Why I walked away from $25 Million Dollars
It’s been little over a year, since I stepped down from leading Xcellon Capital, an investment manager in Nigeria, where I was able to raise over $25M from local institutional and high net worth investors. My journey to Xcellon Capital was a departure — my initial target was raise a VC fund with my team at tiphub to back the most high-potential startups led by African and African American founders. So how did I wind up in Nigeria? In search of capital —trying to raise our first fund, I left no stone unturned and began to build interest within my professional network for tiphub’s fund by first developing a pre-accelerator program, Diaspora Demo, leveraging the pipeline, credibility and resources created.
I didn’t have to look far, many of my former investment banking clients and colleagues took interest. I was asked by one such colleague to help manage his portfolio of technology investments in Nigeria. He wouldn’t commit to tiphub’s fund but was willing to bring me on as advisor to his portfolio, which I believed would help me create a track record of building value in the early stage space. He kept his word and introduced me to other investors, so I set off to Nigeria — within 5 months I secured another $25 M in assets under management from institutional and high net worth investors in Nigeria. Wow that was quick!!!
So there I was, in Nigeria with my first shot at fund management, yet willing to walk away from the whole thing. With a year’s hindsight, the reasons why I walked away from managing $25 Million aren’t nearly as important as the three lessons I learned about raising money on the journey.
First things first…founders of color have to tell better stories.
Before I raised capital — I knew from my experience in finance that when you seek other people’s money, you end up getting exactly what you can convince others of…cut and dry, despite what may be the investor’s bias and many times because of that bias. Technology diversity and inclusion advocates say that venture capital firms should invest in diverse founders and the investors in those firms, the LPs, should advocate such. The sentiment being that we, the diverse founders and fund managers, deserve more investment opportunities for a variety of sound statistics and compelling investment returns data driven reasons.
…when you seek other people’s money you end up getting exactly what you can convince others of…
To be honest — the numbers don’t matter. The angel investor and venture capital narrative I’ve often heard about founders of color or fund managers is that we aren’t ‘investment ready’, a catchall for “I’m just not convinced they will be successful.” The bottomline is being able to tell a truly convincing story despite this bias. My belief as an aspiring fund manager was to change this narrative — telling a different story with tiphub.
I settled for being able to convince investors on an investment strategy that was opposite of my initial vision. With Xcellon Capital, our strategy focused on public stocks and government bonds, a far cry from technology startups. Meanwhile, tiphub’s VC fundraising stalled — while we received some warm feedback, many investors willing to commit if we secured a lead investor, no lead investor ever committed.
Lesson 2. All Investing Is Tribal
So, what was the difference. All I can say is: Relationships Matter…but not just any type, the one’s closest to you that you’ve already invested in. Sometimes there’s a snowball effect…sometimes there isn’t, I was lucky with Xcellon. Overall from investment banking to fundraising and fund management…the most valuable currency I’ve had is relationships. An investor’s comfort level varies based on their lens of affinity— their tribe. Once you move past industry, investment type and stage…most investors make gut calls based on the person in front of them. Often sizing up whether based on your relationships whether you will be able to do what you say you will. As a founder on the other side of the table raising capital you have to figure out who to spend your time on and when to move on. So as a founder, just like you are being pattern matched by investors…to the extent possible (crunchbase, google and the SEC Edgar platform), you should match the patterns of founders in their portfolio: alumni, former colleagues, women, people of color, former this or currently that. Before raising capital, invest in your relationships — create new ones that have a strong likelihood of backing you, invest in those, then raise capital.
Lesson 3. Stay Focused
I’ve often been told, the two most valuable things a founder has is time and focus. I look back and think I must have been kidding myself to try and raise two funds with two separate strategies, on two continents as a first time fund manager. My advice — find one problem to solve…the one that keeps you up at night. Go to investors with that problem — otherwise you may end up with a $25 Million dollar distraction from your goals.
With the benefit of hindsight…I realized the problem that I wanted to solve is the lack of strong investor communities supporting women and people of color — channeling savings into growth entrepreneurs. This underscores the reason I decided to walk away and seek new challenges with Affiniti VC, building minority investor communities, so founders and fund managers can create a better world of shared prosperity.