The hunt for capital has always been one of the most difficult parts of getting a startup off the ground, but fresh platforms have given entrepreneurs around the world a number of new ways to make that happen. Nowadays, there are more options to get a new company funded, one of the most popular being angel investing (no, doesn't have to be that rich relative), so why does it feel like in Nigeria we are super stunted in that regard?
A few of the angel investors I’ve had the pleasure of meeting are retired entrepreneurs or business executives, although it doesn’t really matter what they currently do or did, what matters is that they are loaded and are willing to invest millions of naira in new businesses (that are scalable) in return for equity, and the best part is that most of them tend to invest for more insightful reasons than just monetary gain. Some are seeking to help usher in a new generation of entrepreneurs, some simply want to be on the cutting edge of development in a certain industry, and still others are just looking to put their experience to work part-time under less stressful conditions than managing their own company.
Just to be clear, I’m not talking venture capitalists here, we seem to have a fair amount of those around. While angel investors are usually wealthy individuals (or occasionally groups of individuals) who invest their own independently earned funds, venture capitalists are corporate entities that use funds from other investors and manage that money by investing it in growth businesses. The major differences can be seen when we compare them in terms of scale and execution.
Scale
Venture capitalist companies generally take on much larger projects than angel investors do. The average range of angel deals might be between N2 million and N10 million if the angel is acting as an individual, while venture capitalists typically deal with transactions from N50 million to N150 million or even a lot more.
Execution
Venture capitalists have their own investors to please, so usually the operation will require a painstaking investigation on any company applying for cash. Most angel investors do not have the same sort of structures set up to put a company through its paces, so the hurdles are usually not as much. Once the cash is handed over, it is standard for venture capitalists to place one of its professionals on the board of the startup, and to assume fairly close supervision of that company's operations. An angel investor might require a board seat, but this is less common, and generally the supervision is less rigorous, allowing for more wiggle room.
Although I appreciate the effort of platforms like the Lagos Angel Network that brings together individuals and organizations seeking to invest in and mentor Nigerian technology start-ups, I still have to ask, where the heck is everybody else? There are many great ideas stuck in limbo due to lack of capital, and there are so many wealthy business-savvy men and women in Nigeria, we really need this if we are serious about the economic growth of our country.
Photocredit: Forbes
