Startup investment - Afrikan Heroes

African Startups Braces for Sherpa Ventures $1m Pre-seed fund

December 10, 2020

The sky is getting brighter for African startups as more venture capital firms are looking in their directions. The latest being the founder-backed fund from VC firm Sherpa Ventures , a debut fund dedicated to investing in pre-seed tech startups in Africa, which is backed by several notable founders and angels and has already made its first investments. Founded by startup investment veteran Aaron Fu, ex-Uber Africa launcher Alastair Curtis and ex-IROKO executive Nikhil Patel, Sherpa Ventures invests in early-stage tech and tech-enabled startups in Africa.

The US$1 million Basecamp Fund will invest US$25,000-US$50,000 in startups who are usually raising less than US$500,000, and work with them over six-to-nine months before deciding to follow-on with more substantial capital. The VC firm, together with a community of investors that includes the likes of Twiga Foods co-founder Grant Brooke and investors Emilian Popa and Lexi Novitske, will work with founders to strengthen and scale their startups by injecting capital and extensive local experience and expertise.

Speaking on this development, Aaron Fu said that Sherpa is a supportive and collaborative community – “a community of capital, expertise and experience who have built and operated some of the strongest startups on the continent and across the world. We can’t wait to partner with extraordinary teams in the region, to realise the power of one generation of startup operators in Africa investing in and sprinting alongside the next generation,” he said.

Sherpa Ventures has already made two investments – in Nigeria’s OnePipe, a unified platform that aggregates APIs for financial services and large institutions, and Ghana’s Boost, an asset light retail distribution and working capital platform focused on MSMEs. Mike Quinn, co-founder and chief executive officer (CEO) of Boost, which is launching in Ghana and South Africa, said Sherpa had been one of the first entities to believe in the startup and back it when it was nothing. “They brought other investors to the table, and have been helping us design country entry strategies and develop a stronger hiring framework,” he said.

Curtis said companies like Boost and OnePipe were building scalable but grounded businesses, and also catalysing sustainable growth of businesses in their ecosystems. “These audacious entrepreneurs are driving the next wave of economic inclusion and growth in Africa,” he said.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Reasons Why Your Startup Is Still Not Getting Investment

May 24, 2020

Thomas Bird, a venture capitalist at a Canadian seed-stage investment fund

This is probably the most discouraging thing in the startup ecosystem. You’ve got a beautiful slide-deck, passion for your work, have talked with VC’s, but you still can’t seem to get anyone to commit.

After you’ve got your potential investor’s attention, there are still a few extra roadblocks that I’ve seen over the years that can be the culprits.

Let’s dive in.

1. Your financing plan doesn’t make sense

Investors don’t invest arbitrary amounts in startups, we invest in plans.

Investors want to ensure that you have enough money to make it to your next round while executing your business plan. You’ve got to show how exactly that is going to happen and how much it’s going to cost. If you pitch investors for $1M and they interpret your plan as needing $5M to adequately grow, you may have an issue getting them onboard.

If you need $5M to make it to your next round of financing and you’re looking for one investor to fill that entire amount, it probably won’t happen. Investors like to share the needs of a round and work with each other. They discuss the investment and each participates in the round to reduce the overall risk.

Takeaways: Have your financing needs defined and build a team of investors from that.

2. You haven’t looked for cheaper capital

Venture capital is expensive. It’s the most expensive money you can get because you’re buying it with shares of your company. Venture Capitalists should be the final partners you consider when funding your business, and they know it. They also want to know that you are going to be efficient with their money; if you haven’t tried or gotten resources from somewhere else, why should they give you theirs?

There are lots of non-dilutive funding sources out there: government programs, economic development initiatives, and select accelerators. You may even consider debt options (not payday loans or credit cards). There are lots of low-interest programs out there that are familiar with seed-stage risk.

Takeaways: Research other types of funding and incorporate those into your financing plan.

3. They don’t really know you

Venture investing is a long process. You are entering a relationship that can last up to a decade on average. For this reason, investors want to know that you’re someone who they can trust to deliver. This is the reason that so many investors are reluctant to invest in entrepreneurs they haven’t worked with before. So find a way to get to know them! An example of creating familiarization would be bringing on someone as an advisor who has prior experience with this VC.

Takeaways: Network and become associated with the fund through other ways rather than just asking them for money.

4. They haven’t fallen in love with the product

I’ve seen this happen multiple times, an entrepreneur has an interesting product but the investors just haven’t fallen in love with it. This can be tough to overcome but not impossible. It’s important that the investor can envision the product-market-fit.

Sometimes this comes down to the investor not fully understanding what your product does. I once heard a veteran VC say that before he invests in any company, he gets them to pitch to his 8-year-old grandson. If his grandson doesn’t understand what they do then he doesn’t invest. Simplicity and clarity are key.

