What We Learned Writing 21 Cheques in 2 years

I read Tayo’s recent post, and watched with keen interest, as several people brought their perspectives to the table. I am glad he took some time to expand on his series of tweets that were insufficient to provide much context within 140 characters.

Our ecosystem is evolving fast and to a large extent today there are more hassle free funding opportunities for the best entrepreneurs. I’m super excited for the recent announcement of Flutterwave’s $10,000,000.00 series A funding round — after only 1 year of operation. And so I find this debate to be a much needed conversation on the future of our ecosystem and it has inspired me to share some thoughts on our learnings at VP from making 21 early stage investments in African founders over the last 2 years.

2014 was the year I made my first tech investment. Prior to this, I had invested in other traditional vehicles like real estate and even trading businesses like diesel peddling etc. That 2014 investment of $50,000.00 was unique for many reasons. For one it was the first investment in a tech based company we weren’t operating; secondly it was done without fully understanding the investment instrument (a convertible note) and the investment was more so in the founder than the idea.

Since then, I have learnt a lot more, spent time in formal learning at Berkeley, we have invested in exciting companies like Paystack, and now formalized our passion to support early stage companies via Ventures Platform. Through all this we have learnt a few lessons.

It pays to be founder friendly.

Because founders talk among themselves and it is important to be the first option for the next batch of best founders. When Ventures Platform hosted Michael Seibel of YC in Abuja, the one thing that stuck with me from all the insights he shared, was the need to be super founder friendly. At VP, from day 1, we have taken this message to heart and ensured that our terms favor the founders as much as they preserve the interest of the investors and the company at large.

It’s a privilege to get a chance to invest in a great company.

The best investors want to invest in companies that would do fine with or without them. At VP we also wanted to make our investment process super-fast; as startups do not have the luxury of waiting 6 months for an investor to arrive at an investment decision. At the early stage, speed is critical to the survival of startups and at times the difference between life and death might just be that immediate cash injection.

There are very few people writing cheques.

There is a lot more chatter/advice than action. Truth is, giving this scarcity of capital, entrepreneurs would grab cheques anywhere they can find it especially when on friendly terms. And so in our view, the entrance of foreign investors and accelerators is definitely a positive for our ecosystem. It creates more funding opportunities for hundreds of local entrepreneurs who before now had just a couple of doors to knock on. Would some of these investments turn out bad? Yes, but it’s not any different in other climes. We mustn’t be too hard on ourselves.

The best way to learn is to write a lot of cheques.

By writing 13 cheques through our accelerator (in 12 months) and about 8 outside-accelerator investments we have learnt much more than we would have if we read all the VC books in the world. Of course it hasn’t been all rosy, but we believe that one must take the good with the bad. In any event failure is a key part of the process. In doing this we have also enabled more experimentation and inspired more people to break out and try to build something great. Though, we initially started investing our own capital, we now have a larger fund with other investors that enables us write a lot more cheques and make greater impact.

Exits are key, but exits come in different shapes and sizes.

While we all live for exits — at VP, rather than feel threatened by the increased interest of the foreign accelerators and investors — we have chosen to embrace them and explore how we might become feeder stock to them. Today, we now have one of our accelerator companies in one of the top 3 global accelerators, joining the ranks of other superstar portfolio companies like Printivo, Kangpe, Tizeti and Kudi.

Magic can happen anywhere.

When we set up VP as a fund and accelerator and also opened the doors to Ventures Park (our co-working / co-living campus) in Abuja, we got many questions as to “why Abuja?” Since then it’s been amazing to see organic growth of a community of entrepreneurs, engineers, and freelancers that now live and work on campus — all dreaming, working and building their passions in a city that they said was all about government contracts. Through our accelerator we have also had the privilege to invest in amazing founders including a Cameroonian and Belgian company building technology for Africa.

The best investors are entrepreneurs themselves.

Having built several businesses for over a decade now, one is better able to empathize with the struggles founders face. This experiential quality is one that the entire VP team share and I suspect the founders we support are better for it.

The fundamentals are fundamental!

In our short but active experience we have found that the basic qualities like — grit, integrity, discipline and a clear vision of the future that helped us build our various businesses, still ring true even for startup founders. It’s all about the quality of the founder! Our program at VP is designed to influence and leverage the best qualities of the founders we support. We emphasize non-startup-traditional things like corporate governance, ethics and having a clear moral compass. We also find it valuable to be very hands on with our founders and their businesses.

We urgently need more public winners.

Investors are like sheep. We follow signals. The best of us do not want to miss out on exciting markets that have all the right indices (FOMO is real). But that rush only lasts for so long. We also need commensurate returns in a reasonable amount of time. And so while the current wave of foreign capital is cheering, our entrepreneurs need to double down and prove their mettle. If we do not showcase winners soon, things can slow. Examples abound of markets that cooled when investors got burned. However we mustn’t also over-compensate for this concern. This enthusiasm should not be curbed. If you look closely, there is signal in the current noise. It will attract talent, money and resources that would have gone elsewhere.

All in all, I welcome this debate and I understand Tayo’s worry about the need for better filtering, however I reckon it is more important that we do not rain on this parade. After-all venture investment is more about optimizing for the upside than over-protecting the downside.