A new Nigerian VC is trying to democratize startup funding for everyday investors
The subject of funding is nearly always top of mind in Nigerian startup and venture spaces.
But while founders and startups looking to raise funding have typically had to look to the US and Europe for venture capital, there’s an increasing number of options back home.
The latest addition to that growing list is the Future Africa Collective, launched by Iyin Aboyeji, who made his name as a early co-founder of Andela and then Flutterwave. Unlike investment funds backed by institutional investors, Aboyeji is looking to democratize the opportunity of investing in African tech startups for younger interested investors.
The model will see the Collective search for startup investment opportunities and offer investors, who join, a chance to invest. “We do the diligence and present that to qualified pool of investors for a chance to fund the deal,” Aboyeji tells Quartz Africa. Investors who decide to fund any deals can follow through with the Collective’s US-based fund partner.
So far, signed up investors have comprised diaspora-based Nigerians looking to tap into tech opportunities back home as well as younger, upwardly mobile Nigerians interested in aggressive investment strategies, Aboyeji says. The big goal is to “create new and more sustainable funding sources for the ecosystem” and “extend funding to founders particularly at the earliest stages.”
Investment in Nigerian startups has soared over the last five years, making Lagos the most valuable tech hub in Africa and dominating investment rounds on the continent last year.
But the funding has been dominated by funds from Silicon Valley, London, China or elsewhere rather than from local investors or high net worth individuals, who tend to focus on more traditional sectors like energy and agriculture.
While there’s an increasingly influential angel investor community building in Nigeria and across the continent, there have been fewer opportunities open to non-professional or sector-affiliated investors. By opening up to everyday middle-class investors, Collective will be aiming to plug an underserved gap where there’s increasing interest. One example of a startup that has tried to open up investment opportunities to ordinary Nigerians is Farmcrowdy, which allows backers to stake stakes in local farms.
There are already early signs of promise: eight investors pooled $100,000 for the Collective’s first fully funded deal within three days and it received 400 applications from potential investors within the first week.
Much of the Collective’s credibility likely stems from Aboyeji’s track record as a startup founder and investor. He previously co-founded developer outsourcing firm Andela and payments company Flutterwave—both companies have received over $235 million in funding between them. Earlier this week, 54gene, a genomics research firm Aboyeji invested during its seed round, also raised $15 million in a Series A round. Aboyeji, 29, has already invested in 20 companies across Nigeria and East Africa.
The Collective’s launch coincides with notably growing appetite to invest in dollar-denominated assets among Nigerian millennials.
Given the threat of inflation and devaluation of the Nigerian naira, dollar-denominated assets are a more stable choice for long-term bets to store and grow wealth.
And, over the past year, a crop of local fintech startups have found success offering products that allow young Nigerians invest in US stock markets and real estate.
Being able to raise funding from several “ordinary” Nigerians (average ticket sizes expected to range between $10,000 and $25,000) is also likely to boon for local startups, particularly early-stage companies seeking seed funding. This is especially the case with local high net-worth individuals not investing in or championing Nigerian startups like their counterparts in the US and Europe.
The timing of the Collective’s launch, amid the coronavirus pandemic, is also important. With local and global economies shut, the economic cost of the outbreak is climbing. World Bank projects Sub Saharan Africa will fall into its first recession for 25 years while the International Monetary Fund predicts Nigeria is headed for its worst recession in 30 years.
“As with every recession, foreign capital will dry up [and] as soon as there’s a recession or a Naira devaluation, companies die,” Aboyeji says. While the idea for a funding collective had previously been in the works, Aboyeji says it was fast-tracked due to Covid-19. “The question was ‘how do we maintain resilience [of the ecosystem] by quickly figuring out alternative funding sources’,” he says.