"I'm a cool, calm guy. I would describe myself as curious as well," Victor Kareem told me when I asked how he would describe himself.
It's a common question I throw at my guests as I try to learn more about them beyond their professional achievements and since Kareem's response is significantly different from what I'm used to, I follow up with another question. "How do you stay calm and loving when you live in Lagos?"
After smiling for a millisecond, he said his secret lies in living in a quiet part of town, while habits like meditation and prayer keep him centred.
"First thing I would advise is to put yourself in a calm environment. I live in an isolated and quiet estate not very far from town. It's very quiet so that helps to centre me and then just do other things that help to centre you as well; meditation and prayer are very good tools."
Last year, Kareem joined the Lagos Angel Network as its Executive Director but before then, he spent some time at Future Africa where he was a manager and helped out with the Future Africa Collective. Long before he got into Future Africa, he was an investment banker, helping businesses to raise capital as he quickly rose through the ranks.
"My career started in investment banking," he said. "I was a quick study right from when I finished school so I grew fast within the organisation. I was in what they call corporate finance, helping to raise funds for SMEs mostly but more like medium-scale enterprises."
Equity vs debt funding
While he worked as an investment banker, Kareem was introduced to the lending industry after he was tapped to join a new lending company. There he helped to provide small businesses with working capital and also discovered that he loved the work that went into capital allocation for businesses.
However, he believed that equity was a better funding option as opposed to debt for the businesses they worked with. With that realisation, he joined Future Africa. At an event in 2022, he met veteran investor Kola Aina, and a few weeks later, got an offer to join the Lagos Angel Network.
Explaining his preference for equity investment, Kareem pointed out that debt is not an ideal form of financing for most early-stage businesses as they easily find themselves focusing on generating enough cash flow to service the debt. Equity investment, on the other hand, gives businesses room to build innovative solutions and is one of the reasons it is favoured by most startups.
"Debt financing is better for later-stage businesses. If I'm putting it simply, it's better for businesses that can produce steady cash flow. As far as you're able to predict steady cash flow and you've had that maybe from the past six months or 12 months, it's okay. Equity is better for startups where you know you're taking a lot of risks and you're doing something new or innovative.
"Debt brings a lot of short-term thinking. People don't think, 'Oh, what more can I do?' Or try to build foundations really well. They just say, 'Oh, what's the first thing I can do to earn ₦5,000 or ₦10,000?' and they just start doing that. So they get into this trading mentality as opposed to a long-term business mentality."
On taking ownership and being self-aware
As you may have noticed, Kareem has had quite the journey since his first role as an investment banker and I was curious to know what could have influenced his rapid rise. He attributes this to awareness and taking ownership in the roles he has held.
"Two things -- ownership and awareness. I've always been kind of an intrapreneur and then I have an entrepreneurial spirit, so I always take charge of anything that I'm doing. They don't give me a manager. I'm always my own manager and I try to get things done as well as I can and beat deadlines and targets.
"I think ownership has taken me really far because I always take responsibility for everything. If you are owning the project that you're doing, people will be watching you. If you handle this really well, they'll give you something bigger. You handle that really well, they'll give you something bigger.
"So that's the growth that you're seeing. It's just more challenges. Awareness is just being honest with yourself about what your strengths are and what your weaknesses are and not getting fuzzy. There are going to be a lot of challenges and you need to be able to tell yourself, okay, I'm not good at this. This is something I need to learn, or this is something I need to partner with someone to get it done. That way you're not being delusional and slowing yourself down."
Qualities of a great investor
According to Kareem, the ability to exercise restraint and patience are two qualities of a great investor. A great investor must also have a lot of information about the investments they hope to make.
"You have to know what your investment rules are and stick with them. Investment is a game of patience and time and it compounds. So I would say discipline one, two patience, and three, information. The nutrition of investments is information.
"If you don't have the right information, you cannot make the right decision. The problem that I feel we have in Africa is that we don't have enough data and we don't prioritise data and research as much as we should. But we are very big on getting information from people and all that."
In addition to his role at Lagos Angel Network, Kareem is also a member of the Young African Catalysts, an organisation that was set up to provide venture capital newbies with the lessons and resources they need to excel in their roles. An investor's value, he said, is in their ability to help entrepreneurs achieve their financial goals.
"To get to that point as an investor, you do need some level of training over an extended period of time and I think communities like Young African Catalysts help to do just that."
When choosing an investor, Kareem advises that founders interview prospective investors to discover whether they align on specific aspects of the business. To prevent clashes between founders and investors, he counsels that all agreements be formalised, with every party's responsibility laid out.
"Founders may find this very impractical but I think you should be interviewing your investors as much as they are interviewing you. Make sure that they understand your business very well and get what you're trying to do. You also have to formalise, as much as possible, the relationship. Put things in paper agreements so that nothing is left undefined."
Difference between angel investors and venture capitalists
Having worked with angel investors and venture capitalists, Kareem believes the major difference between angels and VCs is their ability to think long-term about their investments.
Since angel investors use personal funds for their investments, they are often free to back startups that they truly believe in without worrying about returning a fund. Venture capitalists, on the other hand, have to return their funds to raise more capital from their limited partners.
When making an investment decision, Kareem considers the market the startup is playing in, its go-to-market strategy, and the team. While the size of the startup's market is crucial, he argued that it is important that a startup is not building a product that can be easily replicated by a larger competitor. Furthermore, he adds that a startup's strategy for acquiring customers is as important as the presence of a market for its product.
"You can have two really great startups [with] really great ideas but one is more effective than the other and they win market share faster. That's the one you want to invest in and you usually know that through their strategy and plan."
The majority of startup funding for Nigeria goes to startups based in Lagos. While that is not unusual considering the state's position as Nigeria's economic capital, it can stop some of the benefits that come with developments in the startup space from getting to other parts of the country.
Kareem, however, believes that while the government has a role to play in fostering nationwide economic development, individuals are better placed to drive change.
With capital often needed to unlock value, he opines that considering most of Nigeria's wealth is concentrated in the hands of older individuals who may not be familiar with the startup space, a lot of education has to be done to inform investor groups around the country of the rudiments of startup investing. He also adds that creating proper governance frameworks that protect investors would encourage more people to put their money behind startups across the country.
While it is common to compare the pace of development in Nigeria to more developed ecosystems, he highlighted the need for patience. "I think people forget this. I don't know who we are comparing ourselves to, but we are a very young ecosystem. So time will improve things naturally."