Investors usually fall in love with a product when they see a clear path to revenue and the potential for serious adoption. Your job as an entrepreneur is to make that vision as clear as possible.

Takeaways: The first customers you have to sell to are your investors. If you suspect that the investors you’re pitching don’t understand the product fit, create an “Ah-ha!” moment for them. You can do this by clarifying the path to revenue and market adoption.

Thomas Bird is a venture capitalist at a Canadian seed-stage investment fund.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.

New Report Shows Which Sectors Startup Investments Are Now Going To As Covid-19 Hits Startup Investments Globally

April 14, 2020

Philip Bahoshy, founder and CEO of MAGNiTT

Even though the Covid-19 pandemic started late in the first quarter of 2020, it is already beginning to have ripple effects on startup investments in the Middle East and Africa. A new report by the Middle East and North Africa (MENA)’s largest startup data platform MAGNiTT, shows investor appetite has increased in startups covering grocery delivery, healthcare, e-commerce and edtech (or online educational startups)

Here Is More You Need To Know

A survey of over 100 startup founders participating in Magnitt’s weekly webinar series saw 59 percent say their business had already been impacted by the crisis.
Some 48 percent said revenue generation was their major concern and 25 percent pointing to fundraising as the issue that keeps them up at night; while 41 percent anticipate lower-than-expected revenue growth rates in 2020, with 29 percent anticipating revenue below 2019 figures.

“Some VCs have already raised funds and are looking to deploy the capital in the next couple of months and a lower valuation is good for the ecosystem. The pool of funds may be smaller but VCs are looking to invest where they can as part of business continuity,” Philip Bahoshy, founder and CEO of MAGNiTT said.

He said that profitability will be challenged as people are not investing as they used to and “we may see a flattening in the number of deals this year and a decrease in the total value of investments”.

“It wouldn’t be surprising to see some startups and SMEs finding challenges in their operations and close down as a result,” he said.

“Fundraising activity is moving online as startups and investors are quickly adapting to the new normal and startups are increasingly looking for alternative ways to fundraise during the current crisis,” he said.

This graph shows a major decline in startup investments contributed by the Covid-19 pandemic

Startups In The MENA Region Saw A Decline Of 67% In Funding From January To March 2020

According to MAGNiTT, the number of investment deals in the startup space in the Middle East and North Africa (MENA) saw a steep drop of 67% year on year in March due to coronavirus outbreak, notwithstanding a 2% increase in year-on-year funding in the first quarter of the year.

“It is very challenging to know exactly how Covid-19 is going to be in the next couple of quarters,’’ Bahoshy said.

“We anticipate that investors will look into supporting their portfolio companies that may be challenged; there is going to be new opportunities that are going to arise out of the situation and investors that have cash are going to invest in opportunities; valuations are going to have a correction as people will not have high growth rates in this environment as they would have previously and this, in turn, is an investment opportunity for investors,” he added.

The report also says the number of investment deals in the first quarter of 2020 stood at 108, representing a major decline by 22% when compared to 138 deals recorded in 2019.
From the report, startups in the region raised $277m in the first quarter of this year compared to $271m a year ago with several startups raising large funding rounds in January and February, including Kitopi ($60M), Vezeeta ($40M), and SellAnyCar ($35M).

“Historical data highlights that investment rounds across Mena tend to take, on average, six months to come to fruition,” said Bahoshy.

“We will most likely not see the full impact of Covid-19 on the venture funding space yet for a few months. However, early indications have already shown a slowdown in funding announcements, as startups and investors re-evaluate their positions in this new environment.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.

Egypt sees rapid growth in startup investments

December 9, 2019

Egypt has been experiencing a rise in startup investments in the last few years, driven by Egypt Vision 2030 which aims to boost private investments into small- and medium-sized enterprises (SMEs).

The most populous Arab nation hosts 128 active startups and 34 inactive startups that stopped operations between 2013 and 2018, according to the fourth edition of “State of Digital Investments in MENA 2013–2018” report developed by Arabnet in partnership with the Mohammed Bin Rashid Establishment for SME Development (Dubai SME).

Launched during Arabnet Beirut X, the report analyzes MENA technology investors and investments over the period between 2013 and 2018.

According to the report, female founders of startups in Egypt account for 12% of the total 227 founders.

The North African nation came in the second place in terms of the number of investment deals in 2017 and 2018, with 51 and 40, respectively.

Over the period between 2013 and 2018, the number of investment deals totalled 214.

Despite a drop in the number of deals from 2017 to 2018, the value of deals hiked to $66 million in 2018 from $16 million a year earlier on the back of several significant investments, including Swvl at $30 million and Vezeeta at $12 million.

Moreover, initiatives such as the World Bank’s $200 million investment project which targets SMEs as well as huge investments into Egyptian startups are expected to promote the overall ecosystem in Egypt.

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