Nigerian entrepreneurs are constantly looking for angel investors and VCs to back their ideas. In fact, Nigerian startups raised a total of $1.37 billion in 2021 alone – which sizes up to about 35% of the total startup funding raised on the continent last year.
If you’re planning to take on some funding to run or grow your new startup, angel investors are a great starting point. But the question is how do you find angel investors in Nigeria who are willing to fund your startup?
In this guide, we will be sharing with you the following:
1. Who is an angel investor?
2. How Do Angel Investors Work In Nigeria?
3. The pros of angel investors
4. The cons of angel investors
5. What angel investors look for before investing
6. How to pitch to angel investors
7. 5 Ways to Find Angel Investors in Nigeria
8. Leading Angel Investors In Nigeria
9.More resources for Nigerian startups
1. Who is an angel investor?
According to Wikipedia, “an angel investor is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or ownership equity. Angel investors usually give support to start-ups at the initial moments and when most investors are not prepared to back them”
Simply put, an “angel investor” or “angel” is basically a private investor who offers startup founders some (or all of the) capital needed to get the ball rolling.
Aside from providing financial backing, some of the other value angel investors provide startups include:
- Connecting startups with relevant industry connections.
- Promoting the startup through their own PR channels or on social media.
- Providing strategic advisory services to startups based on their wealth of business experience.
When these angels team up to form an organization for the purpose of investing in startups, they are known as “angel investor groups”
There are no specific regulations on Angel Investment in Nigeria. Angel investors are simply governed by the general laws on Investment and Tax.
There have been numerous angel-backed Nigerian startups that have gone on to achieve incredible success. Some of startups include Paystack, Flutterwave, Andela, Piggyvest, Kudi, Helium Health,TalentQL, etc.
2. How Do Angel Investors Work In Nigeria?
Generally speaking, the way angel investing works is that an investment, say $10,000, is made into an early-stage startup in exchange for convertible debt or preferred stock/equity in the company.
Most angel investors are risk takers. They understand that investing in a startup sometimes means they might lose their entire investment if the company fails. On the other hand, they are aware that a successful startup could bring them 5-20X returns on their investment.
The process of raising money from an angel investor in Nigeria involves the following stages:
Pitching Investors
At this stage, the startup founder will provide the investors with a professionally written business plan which covers the financial projections and go-to market plan. Additionally, the investor(s) may require the entrepreneur to do a live pitch of the business idea using a powerpoint presentation (known as a pitch deck).
If the investor is not convinced of the feasibility of the business idea, they might typically give a rejection response immediately or via email. However, if they are interested in the business idea and find all that the founder has shared with them credible, the deal will proceed to the next stage – due diligence.
Due Diligence
A due diligence is basically a thorough background investigation into the startup, its founders, team, market data, etc. An investor would typically employ the services of a professional to carry out this investigation in order to decide whether or not to proceed with the investment. The process of due diligence usually covers three areas:
- Legal due diligence – the following are given careful consideration: i) how the shares of the company are structure (class and right of shares), ii) all current shareholders, iii) employment contracts, iv) intellectual property and licensing. v) business assets
- Financial due diligence – investigations are carried out to prove the viability of the business model. The pro forma statements are also reviewed thoroughly.
- HR due diligence – Background investigations will be carried out on the management team and its board of advisors.
- Technical due diligence – technical aspects of the business such as its proprietary technology will be investigated.
Consents and Approvals
Once the due diligence has been completed and the investor is ready to move forward with the deal, it’s time for some additional legal stuff. The startup will need to obtain the following approvals:
- Shareholder approvals for transaction by way of passing resolutions for transfer of shares
- Shareholder’s waiver of existing pre-emption rights (if any) and termination of any existing shareholders’ agreement
- Shareholders resolution for increase in share capital where existing shares are insufficient to allow for a transfer to the angel investor(s)
- Approvals from the Corporate Affairs Commission “CAC” in Nigeria for increase in share capital where there is need for increase
Transaction documents
The most important transaction documents will be:
- Memorandum and Articles of Association
- Shareholders Agreement
- Employment Agreement
Note: The investor consents and approvals may or may not be required depending on the size of the funding round.
Closing
Once all the legal stuff have been completed by both parties, you will typically know the closing date a few days in advance, though sometimes it can be a moving target as issues come up during the final document negotiation and preparation.
3. The pros of taking on angel investors
Let’s face it – many Nigerian entrepreneurs don’t have the luxury of bankrolling their business – which leaves them with the decision to turn to the bank or investors. When compared with taking on bank loans, being backed by angel investors seems like a far better alternative to getting startup funding.
Angel investors typically take some equity in your business for themselves rather than dipping into your cash flow like bank repayments do. Another way to look at it is that angel investors take a risk when investing in your startup – banks do not. If you take out a bank loan, you will be required to pay back regardless of how your startup performs. Investments from angel investors are do not come with a repayment requirement if the business folds up.
