Entrepreneurship and Investing in Africa: A Conversation with Bade Aluko
Bade Aluko believes in planning, “I’m the type that will plan a cruise for next year and pay for it right now, and diarize it!’ he says.
Driven by his passion for creating opportunities for entrepreneurs on the continent, Bade is an entrepreneur and investor — investing in early-stage startups across Africa.
His belief in early planning and his passion for entrepreneurship led him to Untapped Global. While representing one of his portfolio companies, an early stage e-mobility startup manufacturing electric bikes out of Accra Ghana, Bade began strategizing financing models for the asset-heavy startup, “I started thinking about how we can manage the funding requirement beyond equity. And that’s where the concept of debt came in. I started looking for people who can provide debt financing for that startup,” he says
“I’m very impressed with what Untapped is trying to do in Africa and emerging markets. And what was interesting was that I went after Untapped. Untapped didn’t come after me. I was introduced to Lundie Strom in Cape Town, who introduced me to Yvonne Okafor in Nairobi and Jim Chu in San Francisco. And the rest, I guess, is history,” says Bade.
I sat for an interview with Bade Aluko, first to discuss our shared admiration for Nigeria’s Nollywood — the world’s second-largest film industry, right behind India’s Bollywood, but, more importantly, his investment in Untapped’s equity round, his thoughts on retail investing, and his journey from entrepreneur to investor.
Tell us more about yourself and why you got into investing.
I’m an entrepreneur and investor. I Co-founded my first company in January 1994 with my friend and colleague. After pursuing computer science in college, I came back to work at the IBM office in Nigeria (DPMS). I rose fast to the youngest software manager position for PCs and RISC systems, which were mid-range IBM systems from which bank enterprise servers were based.
While in that position, I noticed some gaps in the market. My friend who worked sales at IBM and I decided to put our heads together and build our own company. We became IBM distributors selling IBM equipment.
By 1997, we had become the largest selling distributor in sub-Saharan Africa for IBM outside of South Africa. But, like every other business, it was full of challenges. We did not have investors or mentors like most startups and founders have today. The ecosystem was not as collaborative as it is today — people tended to work in silos.
In the ’80s and 90s, there was a significant disruption in the Nigerian Finance industry. To give you some background, before that, the banking sector in Nigeria was largely government-owned, in addition to prominent international players like Barclays and Standard Chartered. Nigerian banks were small and few. But in 1990, the government decentralized the process, allowing private banks to come to the country.
At that time, technology functioned on a batch system. I remember vividly if you wanted to pay a check into your bank from upcountry Nigeria, it would take 21 days to clear in Lagos. So we saw an opportunity in banking software, and in 1998 we started a subsidiary of the primary company to focus primarily on distributing banking software. It was that company that put us on the map! To date, we’ve handled projects in about thirty-four countries, with offices in ten countries across Africa.
In 2019, I retired from active operations and got into angel investing and venture capital.
I’d put some money in some companies early on, and they did pretty well. So when I retired in 2019, I wasn’t quite sure what I wanted to do, but I knew that I wanted to give back.
My driving force was the challenges I’d faced when starting my own business. I wondered, ‘how can I help those coming after me have better access to funding?’ ‘How can I help them to build relationships and networks in the industry?’ And, ‘how can I create a formal mentoring program to help young people achieve their objectives?’
My greatest joy is seeing young people who passed through my tutelage doing well!
Why did you invest in Untapped Global?
Untapped and I share the same ethos. I’ve always wanted to create opportunities for entrepreneurs in Africa through mentorship or by connecting them to ecosystem builders and investors.
If I’m sitting in Johannesburg, and there’s an entrepreneur in Uganda running a water business- using a water ATM to generate income, I probably wouldn’t invest in him because I don’t have enough knowledge about the business or the environment he’s operating in. But with Untapped, you have teams on the ground who understand that business. You leverage technology through data generated from that asset to track usage and income, so, you know how the business is performing.
It’s easier for me to put my investment in Untapped because I can fulfill my goals with minimal risk. After all, you have inherently de-risked that investment — and Africa is a huge continent! You couldn’t stretch to fit it all as an individual, so Untapped is also geographically diversifying my portfolio.
What is the “African opportunity” for you and other investors?
Africa is the land of opportunity and has become very sought after by the Venture community. Early in my career, I’d tell all my friends in the diaspora that everything you take for granted here is an opportunity in Africa. For example, whereas my friends in the US or Europe don’t bother to think about power, I have two generators in my Nigerian home. Public power, sadly, is my third backup. Power companies in Nigeria can’t meet the demand. That’s an opportunity.
Africa has enormous opportunities and talent. It just needs capital from VCs and other funders. The challenge becomes how international investors deploy capital to startups and entrepreneurs in Africa. A lot of them don’t know much about Africa. This is where organizations like Untapped and my venture fund, White Hibiscus Capital, fit perfectly -those of us on the ground who understand the market and do due diligence on companies at the early stage and deploy capital. Then, when the American company comes with a $20- or $30- million dollar check, we already have great investable companies.
And that is why today, there are a lot of international venture funds and investors coming in at Series A, B, and C in Africa. Over time, we’ve built great companies, de-risked the business, and built excellent standards.
Why do you choose to invest at the early stage?
I think that’s where I can have the most impact, but it also aligns with my objectives. If I wait for a series A or B, my value add is not that necessary. It’s also about creating a pipeline for really great companies. If we divert our assets into funding those early ideas, we create a system and eventually grow the ecosystem and create opportunities for international investors to help carry. And you can see that growth in the last five years, especially in Nigeria.
How do we encourage high-net-worth individuals in Africa to invest in African startups?
I think the goal should be how we can make sure that a Nigerian with 1M Naira (around $2,000) can invest in a startup or small business anywhere in Africa. Retail investors, that’s what we need in Africa.
We’ll never get there if we’re looking at the Dangote’s and other high net worth individuals. I like that Untapped is tapping into that as well. We need to redesign the system, create policies that allow retail investing, and educate people on that.
I understand the worry for governments is that retail investors typically do not know to ascertain the risk level of their investments. It’s a concern for governments everywhere that you might fall into a Ponzi scheme. However, legislation needs to recognize SMEs as the backbone of the economy and that they need funding — and the traditional financial institutions cannot fill that funding gap.
What is your advice for entrepreneurs in Africa?
First, entrepreneurs don’t get into entrepreneurship because they want to make money. They go into it because they want to create a solution and make money while doing that well. Secondly, be collaborative — recognize that you are not an island and find people that compliment you.
Lastly, never stop learning. It is when you grow that your business also grows.
Untapped Global offers profitable, data-driven investment opportunities for global investors to finance high-growth businesses in emerging markets.
Their investment platform is open to accredited investors. Create an account and start investing in the world’s fastest growing market! https://untapped-global.com/
