Power Of Private Capital: Building Systematic Processes For Early-Stage Investing In Africa
with Idris Bello, Founding Partner, LoftyInc
- Tell us about LoftyInc and the factors that drive your investment decisions
LoftyInc Capital is an early-stage, Pan African VC firm founded 7 years ago, and the factors that drive our investment decisions are based on the work we’ve been doing for the past decade, helping to pioneer the early-stage tech ecosystem in Africa, starting with Nigeria in 2010 and expanding across the continent; from Sudan to Zambia to Uganda to Rwanda. And at the heart of the name, LoftyInc, is how you turn lofty ideas into incorporations. We believe for young Africans and the billions of people in Africa, we need to create high-impact jobs that create shared wealth, shared prosperity, and advance the economies of these African countries.
We believe venture capital is the tool - the vehicle - to do that. It’s what drives us in our selection of founders to back, the selection of sectors to invest in, and the successes we’ve recorded.
2. LoftyInc is investing in the big four countries. Which other regions are of interest and which sectors do you see attracting the most investment in Africa over the next year?
We started in Nigeria and then moved to Egypt, Kenya and South Africa, with the idea to pioneer. And now we are finding Francophone Africa very attractive. When you look at the countries where we are already investing in, you have French-speaking countries that are close to Nigeria and you have French-speaking countries in North Africa that are close to Egypt. It’s a block white cell that is tied together by currency, by common regulation, and by several other factors, and has some amazing people. So we’re finding those regions very interesting right now and have set up our office this year in Abidjan to cover the region.
We also look at sectors. Again, we’re a tech-enabled VC supporting firm and what we are looking for now is the first wave of fintech - financial technology. We’re looking at how to apply fintech to basic everyday needs and not just for payments.
I’ll give you an example, in the UK you have the Oyster card; in Nigeria, one of our startups built a touch and pay card, which is now enabling 3 million of unbanked Lagotians every single day to take that card and board government buses with it. And with 3 million people use those cards, you can then extend the use. You can extend it to use in the pharmacy and use it in the market to buy things. So again, you are including more people because you are then digitally transferring money to broad mass transit in a place like Lagos, and suddenly, drivers are becoming banked, and because drivers are becoming banked they have access to other things like health insurance for themselves and their families, and vehicle insurance for their vehicles. They can access credit to purchase new buses because there’s no transparency into their income. You know, those very, very impactive companies are the kind of companies we’re backing within the sectors we’re looking at.
3. What is your take on the expected global funding crunch and do you think it affects the availability of investable deals in Africa?
To folks who are looking to invest in African space and getting concerned about the downtown during these cycles, I tell them: get the backbone. Because there are problems to be solved and there’s money to be made; because people still have to pay to eat and they have to pay for healthcare. So there’s money to be made at the right level; I tell them to get in now because the other thing is about cycles.
This is probably the best time to invest. In about 5 to 7 years when the cycle goes up is time to sell. The problem is people run away from investing right now and then when the cycle goes up, everybody rushes in and the valuations get crazy.
We are very deliberate about building for the long term, and if you find good founders who build for the long term you will get the results. We say this as people who have been here for 12 to 13 years and have seen these cycles but yet have consistently returned capital back to our investors because we chose great African founders to back who solve problems and build companies that people are willing to pay for. And we are patient. If you do this consistently you get returns.
In Africa, we have a lot of work to do. We have companies to build. We have people to feed, we have existential issues and we cannot allow the fear of a recession to stop us from wanting to invest.
We have to continue to find investable deals. The difference is, that these may not be nice-to-have companies, but these are the must-have companies; for example, companies that drive energy efficiency. You see the struggle across the continent from Nigeria to South Africa on energy issues. How do you build companies that actually solve those problems? Because these are the companies that impact manufacturing, they impact jobs, and they impact mobility.
So finding companies that are solving problems is key for us and we are coming to back them because the problems we have on the continent do not understand recessions. People still need to eat, they need to take care of their health, they need to go to school.