12 Things I've learnt working in Venture Capital
I thought I wouldn't be in venture capital until my late 50s when I retired. Venture Capital seemed like a cool thing to do when you don't have a day job anymore-sipping champagne in your Patagonia vest while your body looks far too great for a 50-year-old.
I started my career in African tech in 2012 and fast-forward to 2019, I co-founded Future Africa— led by Iyin Aboyeji alongside Dami Fasawe, Adenike Sheriff, Chuba and Chine Ezekwesili, Adetola Onayemi and Mayowa Olugbile.
In January 2020, we announced the Future Africa Fund — an early-stage fund for African startups. At the height of pandemic lockdowns in April 2020, we went a step further to launch the Future Africa Collective — a community of angel investors who join Future Africa to invest on a deal-by-deal basis. Future Africa has quickly become one of Africa’s most prolific early-stage VCs in Africa, investing about $4.3 million in 43 African startups in 2021.
You can learn more about Future Africa here.
In the last 3 years, I've learnt a lot more about technology, startups and venture capital than I could ever imagine. In this piece, I will share some of the most interesting lessons I learned.
VC is a relationship business.
Relationships are vital for venture capital investors. Asides from forms on their websites, many VC firms rely on formal and informal intros to startup founders. This behaviour can easily cause tunnel vision for VCs, but the truth of the matter is that if you're funding a business with millions of dollars, you want to make sure that people in your industry can vouch for them. VC is about trust as much as it is about innovation, technology and funding entrepreneurs who can solve problems. I wrote more about this in my 30-day newsletter series. You can read it here.
Investing is difficult
Investing is so hard. African VC firms receive thousands of applications and intros each year. They have to sort through these applications to decide who to talk to, study the sector, carry out due diligence, look through terms, and determine what startups get funding.
There are so many variables that affect what startups get funding. Sometimes, VCs love a startup but can't invest because they've invested in too many startups in that sector, which could lead to overexposure. They might also love a startup but want to wait a bit because there's regulatory uncertainty. Founders often forget that VCs have limited capital and can not fund every startup.
Taking risk requires capital.
People say many things about African VCs and angel investors taking their time to invest. The truth is that it's hard to take risks when you have less capital. It's easier to ask people to take risks when it's not your capital that's at stake.
Because of limited capital and limited wealth, African angel investors and VCs can't take as much risk as they want or they should. Many would rather wait for some traction number or other investors to take risks .
For the first time in a long time, Africa is experiencing a new and transformative method of wealth creation that's not dependent on mined, extracted or cultivated natural resources. As the African tech ecosystem matures and more people get richer, they will naturally take more risks.
African VCs like fundamentals
The best African VCs love business fundamentals. They're very simple and straightforward people who can break down your deck and see through hype and shenanigans.
They're not easily impressed by waitlists, vanity metrics and download numbers either. Founders should learn to show traction and revenue or activity(like letters of intent or signed agreements) to drive actual revenue or transaction volumes.
African VCs know stuff.
Many founders assume that African VCs don't know what they're talking about. This story isn't true. We must remember that most analysts, associates and partners at African VC firms have lived in Africa for most of their lives.
The challenges of our continent are their lived reality. They've suffered inadequate healthcare, multiple university strikes and know what it means to transact within Africa's borders. They also have profound expertise working in many traditional industries — their advice and network run deep. Also, please don't lie to VCs about who's funding you — it's effortless to validate or invalidate your claims.
I'm always surprised at the depth of questions members of our syndicate(Future Africa Collective)ask founders. They seem to know everything about all industries. We're truly grateful and blessed to have them.
Founders need a lot of help.
Founders often need more help than they think. A lot of founders believe that capital alone will solve their problems. Money will only solve part of their problem. Founders need leadership skills as their companies scale, help with hiring, meetings with(and securing partnerships) industry heavyweights, brokering with & supporting regulators, and so much more.
Founders also need friends they can lean on for support in difficult times. Startups are hard, and the journey is rarely as rosy as it looks in public. It would help if you had friends you could ask for advice & hang out with on tough days. Build your community of advisors who can tell you when you're going wrong, making bad decisions or need someone to rant to because your regulator is moving mad.
Founders should separate their identity from their startup.
Society today elevates entrepreneurs to god-level status. Founders need to remember that they are human before startup founders. They're leading a team on a mission to solve a complex problem, and they're going to get rewarded for it. Founders should find ways to separate themselves from their jobs as leaders so they can find the time to rest, explore hobbies, self reflect and make friends that don't work in tech.
Thank you for reading this article so far. I write about technology, startups, work and growth marketing. If you're enjoying this, you'll love my newsletter.
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Startups are hard
I feel like a lot of people already know this. Doing business in Africa is challenging. Startups are even more complex. They're unimaginably difficult businesses, and you should only embark on one if you're ready. You should only join a startup if you're prepared to face the craziness. Everything that you think could go wrong will go wrong. My friends who are product managers always tell me: Every day is for fighting fires.
Ask for equity
Equity is how you can truly become rich. Many talented and experienced employees in the African tech space don't ask for equity. Please ask for some equity -especially if you're joining a startup at the early stages. If you're worried that your equity can go to $0, your worry is valid. It's, however, better to have equity than not. Many African startups now have employee stock option pools, so you should ask your HR or founding team.
Please read this thread by Ido Sum on how employee stock options work.
Founders must focus
In a world where you're elevated and constantly celebrated, it's easy to get carried away with press mentions, interviews, speaking engagements and activities. You must remember that many of these wouldn't tie into any results for your team.
Startups can go multiple different ways. Founders must lead their teams to be hyperfocused. It's entirely okay to pause acquisition campaigns so you can focus on the quality of your product. Ecclesiastes says — there is a time for everything under the sun.
Hype doesn't last too long.
Hype is great. Trust me; I've been there before. Hype gives you a rush and makes you feel like you can do anything in this world. However, hype often doesn't last long. Founders and startup teams must focus on the fundamentals of their business model and not get carried away with technology or ideas that seem exciting or cutting edge — it's often a huge distraction, and many people regret it. If the technology doesn't solve your customers' problems, you don't need it. If your customers are not yet on the new hot social media platform, you don't need to create content for it.
I love our community.
I love how open and welcoming Africa tech is. We share information, talk about hard things, write articles, create group chats, collaborate when talking to regulators, hold webinars, recommend and share jobs to our friends, make intros to different VC firms and support each other as much as we can. We have a community, and we must hold on to each other.
There's more work to be done.
There's so much work to be done in the African VC space. This year has already seen an announcement of new funds — I'm always so excited to see new funds launch. I'm even more excited that many funds now have syndicates in addition to their traditional fund; this means more capital for African founders to solve problems. I love that African VCs are figuring out many ways to increase the pie of money available to founders.
Thank you for reading this article. I write about technology, startups, work and growth marketing. If you enjoyed this, you'd love my newsletter.
SUBSCRIBE HERE
Further Reading:
- Venture Deals by Brad Feld and Jason Mendelson — Order from Flippe to get it in Nigeria.
- Venture Capital and how to get it — Scott Kupor. Order from Rovingheights to get it in Nigeria.
