It is commendable that Yemi Keri, CEO of Heckerbella Limited (a Technology Business Transformation company), has the time to be an angel investor. With 22 years of management experience she is also one of the foremost women in technology and was a nominee of the very recent and competitive Wonder Women Awards in Nigeria: Investing In Women’s Women In Technology award category.
What is an Angel Investor?
An angel investor is an individual or group of individuals who invest their cash, access to their personal network and their time into businesses at the seed or early stage of a startup. Sometimes the companies are pre-revenue and have an idea or product and they want to go to market; OR post-revenue and are going into the growth stage, and need the injection of funds for growth. An angel investor takes the risk of investing with the hope of making multiples on their investment at exit.
Why would an entrepreneur go to an Angel Investor and not to a bank?
Most entrepreneurs are not mature enough for the banks. The eligibility criteria, like collateral and other prerequisites that the banks need, are not available from a startup. If they are even able to cross those hurdles, the interest rates are too high to sustain their businesses and may stifle their growth. They therefore tilt towards other options like equity or debt. Some startups are not investment ready. The founders may not have experience in a structured environment and will require some level of mentoring, and an understanding of the different business support services that they require. Angel investors give out not only money and mentoring time, but also leverage their networks for the entrepreneurs. That is pretty much why startups would seek the support of angel investors.
What made you decide to start Rising Tide Africa (RTA)?
In 2016, Ndidi Nnoli-Edozien and I had the opportunity to mentor women who came to the Lagos Angel Network (LAN) where we are both members. At the same time, the women of Rising Tide Europe and Rising Tide US (known as the Next Wave) wanted to invest in Africa, so we decided to start Rising Tide Africa, a group of female angel investors harnessing their network, resources, passion and capital to develop Africa. The Rising Tide network seeks to increase women’s participation in angel investing as an asset class by encompassing investment portfolio in startups, education on the investment process, mentoring female entrepreneurs and the development of successful female businesses across the continent. We are not only a female network but also a syndicate of the Lagos Angel Network.
You’ve ventured into food, coffee chains, film production and FinTechs like Mines.IO. RTA’s investments are varied. What do you look for in an investment?
We look at the team. Teams that have synergy, the requisite skills set to run the business and can sustain the vision. We also expect that the team are full-time employees and vested in the business. We consider entrepreneurs with high impact innovative products or services that have a sustainable business and revenue model. For instance, Mines.IO is a data analytics company that operates a platform for financial analytics. Our investment was timely. After we invested, a $13m investment followed, and this was made by TPG’s The Rise Fund. We also prefer it if the investment required is used in revenue gains rather than capital expenditure. Rising Tide Africa is sector agnostic. Typically we are looking for technology-enabled and scalable innovative entities that have a social impact.
How would an Entrepreneur find an Angel Investor?
Via online deal sources. We are part of ABAN (African Business Angel Network) that refers investors to entrepreneurs on the Ventures Platform 4 Africa (VC4A.com) platform, where investors and entrepreneurs network. There are also referrals from angel investors, venture capitalists, incubators, accelerators, demo days, pitch events and so forth.
Can you take me through process of obtaining funds from an investor?
Ndidi Nnoli-Edozien, Ivana Osagie, Nike Jagun, Uche Ogboi, Damilola Thompson and I make up the Executive Council of RTA. Uche leads the investment team that sources for entrepreneurs, reviews the deals and determines if they are a fit for RTA, based on our investment criteria. We invite entrepreneurs for a 15-minute pitch and a Q&A session with investors during our deal day, which takes place three times a year. Parties with deals that are of interest are invited for a deep discussion with the team for a better understanding and clarity. The team then recommends if it is a go or no-go. If we decide to invest, a deal lead is assigned the responsibility of leading the due diligence, negotiations, valuation and to determine the amount to invest. After negotiations, term sheets are executed. We then call for funds from the investors, after which funds are disbursed to entrepreneurs.
What do you look for in the people who run the companies you chose to invest in?
Investment is like a marriage. If you are making an angel investment, you are going to be in it for three to seven years – sometimes up to 10 years – before you exit. The chemistry between founder and investor is important. Certain fundamentals are critical- integrity, knowledge of the product or service, industry and market. Does the product have low barriers to entry? And if you are investing in a FinTech, do they have a good technology person on the team? You also look at the strength of the team and see if they work well together, and at the personal style of the founder/s, as well as their leadership skills. Are they able to inspire and manage their team? There are also some founders that hold another job role, and they are just engaged on startup as a side-hustle. Those kind of entrepreneurs are high risk because they are not fully invested.
What are the biggest mistakes entrepreneurs make when they come to angel investors?
1.) Entrepreneurs don’t carry out enough customer-centred research on their products. Who wants it, why do they want it and why would they pay you for it? 2.) Entrepreneurs need to think about scalability and product/market fit. 3.) Some entrepreneurs know about their product but have little knowledge about business support services: legal, accounting, documentation. 4.) The belief that once they get funding the business will grow. 5.) The assumption that they can access the funds immediately an investor indicates interest, when in fact the commercial, legal and financial due diligence must be completed first. This process takes time, and sometimes, before it is completed the use or requirement of funds may have changed. Entrepreneurs need to project and start the process of seeking funds early.
How important is networking?
Networking is very important. It educates the entrepreneurs but also the angel investors. RTA creates networking opportunities where entrepreneurs have access to angel investors, a platform where they can both be educated about the needs of the other.
How do you become an angel investor?
To become an angel investor, please understand that it is a high risk venture, and you may not get your money back. Therefore, only invest an amount of money that you know will not affect your life if you lose it. It is advised that angel investors only invest 10 per cent of their asset portfolio because the risks are the highest known in terms of any asset class. It is people with disposable income that can spare enough money to help grow another business. At the same time, their investment can make them a profit if the business does well. But still, due to the high rate of startup failures, you need to consider multiple investments. It is also important to invest with other investors. Simply join a network.
What are the angel investor types?
There are passive investors. They just give you their money to invest. Then there are partial angel investors who have their day jobs but are active angel investors. Some angels are full-time investors. They source good entrepreneurs, invest, mentor and are fully involved in the growth until they exit. Full- time angel investors have an array of investments in their portfolio.
Is there a difference between female and male entrepreneurs?
Certain patterns are emerging. The female entrepreneurs tend to be conservative, emotional entrepreneurs with a product or service that stems from a place of passion, compared with the male entrepreneur who is more daring and sees his product or service purely as a business idea designed to make a profitable return.
The women are very conservative in their ask. You come to a pitch and the man may be asking for $3 million, compared to the woman who is asking for what will make ends meet for her in the next two or three years – perhaps $50,000. If, for instance, there is a FinTech business and you asked the male entrepreneur if you could take the application to the moon, the immediate answer would be that he has already discussed it with his developer and he will send you the plans in a few weeks! If you asked a woman on the other hand, her reply would be that she would discuss it with her developer and get back to you. Therefore, in my mind as an investor, the man is giving you confidence that he has already thought about this question, and is pursuing the idea, whereas the woman may not have thought so deeply about it. As an investor, confidence resonates rather than uncertainty. So, the level of boldness and sincerity between the genders is slightly different, though, increasingly angel investors testify that female-led businesses do better in terms of sustainability, growth and return on investments.
On that note, any advice for women entrepreneurs?
The first thing to focus on is your personal confidence and clarification of who you are and what you are capable of accomplishing. Try not to limit yourself to businesses you can control but be brave and dare to dream.