In the 9th episode of Invest In The Future, our Growth Partner, Olabinjo Adeniran, spoke to Idris Ayodeji Bello, Afropreneur & Founding Partner at Loftyinc Capital Management, an early-stage African-focused technology fund.
Loftyinc is an early investor in 2 of Africa’s 5 unicorns – Andela & Flutterwave and backs startups across Sub-Saharan Africa and the MENA region.
Invest In The Future is our live podcast series. We learn from prolific investors and founders who have invested in and built some of Africa and the world’s most impactful technology companies.
Listen to the entire conversation with Idris below.
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Here’s what we learnt from Idris:
Ten Years Ago, Investing in African Startups Was Chaotic
1. Hitting $2 billion in 2019 and averaging more than 40% annual growth, the African VC space has gone through tremendous growth in the past couple of years.
2. As one of the earliest backers of African startups, Idris acknowledges that the ecosystem is entirely different from 10 years ago.
3. Many processes such as due diligence were not as structured as they are now. For example, back then, due diligence took about 6months to complete, and after completion, the company may have hit rock-bottom.
4. For Idris, the investment journey has been mostly about ‘’Learning by Losing Money’’, which he fondly calls LLM.
5. “In retrospect, it turned out well, right. I probably made more money ever than what was in that pool, but it was a stupid move because I wasn’t doing it thinking far out of I am going to have a 5x of exit,” Idris says.
6. Initially, the cheques given to these startups were about $5k and $10k—the turning point being Fora, which later became Andela.
7. Essentially, it was a chaotic learning period for both investors and founders. “Some founders took your $5k and never saw them again. It was very basic, and people were not fully invested in it,” Idris shares.
8. Another fun observation that we find interesting is that Idris adequately documents all his investments and can mention the dates of almost all of them.
9. We learnt that investors should have a track record of their investments that will enable them to reflect on later.
Building a Community is Necessary
1.In May 2010, while in the US, his professor shared an idea (business models for low-cost technology) to scale to Nigeria.
2. During his return to Nigeria, he realised the non-existence of technology structure and the need to focus on the ecosystem.
3. This trip to Nigeria inspired him to write a report and article about entrepreneurship, which led to him meeting Michael Oluwagbemi.
4. After he met with Michael Oluwagbemi, bounced a couple of more ideas with him, Loftyin was born.
5. In late 2010, the tech hub, wennovation hub, was formed. “What we did then was just to hide the I from Innovation which we assumed would represent the individual, replaced it with the WE, meaning collaborative corporation,” Idris shares.
6. With all these, it wasn’t about investing for Idris; it was, in his words, “maybe just something on the side.’’
7. For Idris, creating a community of angel investors wasn’t done intentionally. Instead, it was from an observation that these entrepreneurs needed funding to scale.
8. Before deciding to use his pension funds to invest in these entrepreneurs, the initial people he reached out to rejected his idea of investing in them.
9. You can never go wrong with building a network of people who have the same ideologies about life, in general.
10. According to Idris, he is where he is today with the help of his strong network.
Today, making Profitable Investment Decisions
1. Today, Idris has a structured way of choosing the companies to invest in. A testament to growth and believing in the journey!
2. All the lessons Idris has acquired so far have made him a thought leader in the ecosystem.
3. Now, the first thing he looks out for is the founder(s). “Today, we have a higher quality of founders,’’ he shares – this makes about 60% of the final decision.
4. Idris believes that asking a simple question, “Why you?” goes a long way in making investment decisions.
5. Other questions about the founder(s) are:
- What are their exposure and network?
- What is their connection to the problem?
- What is their understanding of the problem?
- What unique experience do they have of the space they are building?
6. Timing is also an essential fact in building a company. A couple of o months ago, some infrastructures were feasible, and now they aren’t anymore.
7. Idris reminds us that many of the infrastructures and companies we are building in Africa are linked, and they go hand in hand.
8. “For you to do commerce seamlessly, you need to solve for payment, and we are looking at fintech,” Idris shares. “And we are looking at logistics for you to deliver the goods,’’ he adds.
9. At the same time, he emphasises that we need three essential things to build a prosperous continent—people who are well educated (education), healthy (healthcare) and food security. All these make up the top sectors he is interested in investing in the continent.
10. Company trends are also a common factor. Due to the number of similar decks, Idris asks the question of “Does it make sense to invest in one in each region? Some regions have advantages over the other region,’’
Listen to the entire conversation with Idris below.