Nigeria is Africa’s most populated country, with over 180 million people, and as of consequence the West African nation has a robust consumer market and last year it overtook South Africa as the largest economy in Africa. Nigeria is known as Africa’s largest oil producer, but over the last few years the country has emerged as a major player in terms of technology startups. KITE Invest spoke with H. Tomi Davies the Chief Executive of the Lagos Angel Network to get a glimpse into the Nigerian angel community and the newly formed African Business Angels Network.
KITE Invest: Please shed light on the Origins of LAN? What has been some defining milestones and biggest challenges in LAN’s history.
H.Tomi Davies: Historically, entrepreneurs in Lagos, Nigeria have faced significant challenges in starting-up and supporting the early growth phase of their new businesses. The Lagos Angel Network (LAN) was established in 2012 as a formal platform to bring together individuals and organisations seeking to invest in and mentor the most promising start-ups in the Lagos area. Its establishment was to address a groundswell of interest from the investor community for a credible platform through which to channel interest in angel investing and mentoring. After we founded LAN, Mr Adedotun Sulaiman, a renowned management consultant and angel investor in Nigeria, accepted to serve as the Chairman and has strongly supported the process of building the network. The key defining milestones of LAN that come to mind are:
- Launching LAN – In September 2012, after months of deliberations, research and planning, a Steering Committee comprising of individuals such as myself and organisations including the Paradigm Initiative Nigeria, Wennovation Hub, Mobile Monday Nigeria, The Tony Elumelu Foundation, Alethia Capital and TechnoVision supported by Infodev (a global entrepreneurship program within the World Bank Group) launched the network. The event marked the beginning of the LAN journey that has been a fascinating and quite exciting roller-coaster ride.
- Inaugural Pitch Session – In May 2013 after months of sifting through tens (if not hundreds) of teams we finally managed to hold the inaugural pitch session for the first cohort of entrepreneurs. This was a very significant milestone for LAN as it brought together the entrepreneurship and angel investing community in the Lagos area in what was probably the largest gathering of angel investors in Lagos at that time for the first time. The event also served to stamp our name into the Lagos Startup scene. It marked a key point in a very interesting process of us learning the best way to develop an angel-investing ecosystem in an emerging economy like Nigeria.
- Angel Fair West Africa - In April 2014, LAN was the host angel network for the inaugural edition of a regional angel-investing event called “Angel Fair West Africa”. The event brought together angel investors from all over the world and entrepreneurs from across West Africa. It was a very successful event that helped create a platform for strategic engagement between the Federal Government of Nigeria (represented by the Minster of Trade & Investment) and the Nigerian angel investing community (led by LAN).
- Demo Africa Investor Summit - In September 2014, LAN in collaboration with VC4Africa and the European Business Angels Network (EBAN) held the Investor Summit “The Future of Angel Investing in Africa” at DEMO Africa 2014 in Lagos, Nigeria. This event was significant to LAN as central to the discussions at the summit was the need for an Africa-wide angel network association, which led to the creation of the African Business Angel Network (ABAN).
We have also faced a number of challenges in our journey so far:
The concept of Angel Investing is at an embryonic stage in Nigeria and investors and entrepreneurs still have a significant knowledge gap to close. LAN has stepped up to play a critical role in closing this gap by advocating for structured programs that educate and support the entire startup ecosystem.
At the heart of this intervention is our soon to be launched Startup Resource Center, 385 HMS located in Yaba, Lagos. (Yaba is fondly referred to as the Silicon Lagoon because of the large number of technology startups in the vicinity). 385HMS has been developed in partnership with leading global technology businesses, banks and others as an education hub for angels & entrepreneurs. It will provide interactive courses, seminars, workshops & mentoring sessions.
KITE: Referred to as a “techprenuer” Can you shed light on Nigeria’s tech startup scene? Why has the tech scene become so vibrant in Nigeria and not as much with its African counterparts?
HTD: About 70% of Nigeria’s 160 million population is under the age of 30 and this provides a huge market for virtually any product or service. Nigeria is also one of the fastest growing mobile phone market in the world with over 70 million internet users. The building blocks for E-commerce, digital content services, mobile learning, digital gaming and mobile financial services have also been laid and several local and global players are in the market. Incubators, Accelerators and open workspaces such as ccHub, Leadpath, Level 5, Wennovation, Passion, Capital Square, Enterprise Creative, Spark and 440ng have come onto the scene to provide environments that nurture and grow startups. The Lagos Angel Network with others such as the Tony Elumelu Foundation, Microsofts 4Africa, Google for Entrepreneurs and a host of others now regularly make seed funding available to startups. The vibrant Nigerian technology startup scene is simply a combination of the raw entrepreneurial spirit of the tech-savvy Nigerian citizen and the factors outlined above.
The role of the government in accelerating the pace of development we are currently witnessing cannot be ignored. The establishment of a Ministry of Information and Communication Technology and the implementation of several initiatives including the TechlaunchPad (focused on promoting software technology development among local entrepreneurs) and Idea Hub (a business incubator for startups) have helped shape the emergent tech startup scene in Nigeria.
