Barring any unforeseen circumstances, Nigerian media and entertainment startup IrokoTv may be up for a big surprise in 2021. Quite some long time away you may say, but this is going to be a huge dot of success on the startup company’s 9 year old life (which is going to be 11 years by then) if the Jason Njoku led company goes ahead to pull the trigger. In a lengthy statement on his social media platform, Njoku’s company may be looking for an exit through Initial Public Offering (IPO) on the London Stock Exchange.
In simple terms, by 2021 IrokoTv would open its company’s ownership to the members of the public, giving way for the company’s initial investors to cash out.
‘‘For Tiger Global, our first investor and largest shareholder (33.36%), I think an IPO in 2021 would be a good step forward for them to close out a decade of ownership and see a return on their original investment from 8 years ago. Ideally we would be able to solidly beat the 10-year S&P 500 index return over their investment period. Cherry meet cake,’’ Njoku says.
Time To Return Money To Investors
Of course, you would expect investors in a startup to get tired at a stage. Simply pouring and pouring more funds into a venture without a return could seem foolhardy. This is what Njoku seems aware of.
‘‘On 30th August 2011, the day the first $3m landed in our IROKO account from Tiger Global, I signed myself up for something else. As a newly minted venture backed business, I now had to create shareholder value. That ‘win’ needed an IRR attached to it,’’ he said.
‘‘For us to be successful as a collective, we need to return capital to shareholders. IT’S THAT SIMPLE. We are not an NGO…Otherwise investors will simply stop investing.’’
Going On IPO Would Be A Tall Order
Everybody can declare an IPO, but how realistic it is would depend on current and the future financial standing of the company.
‘‘Based on our direct conversations with stockbrokers, NOMADs, auditors and lawyers, an LSE AIM listed company valued at $100m would need to have (ultra conservatively) $8–10m in revenue and $0–1m in EBITDA,’’ he said. They are willing to fund losses for high growth, but that always changes. I would prefer to be conservative. For that same company to be at $250m-300m valuation, it would be required to generate $25-$30m in revenue, $2–5m EBITDA and have a clear multi year annual growth outlook of 15–20% (BOKU, SUMO and DOTD are examples of this — although their losses and profits swing outside of this conservative range). IROKO is not there today. But we expect 2020 to be our foundation year which will give us the clear path to run at an IPO in H1 2021.’’
Read also: How Startups Are Changing The Face Of Africa’s Music Streaming Service
Battling With Board Over Critical Decisions
Getting more funding definitely means attracting more getting more people on the board and being confronted with more challenges.
‘‘Most of my board at the time were against building out ROK. The conflicts of interest were clear (my wife was the CEO & founder) and I was the commercial guy — 90% of the ROK deals I did personally myself,’’ he said. ‘‘From personal relationships. I took significant amounts of my time away from IROKOtv to build out that business, to the angst and anger of Bastian, management team and the other board members at the time. There was a ton of resistance, ‘this wasn’t the business they had invested in’. That was until I dropped a $1m per year 3-year deal on the table for ‘approval’. With a subtle, ‘oh I had a pipe line of 3–4 more deals just like this’. We exited ROK after 5.5 years (IROKO invested just $1.4m in equity). A business my management team and cofounder never actually wanted me to build. But it’s alright. It’s all about winning, right? Last week, IROKO approved a special $5m dividend for shareholders. I used 60% of my personal dividend to re-up my shareholdings in IROKOtv.’’
A Look At Iroko
- In 2010, the Nigerian Jason Njoku and the German Bastian Gotter launched irokotv, a web platform that provides paid-for Nigerian films on-demand, which is usually dubbed ‘the Netflix of Africa’ and which is believed to be one of Africa’s first mainstream online movie streaming websites.
- With its headquaters in Lagos, Nigeria and offices in London and New York. iROKOtv brand was so valuable that Jason said in less than a year old at the time, investors paid $80,000 for 10% of the iROKOtv but sold to other existing investors, for $2.4 million.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world