Beyond providing money, Angel investors and VCs add value to startups in form of mentorship and valuable connections. But unlike VC funding which may take a long due diligence process, funding rounds with Angels happen quicker.
4. The cons of taking on angel investors
While there are several benefits to taking on an angel investment, there are also downsides too, especially for inexperienced first-time startup founders.
As already mentioned, angel investors put up with some risk by investing a startup. Being fully aware that if the startup fails, they may lose all their money, they tend topush for short-term growth than VCs do. This may cause startups to make trade-offs that may boost their growth in the short run but hamper their growth long-term.
This constant pressure may sometimes take a toll on the startup team and create a toxic work culture than emphasizes only on immediate growth.
The discussion surrounding shares/equity may also be a downside of taking on angel investment. This is because some Angels may over-compensate for the high-risk of investing in a startup by asking for a larger ownership of the startup. They may also want a seat on your Board or to have enough voting rights to veto some decisions that affect the company.
Lastly, when compared to VCs, Angel investors invest much less than VCs do. Investments from Angels may range anywhere from $10,000 to $250,000. However, VCs typically do bigger deals than range from a few hundred thousand dollars to millions or hundreds of millions of dollars.
5. What angel investors look for before investing
Here’s something we can tell you from our many years of experience in working with startups to raise investments – Angel investors (much like VCs) hardly invest in a startup until they are exceptional at each one of the following areas:
I. Credible Data
Investing in a startup is high risk in itself. But doing it without lots of supporting data to prove the viability of the business is synonymous to flushing money down the toilet – and no investor likes that idea.
Hence, they are looking to invest in startups that have conducted thorough market research and have credible data that supports every single claim in their Unique Selling Proposition (USP), market potential, growth opportunities, marketing strategy, and so on.
If your startup has been operating for a while, then they are also interested in seeing your recorded performance over a period of atleast 4 consecutive quarters.
II. A Comprehensive Business Plan
If you keep seeing the term ‘business plan’ littered all over this guide, it is because it’s a really essential piece to raising business funding of any kind – even with family and friends.
In addition, you need to prepare a 3 to 5 years of financial projections covering income statement, profit/loss, cash flow, balance sheet, and so on.
The process of writing a comprehensive business plan takes time and a lot of effort. One simple advice if you’re going to write a business plan – don’t use templates or business plan writing software.
Looking for a shortcut in writing your business plan will also hurt your chances of being taken seriously by an investor. If you cannot put together a professional business plan yourself, seek the help of business plan writing professionals. But by all means, ensure that that you don’t go with a half-baked business plan.
III. Readiness of the Business
Angel investors are pure capitalist who want expect to see returns on their investment in the shortest time possible. This means they are more open to investment discussions with startups when they already have a working MVP or are as close as possible to the launch of a major product, technology or service.
That’s why we personally do not recommend pitching to Angel investors too early. Ideally, your startup needs to have built some traction before you start considering getting a raise.
IV. Other Critical Essentials
Having a solid track record and experience in the industry in which your startup is operating is a huge advantage when raising money. Investors want to know that you’ve competent enough to lead the business to success.
But aside from being a competent founder, they are interested in the management team you’ve put together. They understand that it takes more than a smart founder to make a startup successful. So, they are interested in seeing the credentials and qualifications of your founding team as well.
Non-cognitive business skills such as passion, conscientiousness, perseverance, and teamwork also play a vital role in building investor confidence.
6.How to pitch to investors
Once you’ve completed your business plan and begun reaching out to Angel investors, eventually you’ll land in-person or online meetings with a potential investor. Now is the time to prepare a pitch that can win the confidence of the investor.
For this, you’ll need to work on creating a pitch deck. But before we share tips on how to write the perfect pitch deck, here are a few tips that you need to know in preparation for pitch day.
I. Have a solid exit strategy in place
This is one of the most common questions you’ll hear investors ask when you pitch to them. Business angels ask this question to gauge your level of commitment to building the business. They also ask to understand your level of flexibility and thoughtfulness.
Ensure you don’t pitch to investors without knowing your long-term exit plan for yourself and investors.
II. Know your numbers like the back of your hand
One sure way of losing investor confidence is not knowing everything there is to know about your financial numbers. You should work with your team’s CFO in breaking down the key metrics that investor love to ask:
- Net Income
- Gross Margin.
- Revenue Growth
- Cost of Acquiring Customers (CAC)
- Churn Rate
- Salary
III. Embrace interruptions
Unlike startup competitions where you are allowed to run smoothly through your presentation for 15 mins before judges ask you questions, expect interruptions with real-life investors. Business angels are often very busy people who also likely have a lot of experience in your industry as well. So your pitch may not last through the entire slide deck.
