This is how I became an Angel Investor in 2020. While I was casually scrolling through one of my favorite Financial Literacy blog on Instagram, Thrive Financials, I saw a post from the curator detailing how he invested his Cash in the pandemic year. I found the post quite interesting, so I decided to engage by sharing with his audience how I invested as well.
My response was simple – (I invested in) Stocks (Just US, Nigeria was sh*t for me), Angel (Seed Round + 1 Series A), ETF, Eurobond, HBS, and Travel.
The post had little engagement – 3 likes and 2 comments. However, I had quite a bit of engagement in my DM. Many of the guys that reached out wanted to know one thing – How did you get into Angel investing?. No one really cared to ask why investing in the Nigerian Stock Exchange was terrible for me, in a year where the Nigerian Stock Exchange was ranked as one of the best performing exchange in the world, a story for another day.
On Angel investing, it was a new playground for me but the Startup ecosystem in itself was not. I have been close to the ecosystem since I left one of the top Nigerian Banks in 2014 for Jumia – $JMIA, I recall my Dad was really confused as to why I’d leave a Bank with “Job Security” for a Startup he called “Jumai”, Jumia has since gone public and is not really a startup anymore.
Jumia was my main gate into the ecosystem, there was a bubbling rollcall of ex-Jumia Staff that already started their own companies at the time I joined. This in itself got me interested in the tech space. Between 2014 and 2018 I had great interactions with founders of various ventures in the ecosystem, interviewed with some, attended events at CC Hub, set up Google alerts for interesting companies, & topics, and Tech Cabal was my best forum, news outlet, and newsletter.
I was super interested in joining some of the Startups I interviewed for because I genuinely believed in their mission and getting stock options in those companies was also a goal for me. The workaround to getting a share of the pie of these companies will be to invest in their rounds, this was not possible for me because I was too busy building my career, gaining relevant skills, and investing in less risky opportunities i.e. “securing the bag”. Thus I had little to no significant cash left to even consider investing in a Startup alone or directly, the keyword being “alone”.
Secure the bag first before becoming an Angel investor, you might make $0
Fast forward to the end of 2018, I was comfortable with where I was Financial, had an emergency fund to cover ~12 Months of my living expense, so it was time to consider more risky investments that would not keep me awake at night. However, there were only a few funds in Nigeria that would let you in with small cheques. Many of the Funds typically consider cheques from $50k and above, they may however consider lesser cheques if you are an Operator that will add additional value besides cash to their portfolio.
— Kola Aina (@kola_aina) October 15, 2020
Comes the year 2020, I call it the year of Angels in Nigeria!. We had an exciting exit that changed the conversation and piqued everyone’s interest -Paystack got acquired by its role model (somewhat) and there was the jubilation on Twitter by early backers, Kola Aina, Olumide Soyombo, Dr. Ola Orekunrin, Oo amongst others. Coupled with this renewed interest in this phenomenon that can give you 5000x in 5 years, Rolling Funds became a thing!
Getting a lot of messages and phone calls from people that want to invest in start ups😂😂😂
Paystack is one of over 10 start ups I have invested in and the first exit at that quantum. And still….most of my cash is in euro bonds. So pls be guided.
— Dr Ola Brown (@NaijaFlyingDr) October 16, 2020
I concluded it was time to go in, unfortunately, or fortunately, “Startups are one of the only asset classes where it’s not just the investor who picks the asset, the asset also picks the investor.”So a few things are considered by founders, the reputation of the investors, value add asides the cash coming in, etc also, you really would not get to know about the deal if you are not active in the space. Thus, my best bet was to join a Syndicate.
The syndicate I joined – Future Africa had a $1,000 annual subscription fee plus 20% Carry and a promise to introduce 20 deals within a year for your consideration. They vet the company, perform due diligence, organize a Q&A with the founder of the Startup, etc. The registration process was pretty straight forward, pay the subscription fee, register on www.angel.co, join the syndicate and execute the necessary paperwork.
Within the year, I joined 2 additional syndicates on www.angel.co, invested in one Seed round of a company I found interesting, also got an opportunity to invest in a Series A round of one of the companies I interviewed with in 2018 🤯. I missed out on some interesting companies as well, the great Startups tend to fill their round within minutes of what the deals are open for investment. I tweeted that it reminded me of the Black Friday rush for our anchor deals back in the day – you snooze you lose.
This is beginning to look like Black Friday deals? You snooze you lose… Jumia's experience paid off 🤣
Glad I got in on this one. pic.twitter.com/sFi6YtM0iU
— Temitope Omoniyi T|O🔎 (@don_contra) December 21, 2020
Key Take Away –
- Secure your bag first before investing in Startups, you might make $0 and exits might take an eternity
- Investing in a founder or company is a privilege, I believe there is more capital than good ideas
- Invest as a pack, join a syndicate, Rolling Fund, etc. It will help you as a beginner
- Do your research, ask questions. Do not outsource 100% of your judgment