An Insight Into How Early-stage Venture Firm, LoftyInc Capital Management, Invests In African Startups
An insight into how early-stage venture firm, LoftyInc Capital Management, invests in African startups
At first glance, Reliance HMO, a Nigerian health insurance startup, and Printivo, a Nigerian print-on-demand startup, appear to be unrelated. However, they do. Both companies are portfolio companies of LoftyInc Capital Management, the company that founded Wennovation Hub, Nigeria's first private incubator.
Wennovation Hub is a collaboration between LoftyInc Allied Partners and the Africa Leadership Forum. It was founded in 2010 by Wole Odetayo, Idris Ayodeji Bello, Dami Agboola, and Michael Oluwagbemi.
With startup investing still in its infancy, the plan was to nurture African startups in an incubator and then present them to institutional investors capable of writing large checks. Two years later, while attempting to raise capital for some of the startups at Wennovation, the partners discovered firsthand how difficult it was for startups to raise capital.
They decided to establish the LoftyInc Angel Network in Nigeria after being inspired by the Houston Angel Network. However, their plans changed when they approached infoDev — a World Bank program that fosters entrepreneurship and innovation — for sponsorship, after being advised to broaden the scope of the initiative.
Thus, in June 2012, the Lagos Angel Network was formed in collaboration with a few other African angel investors, including Tomi Davies and Dotun Sulaiman.
However, much work remained before it could be fully operational. Bello and a few other friends withdrew money from their pension funds in 2012 to found the Afropreneur Angel Group.
Their initial investment was in Fora, which would eventually become Andela. The Afropreneur Angel Group has grown from those humble beginnings to 180 global angel investors who have invested in 134 companies. Sixty-four are African, with Nigeria being the most represented, while 70 span three continents.
What sets LoftyInc Capital Management apart?
With early-stage investing gaining momentum in Africa and more startups being founded, it is no longer sufficient to simply write checks to startups. Investors must now be able to provide more than money to the startups in which they invest, including access to a diverse network and mentorship that founders value highly.
Since its inception, the firm has been committed to providing startups with more than just capital. Bello explains that the firm has a reputation for being a friend to founders and acting as extended strategy teams during a startup's formative years.
“We typically invest ahead of major investors, mentor new founders, source their initial clients from our large portfolio (over 65 African startups) and our extensive Africa-based Angel/LP network, and make meaningful introductions to regulators, partners, mentors, top hires, and experienced board directors. Additionally, founders want us involved in their transactions because we have a track record of attracting both early and later-stage investors to previous ventures,” he explains.
Deal-sourcing pipelines
Bello notes that after years of investing in founders, they now have five primary sources for sourcing deals. He estimates that the firm receives between 20 and 30 decks per week, which emphasizes the importance of selecting the right startups to fund.
One of the most effective sources is via the partners' personal networks. Along with Bello, Marsha Wulff is an authority on African investment. Additionally, they are assured of a constant stream of deals to choose from via Wennovation Hub.
With 180 angel investors and 70 limited partners, 90 percent of whom are African or live in Africa, the firm closes a lot of deals. Additionally, there are over 60 founders who have been funded, as well as other investors who are aware of LoftyInc's commitment to helping startups grow.
Criteria for investing in startups
LoftyInc is a sector-neutral venture capital firm that invests in startups developing products that real users want.
“We're looking for balanced founding teams that prioritize execution, are targeting a large market with few to no competitors, and are building a product that users truly want/need. We are sector agnostic with a preference for tech-enabled health, fintech, and IoT startups.
“Given the strength of our deal flow, the ultimate differentiator is our ability to select ventures that grow and scale and raise additional capital. We've discovered that our experiences founding startups, growing larger corporations, and angel investing has proven invaluable in this endeavor," Bello adds.
He explains that their process entails identifying gaps in the skills and capabilities of the founders they support and establishing procedures to close those gaps. They can rely on their experience and the experience of the investors and limited partners in their fund to assist the founders in this endeavor.
They typically invest between $50,000 and $250,000 in startups they fund, with the possibility of additional funding based on certain criteria. Startups seeking investment can begin the process by visiting the website.
He advises startups to avoid becoming swept up in the hype that typically surrounds startups and to instead focus on building for their customers, not investors. On the type of startups he wishes to see, he states, "I want to see startups help more people escape poverty by developing solutions that also create other opportunities."