The best presenters are often able to flexibly switch from one topic to the other – without losing their momentum – and find their way back to the original structure of their presentation.
IV. Prepare and practice your presentation
Getting 15-20 minutes to pitch to an investor is a big deal. As such, you need to go into that meeting thoroughly prepared.
Your presentation should be practiced atleast a dozen times until you know all your points by heart. As earlier mentioned, you should also mentally prepare to be interrupted with questions at any point during the pitch.
Now that you’re ready to write your presentation, here are some tips on how to prepare the perfect pitch deck.
I. Be thorough with your market research: if you’ve already written out your business plan, this part should have been taken care of. If you haven’t written a business plan, that’s a good place to start from. Moreover, investors typically ask for both business plans and pitch decks.
II. Build talking points around key information: Go through your business plan and pick out your best information – buzz words, product claims, key market data, striking financial metrics, and so on. Add these key pieces to your pitch deck and remember to build a talking point around them.
III. Create your outline: Your presentation needs an outline. There are several pitch deck outlines out there such as this, this, and that. However, don’t be rigid with your structure. Simple ensure you cover the key sections in the plan.
IV. Write out each slide: In writing your slides, ensure you are very concise. No long-form text, explanations, or any technical jargons. Make it simple and easy to read. Legible text works better than small text. Add visual cues such as tables and charts if possible.
V. Get feedback and implement them. Once you completed the first draft, share it with your trusted team members and advisors, and get their feedback and implement it in a new version of the pitch deck.
VI. Add designs and flair: Don’t listen to anyone that says investors don’t care about designs and flair. Designs alone won’t make an investor say yes. However, a boring pitch deck might also hurt your chances of being taken seriously, especially when an investor requests for a copy of the pitch deck before your meeting.
7.Ways to Find Angel Investors in Nigeria
Nigerian angel investors can be found via:
I. Networking
Your family and friends will likely form the easiest sources to turn to when looking for business funding. In cases where your immediately cannot provide direct funding, you can tap into their own network in looking for a business angel.
Another way to approach networking is to attend industry events and meetups where you might meet successful business leaders in your industry who may possibly like your business idea or introduce you with key contacts. The key here is do not hold out on sharing your business at events.
II. Angel investor groups or syndicates
Sometimes a group of experienced investors may come together to invest in a startup. These are known as angel investor groups. For example, an investor with $5000 can convince nine other investors in his network to each invest $5000 – making a total of $50,000 which is invested in a startup.
Similar to angel investor groups, an investor syndicate is when a professional investors pools funds from individual or corporate investors specifically to invest in a startup. For example, an experienced investor looking to invest $100,000 in a startup may contribute 50% of the money and raise the remaining 50% from a syndicate of investors who wish to co-invest a minimum amount with him on that deal.
Some of the leading angel groups and syndicates in Nigeria/Africa include:
- Future Africa Collective – They allow non-professional investors invest alongside their team on a deal-by-deal basis. The minimum investment amount is $2,500.
- CcHUB Syndicate – They welcome investors all over the world to co-invest with their team. The minimum investment amount is $5000.
- Rally Cap Ventures – The pool funds from other operators and founders to collaboratively invest in the early-stage fintech startups in emerging markets.
- Tekedia Capital – They majorly target international financial institutions and investment group looking to invest in African startups. The minimum investment amount is $5000.
- FDHIC Catalyst Fund – They target qualified investors – individuals and corporates – with particular interests in investing in the fintech and healthtech sectors.
- Hoaq Club – They targeted individual investors in Africa and in the diaspora. The minimum investment is $1,000
- Investzilla – Founded by Jason Njoku in Jan 2021, Investzilla is a syndicate that attract invests in early-stage tech startups in Africa. The membership fee to join is $500 and the minimum investment is $5,000.
III. Website platforms
Other than platforms like LinkedIn, there are other platforms that have been created to connect Nigerian/African startups with angel investors around the world. Some of these platforms are:
- GetEquity: Founded in January 2021,Get Equity is a private marketplace for investors and companies to trade digital securities and assets privately and securely. The platform allows companies or enterprises digitalize their assets via tokens and creates liquidity for them by connecting them to investors and syndicates who can buy and sell these assets.
- WeFunder: WeFunder is a US-based crowdfunding service which connects startups with investors online. The company’s online platform offers investment services to startups through its investors’ userbase and startups can receive amount as small as $100, enabling companies to grow and develop their businesses.
- Other helpful platforms include AngelList, SeedInvest, Republic and StartEngine
IV. Startup incubators and accelerators
Startup incubators and accelerators are created to offer support and services to early-stage startups. By default, they usually comprise an extensive network of angel investors, venture capitalists, and mentors.
