I was surfing the internet a few moments back, looking for information about local investor operations & stumbled upon this informative piece by @asemota
It’s a very long read & I applaud myself for reading it end to end. Well, I guess it’s because it was actually interesting & was the knowledge I am looking for, that’s why.
Anyways, here’s the TL:DR
There’s a huge problem in not engaging local investors in the business of local technology entrepreneurs. This problem is part of the reason why successful software shops from the past generation isn’t foundational to the current generation of tech entrepreneurs.
There’s a lot of things to be learnt from successful ecosystems (like South Africa’s) and successful entrepreneurs from the past generation. However, because there isn’t a brutally honest openness in sharing knowledge & information – both successes & failures, from both investors & entrepreneurs – these things may never be learnt.
The basic needs of early stage startups is synergetic relationships that can drive growth & adoption, and hence validation of its technology & services. These kinds of relationships can be nurtured by the kind of information & knowledge sharing I mentioned earlier.
I’m just beginning to have my own fair share of interaction with local investors & I’m discovering that I don’t know anything. One thing I know though is that, despite how “not-so-open” the new generation tech entrepreneurs are, the local investors haven’t been half as open as the entrepreneurs in this space. Someone should find a way of inviting & enticing them to join & share with us on Radar.
Also, with the growth being experienced by @Andela, I believe that, if they dont mind, they can share some knowledge with us. Considering that most of their investment is foreign (as much as I know), they can also share information that can teach local investors how best to interact with & shape this growing industry. So that we all learn & we don’t find this kind of situation, where willing entrepreneurs cannot readily access local funding & experience, repeating itself in the next generation.
I am surprised to hear @celestocalculus say there is a problem with engaging local investors because If I remember what I have read about his former life, he has had engagement with some of the guys that are not too scared to dole out cash, re: Elumelu and Njoku.
Problem with local investors is probably the need to cash out quickly. With the sometimes uncertain nature of our economic environment- currency, etc Family and friends seems like the fastest and best group of investors, 50,000 naira from 10 people is 500,000naira which should be like 5,000 or a bit less sha.
There are three ecosystem wide issues that keep me up every night:
Talent (do we have enough engineering talent - and I’m solving this problem with Andela)
Scale ( how can government support successful startups in getting to scale much sooner)
funding (where can founders get the mentorship and money they need to get past the first 100 days as quickly as possible)
I feel like we have made significant process in the first 2 but the last one is where we need a lot of work. It is not a money problem. Some things have to be practically shown to investors…
From time to time I work with founders and some local investors to share and show what I know. I’m happy to continue doing that. That said Right now, I don’t have the bandwidth to do something at the scale I would like but now I know someone else agrees this is an ecosystem wide issue, I will find the time for it.
Amazing response bro. Well done too with your works. We dey see am.
Considering the last one (funding), I believe the first hurdle is learning how to talk about it openly, without feeling like a taboo is being committed. Knowing that money is a rather sensitive topic, talk more of someone else’s money, it’s understandable why most people would rather not discuss it in a public forum.
However, I believe that if we get the owners/guardians/custodians of the monies to come on here and we rub minds with them, it’s going to be a lot easier for everyone to demystify. I mean, I follow Mark Suster, Ben Horowitz, Paul Graham, etc and their openness about how and what they put their money into largely shape the entrepreneurship direction of SV.
Even if we don’t get to that point of [total] openness, it’s OK to at least try.
The ecosystem is in danger of a ‘single’ success story. As a matter of scale, ‘revenue multiples’, or with serious positioning for disruption.
As a matter of revenue multiples, I give to Iroko.
On scale, I will NOT give to Konga.
On disruption, I have to ask; which startup 1st or 2nd generation have THOUROUGHLY changed the way we traditionally, but ‘successful’ thrived? (MTN isn’t Nigerian)
Pls forget Interswitch. #nomention
(For interswitch I think, they launched a formidable board of backers, not a technology. Tonnes of folks can do way better with the same positioning)
LOL! Haba na, Interswitch changed things actually. You might argue that they aren’t as agile as they once were, but they actually did change the way people bank.
I believe that your concern is their methods: how they actually organised the business/company and how scalable/repeatable it is. I also don’t think the method they adopted would work well for changing the lifestyle of regular consumers.
I think one model that would work is: the Silicon Valley method of funding orientation around consumer products & steering the product direction until it fits properly. Then milking it for all possible benefits. Also, if it’s something that really solves a basic need, you can be milking it as it grows (like communication via mobile phones). Let’s call it The capitalism model.
I believe that this is the model that Konga and Rocket Internet have adopted. And iroko too.
But most times, the innovators aren’t always able to fund and grow their innovations, which is why they need financial partners (aka investors). But then, it requires immense trust in this kind of environment where there aren’t laws that protect people, and each person is trying to outsmart the other.
If you can, read Williams Bernstein’s book on economic history: “The Birth of Plenty: How the Prosperity of the Modern World Was Created”, you would see that that’s the model that developed The West and The United States.
