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Nigerian Startups Lost $10m ICT Funds to Corruption Says EchoVC Partners Founder

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Eghosa Omoigui is the Founder and Managing General Partner of EchoVC Partners, an early-stage and growth-stage technology venture capital firm bridging Silicon Valley and underserved emerging markets with a focus on sub-Saharan Africa. Before this, Eghosa was with Intel for nearly 10 years, and his last role was as Capital Director, Consumer Internet & Semantic Technologies, where he acted as a senior investment professional focused on platform-agnostic consumer, web services and digital media-based investment opportunities in the USA, EU & Asia. He spoke with ADEYEMI ADEPETUN, on technology start-ups opportunities and challenges…

IT’S been over four years since EchoVC started investing in startups in sub-Saharan Africa, how will you describe that experience?

What most people do is to calculate the exact time we started the business, which was in late 2014. What they don’t see is the time spent prior to that, including fundraising time and our preparation for business. We started the process of raising capital and tried to convince people that there was a viable ecosystem to invest in Nigeria and sub-Saharan Africa in late 2011.We, however, formally kick-started the process in 2012, so, it has been a longer period than most people see. But generally speaking, there were not a lot of people looking to invest in technology companies and startups here. There were a few other players who knew the market but no one was taking high risk and early-stage risk. They were putting a small amount of money.We started fundraising in 2012 and we got that completed in 2014. As you were aware, we were the first ICT fund manager selected by the federal government (in March 2013). That was six years ago and plan by the federal government was to catalyse the tech ecosystem through us. But unfortunately, we never got that funding despite multiple pleas and emissaries to Abuja.

The change in government in early 2015 complicated our ability to enforce the contract signed by the federal government, and despite escalating the matter to the office of the President, the Vice President, and meeting the ICT Fund’s contractual obligations, I, Eghosa Omoigui think digitalising the economy appeared not to be priority of the agency of government the (National Information Technology Development Agency) then.

Looking back, I think with all humility that we have done a pretty good job. We have built a very nice portfolio of interesting businesses across multiple sectors. We have not chased the hot sectors. We have done vertical business in eCommerce, healthcare, printing, hospitality, and drove financial inclusion through some of our startups. We are very happy with the diversity of the portfolio because it also shows the diversity of Nigerian micro-economies and the Nigeria-focused entrepreneur, particularly how they think about addressing market opportunities in several sectors. So, we have done our little bit. We could have done a whole lot more but for the disappointment of not getting our contracted government funding.

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What has been the feedback from some of the businesses in your portfolio?

I think the entrepreneurs are happy to have a partner that believed in them. Being a venture capitalist is a very specific thing. Being a fund manager requires a very specific set of skills and disciplines. I think many people confuse the ability to be an investor with that of a fund manager. It is very different. If you are an investor, you are writing $10,000- $50,000 cheques, you are just trying to find the hot deal. The fund manager, on the other hand, has a much more different approach to that. (S)he makes very specific investment judgments, usually around very clear investment deals.

For us, what we have also done is to build infrastructure that allows us to think about how to engage with these companies and how to manage each of them and how to help them. So, it’s a very specific thing and as a firm, you have a group of folks who are not just investing but are also doing portfolio management. A lot of entrepreneurs are good at that one thing but you’re teaching and helping them, not just to be great entrepreneurs but foundationally strong managers and team builders.

What were the greatest challenges encountered by EchoVC in the last seven years?

I think the biggest body blow we took was from the federal government through the NITDA. The agency, which is in charge of IT activities was supposed to give us money and they never did for whatever reason.

Were there any excuses given for not providing the funding?

We finalised the fund in October 2014 and have since requested the monies at least 22 times now, if I recall correctly. Once, a certain folk asked me to come and “visit”. I say we don’t “visit” that way. They now told me that the money had been allocated to somebody who was in Aso Rock. They said I should go and beg her. That was in early 2015.

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So, I said what was that? We signed an agreement, we went through a formal procurement process, viz-a-viz RFP (Request for Proposal) did public advertising. A bunch of interested parties submitted expressions of interest. We were shortlisted and interviewed. We were selected in a legal and ethical way, now you are coming to tell us stories. Maybe I don’t know how things work in Nigeria but this is not how it should work. We complained and complained, nothing came out of it. Luckily, they are no longer there but we still haven’t been funded.

My biggest challenge is how we were denied the $10 million back then! If you think about the kind of companies we would have invested in, we would have had the money to invest in all the big names in a meaningful way. The federal government would have had proxy ownership stakes in a bunch of high-quality African tech companies. Because when we look at even the portfolio companies that we invested in so far and the kind of life-altering value they deliver, it’s incredible. Look at a company like LifeBank, it’s a small startup run by an amazing woman-CEO and they are doing amazing stuff.

How then were you able to get funds?

Blood, sweat and (non-stop) tears! We have a couple of investors that gave us some money. It was much less than what we wanted and needed. So, we had to be even more careful about how we deployed it. But we didn’t have a lot of money after the government walked out, but we had to go to work because that was our commitment to the ecosystem, so we started with the small pool of funds that we had. We’ve done so well so far and continue to be grateful to our investors.

How many deals have you been able to close since inception?

Over 20! We have deployed over $25 million in total, and the value of the portfolio that we manage is heading towards $100 million. This also includes investments we have made via our Africa Tech Small Check Platform in partnership with TPG Growth, a US-headquartered global private equity firm.

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For some of the start-ups that you have worked with and some that will still come, what have you considered the most important?

Prior to investing, we spend a lot of time evaluating the people because we invest in very early stages, and these businesses are very small. So, when you’re a private entity, we can spend three to six months looking at the people and then the business. The first order judgment is around the people and I will tell you that as a venture capitalist that exercise of judgment takes a long time to become good at but you have to exercise it well. You will get screwed sometimes but fundamentally for us it’s about the people. Do we believe in this person’s vision, can (s)he build a team to support him or her? Can (s)he execute in the market? Can this person build the product? Do they understand visible and invisible risks? So, it’s about people.

What’s your advice to the government?

I think there should be a real sense of urgency about the power of this sector – the digitally-powered economy! But more importantly, we deserve to have a greater sense of urgency about how to meaningfully and realistically encourage and drive the sector. Recognising that we are losing talent every day via MMIA should be a priority.

It is sad because once the talent leaves the ability to understand how to build and deliver a product for this local market gets blunted and they start making products for other people in other markets. That hurts us!

We saw some YouWIN winners and they are quality businesses. We invested in one, Printivo, and it has turned out to be a fantastic business. Other government-powered programs, (YouWin comes to mind but I am sure there are others), if architected and executed properly, can drive long-term mass change, today and tomorrow.

I think it is really about leadership infused with urgency. We need to make this environment better, soon. We need to figure out what it is that we can do together. Technology will change every sector so the faster our leaders recognise that and start positioning our people and micro-economies to effectively utilize it, the better it will be for everyone.

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