Africa Archives

5 Reasons Why HNIs Aren’t Investing in the African Tech Space

6 years ago By cumeadi

This is in response to a twitter thread

Nigerian startups are yet to be backed & championed by local high net-worth individuals on a large scale. The result is a tech ecosystem powered mainly by foreign capital.

With thoughts from @TomiDee, @asemota, @OtunbaSho, @oviosu, my @qzafrica latest: https://t.co/5DXBHxMcfv— Yomi Kazeem (@TheYomiKazeem) January 22, 2019

HNIs = High Net-worth Individuals

They’re too old– Average age of an African billionaire is 62ish… They are probably struggling to manage in the current world of emails and text messages. How would they see the value technology can provide to society and even their companies?
If it ain’t broke – If I amassed my wealth by relationships and tangible / assets, why would I take a chance, let alone several chances, in something that only holds paper value? I’ve already established several moats that will keep me rich forever, why do I have to speculate on an industry when I can focus on things I can see.
It doesn’t make financial sense– Alright, maybe I want to invest but the risk start-ups take on in Africa is higher than their counterparts ( I’d love to do research on this but we all know its true). Why would I invest in such a risky proposition when I can just buy government bonds or some land and see better returns?
Not enough 0s- Even a later stage investment in some tech companies don’t make sense. An entry point for investment doesn’t even seem viable in the way some of the HNIs. Scale seems to be a problem
They are afraid of their own death – African tech could be so dangerous, they stand to destroy the companies HNIs built. They are collectively starving out the competition.

Ultimately, the best way for HNIs to engage the tech space are as partners and not competition. I believe working with tech companies to figure out ways applications can solve real business problems and create scalable opportunities is the way forward. Think of further integrating Dangote’s supply chain by leveraging more digital solutions, or improving Otedola’s exploratory efficiency leveraging predictive analytics and drone tech. All thats possible with collaboration.

Strengths and Weaknesses of Nigeria’s Tech Ecosystem with Chika Umeadi from Tiphub

7 years ago By cumeadi

I got a chance to talk about the Nigerian Tech Ecosystem with Andrew from Global Startup Movement Podcast. We discussed the following:

Outside of access to capital, what are the common challenges for Nigerian entrepreneurs I works with?
How has deal flow coming out of Nigeria evolved since I started Tiphub?
Have I seen an uptick in startup activity outside of Lagos?
Whats the balance of Venture vs. Angel capital in Nigeria?

Listen to it on:

Africa · business · Current Events · startups · Technology

Foresight Africa viewpoint – African entrepreneurship in technology: Challenges and opportunities in 2018

7 years ago By cumeadi

I wrote a viewpoint on African entrepreneurship in Technology for Brookings Institute’s Foresight Africa 2018 Report. Here’s a link to the blog post here.

My Notes:

My 1st published article in a major publication… ***touchdown dance***
Updates on Fundraising in Africa from 2017: Read this CNN article here.
After all the Black Panther fanfare, I wish I could add more information on the diaspora’s role in advancing entrepreneurship and technological advances In Africa. I believe they have a major role to play in funding, ideas exchange and actual implementation.

That’s all for now. Cheers!!

Africa · startups · Technology · venture capital

Africa Startup Ecosystems Ranks: Where does Nigeria Fall on the list?

7 years ago By cumeadi

Sometimes a conversation becomes a little more. I shared this a founder who was asking me my thoughts on where Nigeria’s startup ecosystems ranks in Africa. While I didn’t have key metrics, I did mention where I would go to look and how I would evaluate. If I had to make a real essay out of it, (which I’m seriously thinking about doing), I’d probably take a more in depth look at where Nigeria’s startup ecosystems needs to course correct to be a global competitor for talent, ideas, and capital.

