The Venture Capital Market in Africa is unarguably expanding with major impacts and funding from both local and international investors - Major impacts like VCs incubator projects, customer introduction and reintroduction, advice and involvement to startups, the VC market has become an integral part of the startup space in Africa and a key determinate for the scaling up of many economies in Africa.

In 2019 alone, VC investments in Africa (both by local and international investors) rose to an all-time high, in a Partech report where 234 African tech companies raised $2.02 billion in 250 equity rounds. This figure indicated a 74% increase from 2018’s figure where $1.163 billion was raised by 146 startups in 164 rounds.

However, where there is growth in certain areas like the financial technology startup communities, there are other sectors that VC are not exactly paying attention to.

In conversations with Investment Professional, Olasunkanmi Olabamiji, we discuss the VC Space in Africa, analysing founders and startups, and well, a peek into his personal life relating to the VC space in Africa.

Olasunkanmi Olabamiji is an investment analyst with V8 Capital Partners, one of the investor companies in Africa dedicated to ‘backing bold visionary entrepreneurs to grow and scale leading technology businesses across Africa.’

What inspired you to go into venture capital?

Before VC, I worked with a boutique investment bank (IB) where I evaluated and raised

capital for several businesses across multiple sectors in Nigeria. This experience helped

me solidify my understanding of how to analyze businesses, build financial models and

sharpen my storytelling abilities. However, most of the clients I worked with were mostly

brick and mortar businesses and once a transaction is over you are staffed on a different

project and the cycle continues – no insight into the company build-up process and how

they finally grow. Because of these reasons, I was interested in the VC space.

As I made more research, I was intrigued by three things:

Founder’s Network: the opportunity to speak with founders across the continent to understand what they are building, business model and progress to date. If it’s in line with our investment thesis, we discuss the startup funding needs

Impact to be made: beyond just cash investment which is a founder’s primarily objective, some VCs do provide support for their portfolio companies to help them achieve the accelerated growth that’s needed – this was what stood V8 Capital Partners to me – our V8 Engine Impact.

Exit opportunities: in the nearest future I decide to move on from VC, I can use my experience & expertise in evaluating businesses to choose a high promising startup to onboard with.

What has been the most important lessons you had to learn to become a successful investment professional?

I wouldn’t say I am “successful yet” but I believe I am on the path. But I could

give some insights into what I have learnt and still learning to internalize, to succeed as an

Investment Professional in the industry.

Network: you want to grow your network amongst other investment professionals and founders. Doing this, you wouldn’t be oblivious of what’s happening in the space, and most times you wouldn’t have to reinvent the wheel as you can leverage on their brains/research to make an informed decision.

Seek feedback: After you have completed a project, it is best to ask key stakeholders “What could I have done better?”. Ask them for constructive feedback, always seek to understand how to take the work you have done to the next level

Offer to Help: For founders, you can help by providing genuine feedback on how to think through their businesses & gaps that you noticed in their presentation. For other investment professionals: you can help by assisting them however your skillset permits. From the organisational point of view, you always want to know what the priorities are and strategically place yourself to help.

You can see I didn’t speak on any technical skills because I believe that shouldn’t be a

bowel of contention – it should be settled.

How do you value a company when analysing?

When analysing a startup to see if it is worth investing in, I think the question we VCs are

all trying to answer would be:

The Team: Are the management team able to run the projects? What’s their ability to sell a good story? Do they have domain expertise? Can they execute?

Market: Is the market big enough – Hope the founders aren’t playing in a niche market? What’s the obtainable market? Is the timing, right?

The Products/Services: Is the product a need or a want? Can it scale? Is there a clear way to make money?

Competitive Landscape: What are the direct and indirect substitutes for the company’s product services? What is the company’s competitive positioning? What differentiates them from their competitors? Is there a clear strategy in terms of competitive response?

What areas are you seeing the most growth in the startup space in Africa and why?

I want to equate growth to funding raised in the venture space in Nigeria

FinTech: As economies in Africa become more digital, financial services have become increasingly embedded into other digital offerings across varieties of sectors from commerce to education, logistics and more, growing the value proposition of these offering to better serve and retain customers. We saw in 2020, fintech raised $356M and as of September 2021, it has recorded over $1.53b (69% of total funding) thanks to OPAY $400m raised, Wave $200m, Flutterwave $170m amongst many others.

AgriTech: Despite the agriculture industry being the largest and the most vital sector in Africa (70% of Africa’s livelihood), the industry is faced with numerous challenges that technology is here to disrupt. We have seen agritech solutions help farmers boost production, optimize yields, and overall improve productivity by providing data-driven solutions, connecting farmers to the demand side and lots more. Overall solving the issues around food security and help reduce food wastage. The sector raised has over $126m as of September 2021 driven by Gro Intelligence $85m raise, Agricorp International $17.5m raise amongst others.