As a startup founder, they can connect you with investors in their network that may be interested in your business. They also offer mentoring from other local businesses and accomplished professionals.
Some of the leading startup incubators and accelerators in Nigeria include:
- CcHub
- LeadPath Nigeria
- Wennovation Hub
- Spark
- Leadpath
- 440.ngand L5Lab
- Ventures Platform
8. Leading Angel Investors in Nigeria
In recent years, where have witnessed a trend where successful Nigerian/African entrepreneurs who are based overseas are returning back to the country to invest in local startups. There has been an increase in the number of home-grown angel investors as well.
Some of the leading Angel investors the country has to offer include:
1. Olumide Soyombo – Co-Founder at Bluechip Technologies Ltd
- Sector: Fin-tech, E-Commerce, Consumer Internet, Ed-tech.
- Portfolio: Paystack, PushCV, Mono, Gloopro.
- Connect With Him: LinkedIn
2. IyinoluwaAboyeji: Founder and General Partner at Future Africa
- Sector: Consumer Internet, Enterprise Software, Logistics, Financial Services.
- Portfolio: Stitch, Chaka Technologies, Lori Systems.
- Connect With Him: LinkedIn
3. AdetunjEleso: Non Executive Director at CcHUB Investment Company Limited
- Sector: Fin-tech, Mobile, Consumer Internet, Retail Technology.
- Portfolio: Truppr, Delivery Science, Edves Suite, LifeBank.
- Connect With Him: LinkedIn
4. Jason Njoku: Founder and CEO at IROKO Partners Limited
- Sector: Healthcare, Ed-tech, Fin-tech, Real Estate, SaaS.
- Portfolio: Foto, MedSaf, Paystack, Ogavenue.
- Connect With Him: LinkedIn
5. AdewalaAdisa: Managing Partner at The Strategos Company NG
- Sector: Clean Technology, Consumer Internet, Enterprise Software, Healthcare.
- Portfolio: Ogaranya, Quickship Delivery, Proqure Retail Network.
- Connect With Him: LinkedIn
6. Omobola Johnson: Senior Partner of TLcom Capital
- Sector: Fin-tech, Mobile, Consumer Internet, Ed-tech.
- Portfolio: Okra, ULesson, Andela, Pula Advisors.
- Connect With Her: LinkedIn
7. Idris Ayodeji Bello: Founding Partner and Portfolio Manager at LoftyInc Capital Management
- Sector: Financial Services, Education, Healthcare, Consumer Internet.
- Portfolio: Andela, Tora, Mono, Flutterwave.
- Connect With Him: LinkedIn
8. AdedayoAmzat: CEO at Zedcrest Capital Group
- Sector:00 Fin-tech, Education, Healthcare, Enterprise Software, SaaS.
- Portfolio: TalentQL, Tanda, Kaoshi, LoraDiCarlo.
- Connect With Him: LinkedIn
9. Kayode Oyewole: Partner at Ventures Platform
- Sector: Fin-tech, Consumer Internet, SaaS, Healthcare, Ed-tech.
- Portfolio: Kudi, Proteach, Wesabi. Migo.
- Connect With Him: LinkedIn
10. Femi Kuti:Co-Founder and CEO at Reliance Health Inc
- Sector: Healthcare, Fin-tech, Bio technology, Consumer Internet.
- Portfolio: Solugen, Collectly, Kudi, Wifi.com.ng.
- Connect With Him: LinkedIn
11. ChukwukaNwagbara: Co-Founder of Capsa Technology Inc
- Sector: Fin-tech, Consumer Internet, Enterprise Software, SaaS.
- Portfolio: Future Africa, Getcapsa.com, Investbamboo.com.
- Connect With Him: LinkedIn
12. Adegoke Olubusi:Co-Founder and CEO at Helium Health
- Sector: Healthcare, Mobile, Fin-tech, SaaS, Social Media.
- Portfolio: Akido Labs, Draftbit, Frubana, Retool.
- Connect With Him: LinkedIn
13. Michael Okaredje: Founder and CEO of Pickmeup Technologies Inc,
- Sector: Ride Sharing, Clean Technology, Fin-tech, Consumer Internet, Transportation.
- Portfolio: Hequip Resources, Pickmeup, Onos.
- Connect With Him: LinkedIn
14. BusolaEniola-Giwa: Senior Investment Analyst at GreenHouse Capital
- Sector: E-Commerce, Fin-tech, Consumer Internet, SaaS, Healthcare.
- Portfolio: CredPal, BoxCommerce, Helium Health, Migo.
- Connect With Him: LinkedIn
15. Ike Eze: Advisory Board Member at Investment One Financial Services Limited
- Sector: Financial Services, Entertainment, Digital Media, Consumer Internet.
- Portfolio: TaxiTV, BFree, Smile Identity.
- Connect With Him: LinkedIn
