But why? Imagine someone comes to tell me to invest in medicinal tablets. I know nothing about this. If my money goes lost, I will simply think those guys were scammers. There is no one-day educational event that will make me know what I am getting into.
However if I were to invest in a tech product, I understand perfectly what I am getting into.
Investing does not end at transferring money. Those guys will be the ones telling the founders what to do and telling them the wrong things. Just because people have money does not mean it is good to have them invest in the eco-system.
Mark has a point about understanding the business. To me to bridge old and new it helps to appeal to e linkages. Bankers understand IT coz there systems run on it. Access can invest in all the payx startups as can other rich bankers. Rich doctors may not understand social networking but would understand a social network for doctors or medical transcription service or a health management system.
Why it’s true that people with money tend to invest in areas they are conversant with; I think the orientation has changed, at least in developed parts of the world (and that brings education into the equation), where some investors with little or no first-hand experience or knowledge in medical stuff are investing in biotech startups (e.g. 23andMe, Parabon NanoLab and so on) involved in things like genetic engineering because they have been enlightened on the future potential benefits of such technologies. So while it may take time, I think something in the direction of what @Obi_Ik said on investor education can be done, maybe in series for the next few years, by the tech community to enlighten these traditional rich men to see the benefits of investing in tech.
This is exactly my tweet series with @asemota earlier today. No one should expect rich men that didn’t make their money in tech to invest in tech. And if in fact, you get money from rich men outside tech, you might harming yourself/business.
One of those important rules even in raising money even within tech is to (if you can) get money from only someone that understands your business.
It takes someone who understands how value compounds in tech, and how easy it is lose money too, to put money in it. Point is, folks will only invest in what they understand.
Nigeria rich men don’t understand tech. Let’s rest it, and raise our own tech billionaires.
Can you 100% confirm the investors from those companies don’t have some background in the field? I clearly doubt that. its really rare for an investor to jump into an investments they no knowledge about, seriously, how would they be able to evaluate the product?
One of the comment from @akindolu on why OgaVanue got funded
Mostly the type of business they understand or very familiar with. It’s usually a cycle of reinforcements. Patterns and all that. That’s why you should only consider an investor that understand or willing to learn about your business.
At the early stage however, and for the best investors, it is usually a case of people behind the business they try to understand, and their purpose. Their history and true intellect because businesses will typically evolve in their lifetime. It takes intellect to go through that. 10 years after founding, best businesses are not what they started with. Most people know this, so a short cut around is: fund folks with certain backgrounds and education. Or Fund because of pattern or business familiarity and claim it is derived from intellect.
How then did tech attract investments in its early days? Replace tech with hospitality, oil and gas, manufacturing and see if the logic still holds.
People invest money they made from anywhere into anything that can make them more money once they understand how the money can be made. I’m only advocating investor education.
@markessien I understand the concerns about intrusive investors, but it’s still a problem even among regular tech investors. And it’s not just a one time thing. It can be an ongoing thing, they can be incorporated into existing angel networks. Isn’t that the point of ABAN and LAN and the rest of them?
See - it’s as if people don’t understand the difference between $1m and $27m. My company just raised a pretty small amount of money. Them Sim and Jason have raised large amounts of money and have huge companies. I have just raised a small amount of money!
Someone tagged me the other day on facebook that he met the youngest Billionaire and I was looking and shaking my head. How? I’m still a small-time startup founder hustling to make this thing work. Don’t group me in with the tech big boys yet
There was more to the earlier conversation and I know @xolubi would have gotten the gist by now. Go read @OoTheNigerian’s latest blog post to get even more background.
Sorry mehn, this is Bayes Naive classification algo. The probability of you being one of the big guys (pBig) is greater than the probability of you being one of the small guys (pSmall). pBig > pSmall so you are one of the big guys.
When you guys are among yourselves, you can use kNN to group yourselves according to how many millions you have raised.
Let me state here again. MY POST WAS NOT ABOUT GETTING MONEY FROM RICH MEN.
It was about the changing dynamics of wealth and competition in Nigeria and Africa.
Someone asked me this morning about the “minimum amount of money to invest in a company”.
I told him that the best investments I have made have been into places where they really didn’t need my money but my experience and knowledge. Money was just a token. Signal. My being part of something, makes other people that I am talking to about a business know that I take it seriously.
At the level where you invest for returns, the rich people have their people who analyse and make those decisions. They are not emotional decisions. Rich people should NEVER do seed investments. If you are taking their money and they can’t do more for you beyond the money, you are a fool.
I did say some of the investors, not all of the investors; this is an example. However, just as Mark pointed out in another thread you need initial traction, which some of these biotech companies had, before you can attract investors; and also having already raised some money from some notable figures in the tech investment club, as did OgaVenue from Jason and Mark, what stops the traditional guys to look at the portfolio of these initial investors as a basis to put in some money in the next raising round of OgaVenue, after being briefed about their business model and projections?
Honestly, I much rather that the rich guys give their money to an investor like EchoVC and let them do the investing for them. Working with EchoVC is a really good experience - supportive, they give advice, they support decisions, do connections, etc. They know what they are doing because they are professionals.
In contrast, I have spoken to some hobby investors who happened to be rich, and they always seem like they would be so difficult to deal with if on board. The biggest problem is that they always have this idea, which, even if great, takes a lot for the company to execute it. But they don’t understand that. So pressure from such investors can make you start doing things that don’t make sense - either that or you start fighting in the board room, which is also bad.
I much prefer that Investors do the work of communicating to rich guys than going direct.
Only foolish rich people do not give money to Investment Bankers and VCs. I would never take that kind of money. I was offered $500k about 15 years ago by a rich man. I asked him what he would do if he lost all the money? He couldn’t answer. I like sleeping well at night and driving without assassins chasing me.
Rich men and women in Africa don’t invest in tech because there are many, many, far ‘simpler’ untapped opportunities in Africa that can still make them tons of money.
Tech is complex. The requirements for talent, design, business model innovation and governance are far higher than merchandising, real estate, oil transportation and road construction. It is easy to outsource virtually all the components of a road construction and still make a huge margin. On one project.
Until the African economy grows bigger and more sophisticated so that competition in the ‘easier’ sectors become fiercer, no one in their right senses will prioritise tech investments over bottled water and abattoirs.
let me help him rephrase