Lastly, global technology firms have also contributed by making a beeline for Nigeria and introducing programs and implementing initiatives that tap into the entrepreneurial passion of young Nigerians. Notable among these institutions are Microsoft, Google, Huawei, MTN, Samsung, Airtel and General Electric. Nigeria is now on the global map as a key market for any serious technology business looking for growth. This propensity towards investing in Africa’s largest population and economy is what is in my opinion why our African counterparts may not be seeing as much activity.
KITE: What distinguishes the Nigerian Angel Investor apart from others? What does a typical angel investment in Lagos look like and is it changing?
HTD: Excluding the earlier mentioned knowledge gaps and the deal sizes invested in, the Nigerian Angel investor is really no different from his or her counterpart in New York or London. At the Lagos Angel Network we have put in place a structured process for admitting new angel investors into the network based on set of well-defined criteria using the US “Accredited Investor” model. The financial criterion ensures that Angels have the capacity to comfortably make the required investments and also bear losses that will inevitably arise from the failure of a few businesses. In addition, our angels have a genuine desire to dedicate the required time to mentor the entrepreneurs and also make available their business contacts and networks. This is particularly important in the Nigerian context and unarguably the most important value that Angels bring to supporting startups in Nigeria.
A typical angel investment in Lagos is about $25,000 and goes into a startup that is less than two years old but has shown some traction by having a leadership team that has built a proposition that has attracted a few customers. Our initial focus was naturally in tech because of its low barriers to entry and scalability. As part of our review towards the end of last year, we decided to broaden our scope to include agriculture and light manufacturing, as these are areas of Angel competence and interest. They also represent high growth areas of the economy. We had two international events last year that has also opened the door to co-investing with international collaborators from other angel networks.
KITE: The angel investor scene is expected to see a boost across Africa in the next coming years. The launch of the African Business Angels Network (ABAN) is galvanising the community as the first pan-African network of networks. Taking into consideration that Africa is richly diverse, what are some of ABAN’s first steps towards approaching the ranging needs of the various angel investor and startup communities?
HTD: One of the key assets that ABAN has at its disposal are members of the African Diaspora who have a growing interest to contribute and take part in venture creation back home. We intend to use this capacity (especially those who are angel investors in their host countries or have experience investing at home) in addition to our relationships with partners such as the European Business Angels Network (EBAN), VC4Africa and other for setting professional standards, training, and certification, benchmarking, research and networking raising awareness and capacity building and as has already started, supporting cross-border syndications and co-investment. We will ultimately also support lobbying of Policy makers on behalf of the continents angel investment community.
Our aim is to understand, document and promote the opportunity for Angel investing in Africa. We aim to be able to generate, share and promote success stories and help discover synergies between our member networks. We will share best practices to enhance visibility of member networks and their actors while helping new networks emerge.
We will be organising networking events and facilitate other exchanges, both online and offline and generally promote developments in the angel investment and entrepreneurship space across Africa.
KITE: What can be expected in the short term from ABAN? What are the main goals and targets at this time?
HTD: As a start, we are organising ABAN’s first event in Cape Town, South Africa in March where we will be bringing together entrepreneurs from across Africa and the Diaspora to expose them to Angel investors from Africa, Europe and the Middle East. Participants will also be hearing from some seasoned Angel investors about their views on sourcing, valuations and due diligence.
We are also in discussions with the organisers of DEMO Africa about co-hosting an Angel Investors Summit as part of this years DEMO Africa event.
Our main goals for this year is to establish a presence though the events, grow our membership by attracting existing angel networks from all regions of the continent and support the emergence new networks.
KITE: ABAN was established through the joint collaboration of several African angel networks, including LAN, and the European Business Angels Network. In your estimation why are the conditions right for the growth of angel investors and also startups in Africa?
HTD: With increasing political stability across Africa, Internet and mobile penetration rates in double digits, some of the best economic growth figures we are seeing around the globe, over 1 billion people with growing youthful middle class consumers and an active diaspora one is tempted to ask if we are not witnessing a perfect storm?
Startups have a wealth of examples to model and fashion themselves against and the lacklustre funding historically available to them is being consigned to history with the rise of Angel investors and their networks.
Add to this governments starting to accept the private sector as partners is national problem solving and one begins to understand the underlying dynamics that make the conditions right for both startups and angel investing.
KITE: Due to ABAN’s European connection through EBAN, how do you foresee this alliance to impact ABAN’s trajectory?
HTD: Whilst Angel investing in Africa is nascent, the world of ABAN as a network of networks and individuals is not new and we expect to build on what has been done elsewhere. That is why the relationship with EBAN and VC4Africa have been designated by ABAN as “key strategic partnerships”. Our expectation is that we will leverage on both their depth of experience and expertise to quickly develop ABAN as a continent-wide organisation that provides tremendous value to its members. We are already seeing the benefits, as our first event in Cape Town will be in collaboration with EBAN.
KITE: What advice have you given to angel investors and startups affiliated with LAN that you would like to give future ABAN members and affiliates?
HTD: While angel investing is like any other form of investment aimed at generating a return on such investments, it is fundamentally different from all other asset classes. It’s not just about the money, but also about what can be a very exciting active co-creation process with the entrepreneurs as their mentor. As a friend of mine has said, “Mentor capital is a better way to describe Angel investing.”
The ABAN website is expected to launch March 2015