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124 Pages·2017·3.94 MB·English
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Implemented by Scale Up! Entrepreneurs’ Guide to Investment in Nigeria Scale Up! Entrepreneurs’ Guide to Investment in Nigeria SCALE UP! ENTREPRENEURS’ GUIDE TO INVESTMENT IN NIGERIA 4 Foreword Laogs , Niegr i a , a c ti y fo e ov r 2 0 m i l l noi i n h a t ib a t n s , h a s a r a dip l y g row i n g s hpe r e fo t e c h s t a p u s - r . t A n es t i m a t e d 4 0 07 0 0 - a c t i ev a n d v i a elb s t a p u s- r t i n Laog s b e mc o e ke y d r i e v r s fo j o b s a n d e co - m o n ci g r o w t h . Th e etn r e rp e n e u r i a l e co s y s t e m i s g a i n i n g rom e a n d rom e i tn e r n a t n o i a l at t e t n noi – a n d e monc o ci t r a c t n o i . Adrio c ncg ot Sta r t p u G’em o ne s Gabo l S pu t - a r t Eso ycs m te Rrpeo t , 7 2 1 0 Laogs’ s t a pu - r t e c o s y s t e m v a u el i s t h e h i g h e s t i n Af r ci a , v a uel d a t USD 2 ib l l n o i . Mos t e tn r e rp e n e u r s , ,eowh e v r s t i l l s u f e f r f mro l i m t i e d a c e s s t o b u s i n e s s a d v c e i , t a e l t n , m a r k e t s a n d c a tip a l . Thes e nco s t r a i t n s a r e e e v n h i g h e r ro f m o e w n , t oh s e w oh a r e ou y n g , ro l i ev o ut s d i e fo t h e me t pr o l o t i a n re g n o i s . On e fo t h e ke y c h a l e l n e g s ew h eva h e a dr m a yn t i m e s f mro s t a p u s - r , t i s t o f i n d t h e r i g th f i n a n c i n g po t n o i , a n d ro kw no t h e s p e c i f ci du e d i l i e g n c e re q u i r e m e t n s fo t h e s e i n s t r u m e t n s . Th i s g u di e a i m s a t he ip l n g s t a p u s- r t u n d e r s t a n d a n d n v a i g a t e t h e v a r ei t y fo f i n a n c i n g po t n o i s . Thes e i nc u dl e d ie v r s e me c h a n i s m s s uc h a s g r a t n s , s e e d f u n d s , a n e g l i e v n s t m e t n , i m p a c t ro ei t n e d evtn u er t i a c p a l , tbe d e c t . uF r t erer , h o m t e h g eu d i t u o l ise n q u e r i e r - t n e s m , rse o t i v n e x p c e t n taos i a s el wl a s rse o t i v n t y pse i n a n ea is yl e l seis b c c a , w y a a n d fo e f r s rp a c t c i a l s pup r o t t o e tn r e rp e n e u r s i n a sk i n g t h e r i g th q ue s t n o i s w he n ap rp o a c h i n g a n i e v n s . t ro I n re d r o ot cte e a r a ene ev h is r p m o c r e v o v ew i e w dec a hr t u o ot er o m t h a n 23 f i n a n c i n g p a r t n e r s w oh rp e s e tn t h e i r p ro t l o f oi a n d re q u i r e - m e t n s i n t h e g u die b o ko . Smo e fo t he m , l i k e DEG , GTren e c Catip a l a l s o he p l e d u s a n d g eva v a u l a elb e f e d b a c k t o i m erpov t h e g u die . Th e rp i tn e v r s noi w i l l b e s o no a l s o va a i l a elb a s a n i tn e r a c t i ev no l i n e ev r s n o i . B a s e d no a q u c i k a s- e l s s e f s s m e tn t o l o , t h e no l i n e g u di e w i l l p el h e u n e t r rnepe s r ot f id n t eh s u-dte i b s e t f i n a c n i ng ce h m a n i m s , a n d die t n i f y p ot e t n i a l f i n a n c i n g p a r t n e r s . Foreword 5 At this point, we have to acknowledge one person especially: Anton Root, who shared his knowledge and experience for this guide. Thanks to him and the Allied Crowd team (Lars Kroijer, Malcolm Kapuza), who have proven to be experienced partner in navigating through the finance landscape in East and West Africa. We also received valuable feedback and support from GIZ colleagues from the finance sector Diana Hollmann, Gabriela Rosales-Rogge and Annette Kleinbrod (Stifterverband). Last but not least, many thanks to my team from Make-IT in Africa: Chiemelie Umenyiora, Mutembei Kariuki, Matthias Fröhlich, Stephanie Wiedner and Jonas Schug for organizing, proofreading and final editing. We will frequently update the guide to include new financing partners, and improve the methodology based on your feedbacks. So, please, don’t hesitate to contact us via SCALE UP! ENTREPRENEURS’ GUIDE TO INVESTMENT IN NIGERIA 6 Tech Entrepreneurship Initiative Make-IT in Africa Make-IT in Africa promotes digital innovation for sustainable and inclusive development in Sub-Sahara Africa. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH implements this project on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). In collaboration with more than 20 corporate and financing part- ners, social enterprises, hubs and networks, ‘Make-IT in Africa’ strengthens an enabling environment for young tech entrepreneurs – to provide better access to finance for growth, international markets and entrepreneurial skills. More information and contact: www.make-it-in-africa.org Contents 7 Contents Foreword ........................................................................................................................................... 4 Contents ............................................................................................................................................ 7 Glossary ........................................................................................................................................... 10 Introduction ................................................................................................................................. 14 Chapter 1.0 Funding Instrument Overview ................................................................................20 Grant ............................................................................................................................................. 24 Debt ................................................................................................................................................26 Equity..................................................................................................................................................28 Mezzanine ...................................................................................................................................30 2.0 Investor Overview .......................................................................................................... 