HealthTech: The pandemic exacerbated the opportunities for HealthTech as founders were able to raise more funding in 2020 than they did in the past. The industry growth is driven by an increase in medical practices leveraging technology to improve healthcare access across the continent. As of September 2021, the industry recorded over $107m thanks to LifeQ 47m raise, 54Gene $25m.

RetailTech: The African retail space is still largely informal and fragmented, and the continent has seen huge technological developments, accelerated by COVID-19’s restrictions. Due to lockdown restrictions and work from home across the region, this has driven growth in the space as consumer consumption has sprung up at home. $160M raised so far as of September 2021 driven by MaxAB

$40m raise, Capiter #33m raised, amongst others.

Does the impact of a company play a role in determining investment?

I think it depends on the investment thesis of the VC firm. If it’s an impact investor, yes,

the impact of the company goes into determining if they will invest in a startup. If no, it

doesn’t necessarily mean they wouldn’t weigh the impact but that wouldn’t break or the

Investment. I think it’s good to note that there are numerous impacts to be made as different sectors are leveraging technology to disrupt traditional businesses. For example, Mecho Autotech is helping businesses become more efficient as they don’t have to deal with the

headache of repair and maintenance while saving cost – providing the opportunity for

wealth creation for spare parts vendors and low-income technicians. TruQ is increasing

productivity for customers especially B2B customers who can see a tangible reduction in costs and time spent coordinating deliveries.

By experience, what shouldn’t a startup do when seeking out investment?

Send a shabby deck: a deck that doesn’t give insights into what the founder is building, the traction made till date and what differentiates them

Only send out cold emails: as much as sending in cold emails can be good, sometimes it’s just best for founders to leverage their network to get the foot at the door. One thing to note is VC investors receive a junk of emails from founders so the question should be how do you stand out. You could try connecting to maybe the analyst or associate on LinkedIn, look at who in your network can do the intro.

Never sell themselves short: I think a lot of people have forgotten the power of a good story. Founders often want to be direct and straight to the point but oftentimes, that doesn’t work. You should know how to sell yourself with a good story. Like, I want to be wowed with your story. I want to know you with your story, I want to feel the personal connection you have with the deck I am reading.

When you evaluate a company’s financial viability, what statement are you usually drawn to?

When I am evaluating the financial viability of a company for a technology company, I

am mostly drawn to the income statement – looking at the run and burn rate. Most times,

I am keen on understanding what is driving revenue? Segment the revenue per product? If it’s sass business I am keen to understand the monthly recurring revenue, churn rate,

growth rate amongst others.

How would you describe the startup space in Nigeria and Africa?

The African Tech ecosystem is still inexorably accelerating as investors (local and

international) are more bullish about the space flocking towards high growth startups that

are disrupting the traditional business model. As of September 2021, the industry has

raised over $2.2b largely driven by investment in FinTech (approximately 69% of

funding). 

Funding still remains concentrated in the “Big Four”, with Nigeria, Kenya, South Africa

and Egypt. But interestingly, we are seeing an increase in funding in Ghana, Tunisia,

and Morocco. The economic prospect, social and commercial prospects for investing in Africa remains promising – thanks to the pandemic, COVID-19 accelerated adoption. I believe

technology disruption in Africa is here to stay.

Proptech is one sector in Africa growing rather slowly, why do you think that is?

Two reasons: Affordability and Supply.

Affordability: A lot of Proptech startups have sprung up to ease the process of securing a house, and sometimes it seems only high-net-worth individuals or high middle-class earners can afford them. When you compare what the average African earns and the cost of owning a comfortable & convenient house – there is quite a disparity, and it is expensive.

Supply: Unlocking quality supply seems daunting. Many landlords aren't comfortable listing their houses on Proptech platforms because most times these platform pitches monthly payment rather than a lump sum in which the landlords can use to beat the rising inflation rate in many African countries.

What advice do you have for startups looking for pre-seed investment?

My advice to founders seeking pre-seed investment would be:

Focus on building a great product: I think it’s imperative and sometimes goes without saying but please focus on building a product that solves a compelling problem that’s not niche, track your traction, and please try to have to pay customers – in all try to build something worth investing in.

Perfect your Story: there is power in telling a good story either written or oral. Please let your story be clear, easy to understand, and isn’t all over the place. Try and optimize for getting investors teased – let’s ask for more.

Leverage on other founders’ networks: don’t try to build your startup/raise money in isolation. Ask other founders in the space how they raised money if they can do intros for you. Join the founder’s community – they can also help you with business introductions. Don’t try to discount founders’ advice because they aren’t writing the cheque – they sometimes see gaps in your logic and will help you refine your story and pitch.

How can founders reach you?

I am mostly available on LinkedIn and Instagram.

Here is a link to listen to this conversation: Conversations With Olasunkanmi Olabamiji - Sunday, 4th October 2021