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The following article is by David van Dijk who is part of the team behind African Business Angels Network (ABAN), a pan-African association that seeks to promote a culture of Angel investing across Africa.
On 13 August, the second in a series of Angel Investor Bootcamps leading up to the ABAN Investor Summit at DEMO Africa was hosted in Nairobi, Kenya.
The Bootcamps are organised by the African Business Angel Network (ABAN) in partnership with VC4Africa, Intercontinental Trust and the LIONS Africa Partnership. The Nairobi edition was hosted together with Viktoria Ventures and the iHub.
Master-class by ‘European Angel Investor of the year’ Brigitte Baumann
Centre to the Nairobi event was a master-class by President Emeritus of the European Business Angel Network (EBAN), CEO and founder of Go Beyond Early Stage Investingand recently elected ’European Angel Investor of the Year’ Brigitte Baumann.
Brigitte shared insights from her lifelong journey as an investor and took the audience through the whole investment cycle from deal generation to exiting.
A number of takeaways:
For early stage companies Benchmarking has proven to be a successful valuation tool and probably more relevant and usable than more traditional methods better suited for later stage companies.
Angel Networks and angel syndicates tend to screen more deals and make more investments and will therefore also be in a better position to benchmark compared to individual investors.
Benchmarking should be three-dimensional; sector, country and stage of development with three key divers behind the value of an early stage company being Quality of Offer, Market Heat and the Cash Situation of the company. In an African context benchmarking is a challenge but will become easier as more deals get done and more (reliable) data becomes available.
Another point raised was that even though there are universal rules to investing, what has worked in one country or ecosystem or industry should not just be applied in a different environment without understanding how and why something works. Investor education is as important as educating entrepreneurs when it comes to deal structuring, term sheets and angel investing in general.
Besides the science and the analytics, early stage investing is still very much an art form “As an Angel investor when your gut feelings tells you walk from that deal, follow your gut as it will haunt you later.” Brigitte Baumann also shared findings from the recently published Go Beyond Investor Portfolio Strategies and Performance report.
Local Investors Joining the Conversation
The relevance of teams was stressed versus lone-wolf entrepreneurs and the role angel investors play in discovering talent, coaching & developing entrepreneurs and opening doors. “You get out of it what you put into it.” An angel investor who takes her or his investing serious becomes actively involved. Period. Otherwise it is just play and for entrepreneurs this is serious business.
Entrepreneurs are emotionally fragile when you talk about their business; they have poured their life into it. Kenyan entrepreneur Hilda Moraa, co-founder of Weza Tele (recently acquired by AFB), confirmed some of the lessons from the master class during the panel later during the event when local investors joined the conversation.
Commenting on a question from the audience about the level of involvement and control by investors, Hilda replied she was fortunate to find the right investor locally who gave autonomy to execute.
During the same panel discussion local investor Sean Nowak quoted Y Combinator’s Paul Graham in answering the question what investors look for in entrepreneurs “committed to the vision but flexible enough to adapt.”
Other members on the panel were Robert Yawe who has been part of the Nairobi start-up scene from the early days and Mutuma Marangu investor and director in several agricultural, energy and real-estate companies in sub-Saharan Africa and advisor to the Nairobi Stock Exchange. The panel was moderated by Viktoria Ventures co-founder Stephen Gugu, also co-organiser of the Bootcamp.
Emerging trends and New Initiatives
VC4Africa’s head of Investor Relations Thomas van Halen also spoke, presenting the findings from VC4Africa’s annual research Venture Finance in Africa. This research provides valuable insights in trends in investment size, number of deals, jobs created and other aspects of early stage investing and entrepreneurship in Africa.
Meantime Atreya Rayaprolu Executive Director New Initiatives & Africa Intellecap presented the launch of the Intellecap Impact Investment Network East Africa Chapter. Rayaprolu explained the chapter’s goal:
The aim is to plug the pre-VC funding gap early stage enterprises face by mobilising domestic capital and connecting international investors to domestic investors. Our investors come together to support brilliant and passionate entrepreneurs who are dedicated to solving difficult problems at the bottom of the pyramid.
Sebastian Levantard from law and advisory firm Intercontinental Trust also joined the event to speak about deal structuring, tax issues and some of the opportunities available to investors in Mauritius.