An increasing number of African companies are competing in the global arena. Riding on the wave of growth that has buoyed African markets over the past two decades, companies such as MTN, SABMiller and Dangote Group have all expanded outside of Africa making flagship acquisitions from China to Poland.

The Dangote Group has grown rapidly in recent years across more than a dozen African markets and entered the Nepali market in 2015 and has plans for a larger footprint in Asia. But in order for African corporates like Dangote Group to modernize and gain a competitive edge in the global marketplace, they should follow the tried and true path of corporate venture and invest in the next wave of disruptive startups.

In Nigeria, for example, Barter was created by Flutterwave to provide widespread access to foreign exchange, previously centralized in large banks. Barter creates virtual cards for foreign transactions outside of Nigeria for Nigerian startups and corporates, providing them with secure access to foreign currency. Paystack and Amplify are also decentralizing players, providing seamless payment solutions for businesses. In order to compete successfully on a global stage, African conglomerates must harness these startups’ innovation, technology, and country knowledge through investment.

The number of sophisticated African startups is rising and venture capital invested is growing rapidly from a small base. VC investments in 2017 marked a 51% increase from 2016, but penetration is low in African markets relative to other emerging economies. Last year, venture capital funding raised by African startups in 2017 reached $560 million while China and India attracted $65 billion and $17.6 billion, respectively.

Most of the money currently being raised for African startups originates from outside the continent. Cars45, Nigeria’s first online car resale platform, raised capital from TPG Growth and New Enterprise Associates (NEA). Flutterwave received Silicon Valley investment including Greycroft Partners while Paystack secured US corporate venture investment from the US media giant, Comcast. As dynamic startups continue to proliferate across the continent, African corporates would be wise to take advantage through their proximity to gain earlier access to the capital tables of future unicorns.

Local corporates – including those in African markets – should be first to recognize and benefit from the market opportunities of local startups. Already in the US, more than 75% of the Fortune 100 companies make venture investments with about 42 companies creating their own dedicated venture teams. Corporates participated in rounds that amounted to 44 % of all venture deal value in 2017. Over the past two years, Lyft raised over $1 billion from both General Motors and CapitalG (Google’s investment in arm).

The trend is now global. In Asia for example, Softbank’s $100 billion fund and Alibaba’s $450 million Hong Kong and Taiwan-focused fund have gained traction since their launch with targeted fintech investments. Such capital inflow via corporate venture funds is found in 40% of all venture deals in Asia and has helped to drive a whole ecosystem of emerging startups, and African corporates need to take advantage of similar strategies.

Naspers’ big bet

Ironically, despite relatively limited corporate venture funding for startups in Africa, the continent is also home to one of the world’s most successful startup bets by a corporate anywhere in the world. South African media giant, Naspers’ 2001 investment in China’s Tencent is now the stuff of legend. It invested $32 million in the parent company of WeChat for a stake that is now worth a whopping $175 billion. It has made many other startup investments at home in South Africa and abroad since then including SimilarWeb, Swiggy and CodeAcademy, but needless to say none are anywhere as successful as the Tencent investment. Naspers’ corporate venture strategy has helped establish it as Africa’s most valuable company and as a global player.

There is some initial progress being made with corporate venture in the banking space in Nigeria and South Africa. Access bank has partnered with Flutterwave, and FNB manages Vumela Enterprise Development Fund which provides venture capital funding for high-growth SMEs struggling to access capital, with a spotlight on black-owned firms. According to Zachariah George, co-Founder of Startupbootcamp Africa, the leading multi-corporate backed venture accelerator in Africa, “African corporations are starting to establish internal innovation divisions that work with local startups but they need to evolve into more open platforms that allow for collaboration between players across the financial services, insurance, retail and telecoms industries.”

African mobile networks are some of the fastest growing in the world, but they still face many challenges in their local markets. The telcos have been encouraged by their global trade body, GSMA, to collaborate more meaningfully with startups in their countries and beyond. For example, merging the mobile operators’ powerful distribution and payment networks with the startups’ efficiency and high-impact models could pave the way for important and profitable mutual benefits.

“Only a strategic mix of multiple corporate innovation teams, independent industry mentors, digital skills recruiting, and venture capital will galvanize transformative investment into the next wave of African tech companies,” says George. While this space is growing in Africa’s largest banking centers, it must be expanded and deepened throughout the continent.

In an environment of low venture funding penetration, the expansion of corporate venture would be a win-win for African startups and corporates. For relatively small investments, leading regional corporates could solidify their presence both at home and abroad, while modernized and optimizing their operations. Following in the footsteps of other, larger emerging market companies, African firms can fast-track innovation internally and within the African startup ecosystem.

Aubrey Hruby is co-founder of the Africa Expert Network and Senior Fellow at the Africa Center at the Atlantic Council. This article was first published by Quartz Africa.