32 Accelerators / Incubators ....................................................................................................36 Angel Investor Networks .....................................................................................................37 Lagos Angel Network Aims to Promote Access to Finance .....................................38 Foundations ...............................................................................................................................39 Crowdfunding Platforms ....................................................................................................40 Public/Semi-Public Funders..............................................................................................41 Lagos Innovates Looks to Support Yaba’s Start-ups ...................................................42 Banks .............................................................................................................................................43 Impact Investors ..................................................................................................................... 44 Corporates ...................................................................................................................................45 Venture Capital Fims .............................................................................................................46 Private Equity ............................................................................................................................48 How to Connect With Funders...............................................................................................49 3.0 Raising Capital ................................................................................................................50 Different Stages of Startups and Typical Funding Needs at Each Stage .....54 Start-Ups 101. What Makes a Start-Up Appealing to Investors?.....................55 Putting Together a Board of Directors ...............................................................................57 When to Fundraise .................................................................................................................58 Typical Negotiating Process With Investors. ..................................................................59 S C A L E U P ! E N T R E P R E N E U R S ’ G U I D E T O I N V E S T M E N T I N N I G E R I A 8 What you Need in Your Pitch Deck............................................................................... 60 Three Fundraising Tips From Francis Sani, Acceleration Programmes Manager at Cchub ..............................................................62 Key to raising money successfully: Telling YOUR Story ...........................................63 Start-ups, Your Valuation Matters! ................................................................................ 64 Valuing Your Start-Up ................................................................................................................65 Three More Tips From Cchub’s Francis Sani ..................................................................67 Negotiating With Investors: Tips From Entrepreneurs ............................................67 4.0 Nigeria’s Investment Scene .........................................................................................68 A Brief History ..........................................................................................................................72 Top Africa- and Nigeria-Focused Tech Blogs and News Sites ..........................73 Universities’ Interest in Entrepreneurship ................................................................74 Choosing a Market Focus ....................................................................................................75 Investor Scene Growing, but From a Small Base ....................................................76 Local vs. International Investors ..........................................................................................76 Pitching Effectively ......................................................................................................................78 5.0 I nvestor Directory* ........................................................................................................80 Fast Forward Student Innovation Fund ......................................................................83 Enspire Hub ............................................................................................................................... 84 Tony Elumelu Foundation ..................................................................................................85 Wennovation Hub. ..................................................................................................................86 Lagos Angel Network (LAN) ..............................................................................................87 Microtraction ............................................................................................................................88 Imeela ............................................................................................................................................89 Sasware ........................................................................................................................................ 