Tuesday, 7th February 2023
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Searching for our Medici effect

The Medici Family of Florence was a family of humble agricultural origins who later became one of the richest and most powerful with interests in banking and politics. 

The Medici Family of Florence was a family of humble agricultural origins who later became one of the richest and most powerful with interests in banking and politics.  According to Wikipedia – “The Medici family bankrolled the invention of Piano and Opera, funded the construction of Saint Peter Basilica and Santa Maria del Fiore, and patronized Leonardo, Michelangelo, Machiavelli, and Galileo.” 

The Medici Effect
Frans Johansson says in his book titled, Medici Effect: What You Can Learn from Elephants and Epidemics, “Thanks to this family and a few others like it, sculptors, scientists, poets, philosophers; financiers, painters, and architects converged upon the city of Florence. They found each other, learned from one another and broke down barriers between disciplines and cultures. Together they forged a new world based on new ideas—what became known as the Renaissance. As a result, the city became the epicentre of a creative explosion, one of the most innovative eras in history. The effects of the Medici family can be felt even to this day.” 

I have always wondered if African or specifically Nigerian innovation ever had such aggregate influences from wealthy local patrons until I stumbled on an article written a couple of years ago by Ayomide Tayo examining the impact of 419 fraud kingpins on Nigerian music. The report was well written and revealing. There is local money powering artistic innovation in Africa, but it is not the type of money we desire. It is the money accepted out of desperation.

In Ayomide’s words, “For over a decade now Yahoo boys have funded the careers of some countless artists. If this was 14th century Italy, yahoo boys are what the Medici family were to artists, grand patrons who pay for their works of art.”
I believe that the music industry and the tech industry have a lot in common and wonder why there hasn’t been more convergence? Musicians are creative entrepreneurs going through similar struggles as those of tech entrepreneurs in trying to address the same consumer market.  

The recent multimillion-dollar fundraise by MAVIN Records from a vehicle backed by the notable tech investor TPG has proven that funding for the music industry has left the darkness and matured enough to get the attention and investment from institutional investors. Maybe, now, music will be able to invest in building its tech or perhaps investors like TPG will create the “Medici Effect” and break down the barriers between their tech and music investments

Our “Rich Oga” Effect
There have been a lot of conversations about what role the rich or “high net-worth” individuals in our society should play in the technology space. There are a few already investing either directly or through Angel syndicates. I had the opportunity to meet with some local angel investors in Nigeria a couple of years ago, and the feedback I got after the meeting was that what I said there didn’t sit well with them.

First, I told them that technology investment was global and usually for outcomes, they should not see any startup as a local company and should instead encourage them to incorporate outside in favourable jurisdictions to widen their investment options. Secondly, I urged the Angels to start looking outwards for investment opportunities and not restrict themselves to local startups.

Lastly, I discouraged the premature valuation of startups and ventures before they found “market fit” and proposed that they accept something similar to YCombinator’s “Simple Agreement for Future Equity” – SAFE. 
I believe we are making “early-stage” investments in most parts of Africa the wrong way. I don’t think wealthy people should be “investors” for returns or outcome at the early stages of development in any creative industry; they should be patrons like the Medici who bring people together to enable collective growth. Startups can solve problems for the patrons, but they should also be paid for it. We should have an “earnings” approach rather than a returns or capital gains approach to support early-stage entrepreneurship.

A friend in India was able to build a payments startup because he solved the problems of one of the wealthiest people in Indonesia who had payment issues within his conglomerate. My friend calls the man “The Dangote of Indonesia.” This patron in Indonesia gave two million dollars to a young founder to experiment and find the best solution to solving his internal payment issues. It was not an investment; it was more like a prepayment or even a grant. That solution has become one of the most widely used mobile payments products globally with some major banks also deploying it in Nigeria.

Startup investing is more than just giving money; it is an entrepreneurship role. There is a world of difference between giving money, being a patron or being an investor. Being an investor means that you invest knowledge and time along with the money. I have suggested that startups should not approach wealthy Africans to make investments, they should instead think of working with them to solve problems or build legacy projects.  

Young startups still struggling to achieve market fit cannot guarantee the type of returns to which these high net-worth individuals is accustomed.  The best thing the wealthy can do for African tech startups is to provide mentorship, opportunity, and equity free resources to conduct experiments and learn. Maybe in doing this over iterations, we will achieve our Medici effect.