One of my goals is to invest in many startups here and on the continent. The African Fintech (Financial technology) sector is one that’s always been interesting to me because of its potential to solve many social and economic issues.
According to a recent report from Disrupt Africa, the overall startup funding from venture capitalists jumped by 51 percent to $195 million from 2016 to 2017, with fintech funding accounting for one-third of the funds.
One company that specializes in financial technology is GreenHouse Capital. This Lagos based VC firm is assembling the largest portfolio of FinTech companies in Africa.
We spoke with Nichole Yembra, Managing Partner at GreenHouse Capital for more insight. Nichole is the local partner for foreign investors eager to transform African technology startups.
How would you describe the startup scene in Nigeria?
Over 40% of Nigerians identify as entrepreneurs; whether that is a one-woman store selling sweets and household items to series B tech companies getting international buzz. This spirit of hustle and solving every day Nigerian problems runs at the core of who we are.
While there are plenty stories of those who have started, we don’t yet have enough tales of exits which holds the Nigerian startup scene back compared to Kenya and South Africa. For the first time in 2017, Nigeria raised the most money on the continent and H1 2018 is already ahead of that trend.
Both domestic and international investors are backing really brilliant ideas, and this is setting up the ecosystem for much needed success stories.
What do you look for when deciding to invest in a company?
At GHC, we actually have a 10 item criteria, but the most important is the team. We need to know that they are resilient, flexible enough to pivot, technologically sound, and have the right set of morals.
A great team will weather all the challenges thrown at them from both the macro and micro level and we honestly want to invest in people that we simply enjoy being around! We only invest in post revenue companies, so someone out there has to be willing to pay for your product.
Other areas including having at least one technical co-founder, assessing whether the timing is right for this product to enter the market, and modeling scalability.
Currently, your portfolio consists of mostly Fintech startups. What makes this such an attractive sector?
Fintech as we define it is the solution for so many issues on our continent. The most important thing we are looking for is data and a whole lot of it! Data allows everyone to make better decisions and innovate much faster.
For all the hundreds of payment companies, we still simply find it hard to move money across Africa and targeting the large percentage of the unbanked. Let me take one small aspect of fintech—inbound international remittances. In 2017, Nigerians (or others) in the diaspora sent $22 Billion dollars to friends and family in Nigeria. Nigeria’s entire 2017 oil revenues were $20 Billion.
That’s right; inbound remittances were larger than all of Nigeria’s oil revenue. Furthermore, the average fee on those transactions is 10% meaning $2.2B for fintech companies moving foreign currency into the country.
Fintech’s are prominent throughout every fiber of society; from getting accurate patient records to track illnesses and medications to understanding why African aviation runs at a loss compared to its global counterparts.
Fintechs provide increased transparency and improve predictability. Any business that wants to make money needs to be plugged into a payment system, therefore permanently increasing the need for innovative fintechs.
Congratulations on the launch of Vibranium Valley. What is the mission and vision behind it?
We’ve actually only completed phase 1 of Vibranium Valley now which houses Venture Garden Group’s 7 companies and the HQ for our investment arm GreenHouse Capital’s 14 companies.
We will also hold the 8-12 companies we are choosing for GreenHouse Lab, our all female tech accelerator. Once the full project is completed, we will have space for not just long term resident companies, but also those with budding ideas.
The mission is to enhance the tech ecosystem by fostering collaboration. Let’s say one company is trying to provide banking solutions to a state government and their primary system requires microfinance or commercial bank accounts, but the state wants to also incorporate the unbanked.
That company can reach out to other fintechs that help cooperatives or have agency networks to partner with eachother rather than building that aspect of the solution from scratch. Vibranium Valley also serves as a central point for international investors and companies looking to better/more quickly understand the Nigerian investment landscape.
If you have a question about a tech company in Nigeria, someone on our team most likely knows the answer or can easily direct you to someone who does. Being this ecosystem connector and helping shine the light on tech successes in Nigeria are the reasons why Vibranium Valley had to exist.
In your opinion, why is it important to support Nigerian and African startups in general?
Because nobody else can solve our problems for us. Developed countries like Japan, the US, and Germany have median ages between 46.9 and 37.9 years old; whereas the median age for the African continent is 19.5 years old with Nigeria averaging 18.3! Africans are not just the future, we are the now!
These young minds are growing up intrinsically connected with technology and innovation around the world and still hungry and imaginative enough to create both enabling and disruptive solutions to our nations’ problems.
We have already begun outsourcing our brain power to Silicon Valley companies with entities like Andela and countries looking to increase their global foothold can only come here for expansion. Given the large number of infrastructure and systemic issues around power, education, etc., there is not a shortage of problems to solve and the impact can be more immediate and widespread.
What is your advice for a foreigner investors that are interested in investing in Nigerian startups?
Come on over, we’re waiting for you. The beauty of investing here is that it naturally has a societal impact and given the perceived high risk, much higher returns.
I’d advise that you do your homework by engaging someone like us at VGG and always have a local investor in your round that can keep an eye on things on ground.
The biggest point of advice though is don’t come here trying to structure a silicon valley type deal; bring in global best practices, but be willing to localize and always search for context.
Where do you see the company in the next 5 years?
Hopefully as a billion dollar company! For the new age unicorn definition, no African company has yet reached this milestone and we hope to be amongst the first.
We have deployed our fintech solutions across aviation, power, education, banking, and social investment while investing in companies addressing financial inclusion, renewable energy, healthcare, and so on.
With this connected ecosystem, we hope to increase not just our net worth but create a new class of tech millionaires and billionaires who are impacting millions of lives across the continent.
-Tony Oluwatoyin Lawson (IG @thebusyafrican)