90 Growth Capital by CcHUB..................................................................................................91 Beta.Ventures .............................................................................................................................92 Greentree Investment Company .....................................................................................93 StartPreneurs ........................................................................................................................... 94 Afvest .............................................................................................................................................95 FINCA Ventures .......................................................................................................................96 Contents 9 Global Partnerships/Eleos Social Venture Fund.....................................................97 GreenTec Capital Partners ..................................................................................................98 Singularity Investments ......................................................................................................99 eVentures Africa Fund .......................................................................................................100 GreenHouse Capital ............................................................................................................ 101 Factor[e] Ventures ................................................................................................................ 102 Africa Tech Ventures .......................................................................................................... 103 Accion Venture Lab .............................................................................................................104 Africa Enterprise Challenge Fund (AECF)............................................................... 105 DEG Up-Scaling Programme .........................................................................................106 Acumen Fund ......................................................................................................................... 107 All On ..........................................................................................................................................108 V8 Capital Partners ..............................................................................................................109 TLcom Capital LLP .............................................................................................................. 110 IFC Venture Capital ............................................................................................................. 111 Doreo Partnerst .....................................................................................................................112 Convergence Partners ........................................................................................................ 113 Energy Access Ventures .................................................................................................... 114 Helios Investment Partners ............................................................................................ 115 6.0 Conclusion ........................................................................................................................116 Key Takeaways ............................................................................................................................ 119 Useful resources ..........................................................................................................................120 Acknowledgement ....................................................................................................................121 Imprint .......................................................................................................................................... 124 * The funders are ordered by average investment amount, with smaller funding amounts appearing first. SCALE UP! ENTREPRENEURS’ GUIDE TO INVESTMENT IN NIGERIA 10 Gsaso r l y Ac e l e r a t o r | a programme that takes in relatively early-stage start-ups, helps them develop their product, providing mentoring and teaching, and access to a network of potential investors or partners; at the end of the programme, the accelerators typically put on a pitch day during which companies can pitch their services to investors. As a key difference from incubators, accelerators usually have a set timeframe from a few weeks to a few months Aneg l i e vn s t o r s | individuals with disposable income who like to invest part of their portfolio in start-ups. Usually they would invest their cash, time for coaching and mentoring and make business introductions Bu s i ne s s pl a n | a detailed outline of your business, including the problem it is solving, the strategy for growth, revenue projections, marketing strategy, team profiles, and more B2 B – B u s i n e s s t o b u s i n e s s | business that aims to sell products and services to other businesses B2C – B u s i n e s s t o c on s u m e r | business that aims to sell products and services to consumers CAPEX – Capi t a l e x p e n d i t u r e | the funding needed to invest in assets that your business needs to get off the ground (e.g., computers, stock, machinery), or improving these assets Capti a l i z a t o ni t a b e l | also referred to as the cap table, this is a simple breakdown of who owns how many shares in the business, and the ownership percentage that corresponds to Clo l at e r a l | an asset (machinery, vehicle, etc.) used as a security when taking out a loan Cre vten ol i b t e b d / t e o n | short-term debt that may or may not covert to equity in a future financing round. Commonly used to defer the valuation discussion to when an early-stage company has historical financials to guide the valuation process Cdrow f u n d i n g | raising (typically) small amounts from a large group of people

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