So a couple of things… In the life cycle of an ecosystem, Nigeria’s startup ecosystem unfortunately is still in its nascent days. There’s leakages of opportunities for investors and startups due to resource and capital constraints. I do know that we’re heading toward the globalization part of the ecosystem life-cycle. We are seeing a more foreign money, ideas, and resources flow into the Nigerian ecosystem. Comparatively, SA had all of these first and has exits under its belt so I’d still put SA up top. Nigeria still falls in the second tier of startup ecosystems in Africa for the following reason; lack of research and development $ from government, low ease of doing business scores, quality of human capital, access to seed funding (or lack thereof), etc. I will say though, Nigeria has made significant strides in “community” through the cabals, co-working spaces and other community focused pillars that re being built. This can be accelerated by an increase in the quality of education, R&D investment, and improving the ease of doing business metrics to make it easier for startups to find talent, operate, and to make money.

Africa · business · venture capital

Re-thinking Venture Capital in Emerging Markets

7 years ago By cumeadi

For the last year or so, the team at tiphub has done a lot of interesting research and testing to identify key needs to accelerate entrepreneurship in emerging markets like Nigeria. One of the most common challenges, as most would assume, is access to capital. However, speak to VCs and they say they don’t see enough invest-able companies and are constantly fighting for the best opportunities with other vcs.
There seems to be a deeper disconnect that we haven’t been able to capture. In the next couple of paragraphs, I’ll discuss the actual amount of money in the VC space in Nigeria. (Nigeria will be our case study) Identify where I believe they key gaps are, and present a viable solution that will be the catalyst for start-up funding at scale.

Based on a triangulated estimate, there’s about 300 million USD under vc management in Nigeria. This does not include foreign based funds that operate in Nigeria. To better put this in perspective, we took GDP/ VC asset ratio to give some context. Its relatively easy to see that Nigeria is lagging in vc capital as an available asset class. This isn’t the only issue. If we look at how 3oo million USD is deployed year after year, we’ll see that most vc firms look to invest in later stages in lifecycles of most start-ups. This translates into entrepreneurs who need to prove viability and scalability before investment. However, its the chicken or the egg argument. How do companies prove the validity of an idea without funding?

There’s an abundance of growth captial in Nigeria. The key issue is the lack of early stage “market validation” capital needed to get companies off the ground. In more developed markets, entrepreneurs find early capital from the three f’s (Friends, Family and Fools). There are also more opportunities for funding through banks and government grants. Family members are willing to bet on the next big idea. Ultimately, entrepreneurs in developed markets have access to a diversified stream of capital that 1. is at a smaller amount 2. Friendlier terms and capital structures for young companies.

The key gap, as I see it, is access to friends and family capital in emerging markets. At its core, it stems from lack of access to credit and disposable income in rising and emerging markets. This is the real gap. Early stage companies don’t have the capital to fund their first MVP or to validate their market. As a result, many ideas never get tested in the market.

VCs won’t dare touch risky early stage opportunities due to the demand for returns. There’s not enough disposable capital in emerging markets to make a dent in funding for start-ups. How do we create a bridge from pre-seed to growth stage?

In the ideal world, VCs would partner with foundation and governments to fund small scale experiments/ projects. These projects would either fail or succeed and would move to a scaling phase. For example, if we took Nigeria as a case study, the Nigerian government would match $100 million USD with the Elumelu Foundation’s TEEP program focused more on grants to validate….lets say… 2000 ideas. After a year, 400 (20%) of those companies would be invest able opportunities. 400 is a decent pipeline. Key issue here is sustainability. 200 million dollars a year to identify 400 invest able companies is a tall order. However, 100 million dollars a year vs the cost of unemployment in a place like Nigeria seems like a drop in the bucket.

Maybe later, we can also talk about ways to jump start merger and acquisition activity so people see the light at the end of their investment

Key points to remember:

There’s a lot of money in emerging markets.
The key to differentiation in the early stages of a company is what they’ve learned vs their competitors. Cashflow and other financial indicators don’t start to matter until the later stage.
Entrepreneurs need flexible and attainable early stage capital to validate their ideas.
Private/Public partnerships have to find a way to work together to create the bridge for early stage companies.

Random statistic to leave you with: Nigeria ranks 170 out of 189 for raising finance for a business and 129th (up 9 places since 2014) in starting a business.