africa, investors often work with limited or uneven information. Reliable market data can be difficult to find. Industries that employ thousands of people may remain largely informal. Commercial activity may be spread across small operators whose collective economic weight is far greater than their individual visibility suggests.

A market can therefore be substantial without being especially legible from the outside.

Limited exposure to such a market can make it feel small. A sector that has not produced a famous venture-backed company may appear unsuitable for venture capital. If customers behave differently from those in better-documented markets, investors may struggle to see a credible path to scale.

Sometimes, of course, the simple explanation is the correct one. A complicated company may simply have a difficult business model. A small market can, regrettably, be a small market. Being overlooked does not confer hidden-gem status on a company.

The problem arises when these conclusions are inherited from instinct rather than reached through investigation. And even well-researched information itself can be blinding. Because as sociologist Willam Bruce Cameron explained in 1963, “It would be nice if all of the data which sociologists require could be enumerated because then we could run them through IBM machines and draw charts as the economists do. However, not everything that can be counted counts, and not everything that counts can be counted.”

Some companies will resemble the conventional Silicon Valley startup and follow a well-trodden path to venture capital glory. Others will combine software with physical operations because the surrounding infrastructure does not exist. Some will organise suppliers, train workers, educate customers or create distribution channels because nobody else has done the work. Others will operate in industries that look incoherent from a distance but become large, organised opportunities once someone gets close enough to understand them.

In such cases, what appears to be intractable friction may be the problem worth solving for. And a seemingly unwieldy operating model may reflect a clear understanding of how the market works. A category that looks small in a spreadsheet may look considerably different at street level. When the street is well-lit or if you just bring your flashlight and are willing to stray a bit farther down the road.

These distinctions are difficult to capture through pattern matching alone. They require investors to spend time understanding the economic activity beneath the company and the reasons it has taken its particular form.

Looking elsewhere is only the beginning

Fortunately, the African venture ecosystem has become more conscious of the need to search beyond its usual centres. More investors now speak about finding founders outside established networks and looking beyond the continent’s best-funded markets.

That mental expansion matters. Capital is unlikely to reach a wider range of entrepreneurs while investors continue returning to the same rooms, relying on the same introductions and searching within the same small radius.

Geography, however, addresses only one part of the problem. Investors can enter a new market while carrying every assumption formed in the old one. They may travel farther and continue searching for the same founder profiles, sectors, and business models in a different city. In fact, it is more often the case than not.

The result could be a more geographically diverse version of the same portfolio.

A wider investment lens must therefore affect how opportunities are assessed once they have been found. As a collective, we need to separate the underlying economics of a business from how readily they recognise its shape. We need to determine whether a company faces a genuine structural limit to scale or represents a form of growth we have not previously learned to model.

The same scrutiny applies to markets described as small, businesses considered too operational and founders whose experience falls outside the usual signals of credibility. We need to collectively do the work necessary to be better able to ask better hard questions about scale, margins, execution and returns. It’s how we examine whether our conviction comes from the quality of the opportunity or merely from its resemblance to somewhere that has been proven.

It does not mean pattern recognition should be discarded. If anything, it becomes more powerful as we expand the range or surface area from where positive commercial and impact outcomes can be conjured.  In contrast, pattern recognition becomes less useful when the pattern itself starts to substitute for judgement.

A new better way of seeing

Madica was created around the belief that exceptional founders and companies exist beyond the markets, sectors and networks that have historically received the largest share of venture capital in Africa.

Reaching those founders is an important part of our work. Recognising the value of what they are building requires just as much attention.

For us, that involves taking unfamiliar markets seriously enough to understand them. It requires evaluating companies within their local and commercial contexts while maintaining clear expectations around scale, value creation and returns. It also leaves room for the possibility that a business looks unusual because its founders have understood something about the market that the prevailing venture playbook has missed.

History offers useful lessons, but it cannot provide a complete template for companies building in young, fragmented or rapidly changing markets.

Some compelling opportunities may already be around us: in industries that receive little venture attention, markets investors have not learned to read, and companies whose work fits awkwardly within inherited categories. Their relative invisibility may say as much about the limits of the prevailing investment lens as it does about the opportunities themselves.

It’s a story we have been telling over the last few years. Now, over the coming weeks, we will introduce even more investments that show how we put this way of seeing to work. We look forward to telling you about the founders, the companies they are building, and the markets they are helping us understand more clearly.