In this latest episode of The Tipping Point, Ben Black interviews Maya Horgan Famodu, Partner and Founder, Ingressive Capital on starting a venture capital fund in Africa.
Ben: Maya, give us a high-level story of how you went from a 23-year-old with nothing but a pitch in 2014 to actually having a VC fund in sub-Saharan Africa.
Maya: Initially, I wanted to raise a $50 million fund, but I realized that with about a year of work experience post-grad, that probably wouldn’t be my immediate future. I shopped that idea to a few investors, but did not get terribly far. And so, I was figuring out that Ingressive Advisory was an iteration of a crowdfunding platform mixed with an advisory firm. I realized I had to start with finding investors that had a high risk tolerance for the highest risk VC industry in the world. I found them in Silicon Valley by going door to door to VC funds trying to get them to invest in the fund. Remember this is 2014. Today it makes sense that there are deals in Africa; now it’s sexy, it’s trending, billion-dollar exits, and Stripe is acquiring things left and right. However, back in 2014, the questions were more, do Africans even have internet or are developers in Africa really going to be a thing? So it took a lot of informing and teaching about the opportunity that existed on the continent. Half of the investors decided to just come to Nigeria and see for themselves so I would leave them alone. And some others saw there was a reason I was so obsessed with this opportunity and had an idea of what might happen in the future.
After six months of persuading our first cohort of investors to come to Nigeria and check out opportunities, we had guys from large startups and firms, and they actually closed and committed capital to investments in Nigeria. So, we kept doing trips over time; we worked with Y Combinator, Techstars, New Relic, Github, Figma, and more. Today, we’ve had 50 clients with the advisory firm, and they’ve made more than 50 investments in Nigeria alone. Then, in 2017, after they had three years of making money and gathering data points to prove I actually know what I’m talking about, they finally committed capital to our actual fund. From there, over the next two and a half years, we raised $10 million. And then last year we launched our non-profit, so we could really control the supply of technical talent coming out of the ecosystem as well as founders. We’re in every major university in Nigeria sponsoring part of their computer science programs and giving out laptops and data to African youth. We just launched a 30,000-member technical training cohort. Last week, we gave a thousand scholarships for women to learn design. And, just for some numbers, last time we did our training cohort, there was an 80 percent employment rate upon graduation, which proves the really high quality of technical talent.
Ben: I’m excited for you! How many investors do you think you talked to get to that $10 million fund?
Maya: In terms of direct conversations, it was probably close to a thousand for fund one. Then I did around 400 actual pitches, and finally ended with 40 investors in fund one.
Ben: That’s awesome. And I’m one of them! So tell me a bit about mental toughness, because people really suffer when they’re raising their first fund. How do you handle all the rejection, and what kept you going?
Maya: I’m so committed to this because we’re focusing on ensuring that every African on the continent, regardless of background and where they’re from, has the resources they need to build wildly scalable businesses. I grew up in a trailer park in rural Minnesota, struggling in any and every capacity and realizing that despite my own intelligence and my own capacity, forces outside of my control limited me from getting to where I wanted to go; even at a young age. That limitation of access was such an experience for me that I really cannot handle people going through that as well. Also, being half Nigerian and having family from there, and understanding the incredible resilience of the African entrepreneur is really so deeply in my core. When I was working at an advisory firm and back at JP Morgan, I couldn’t sleep at night, I couldn’t eat because all I was talking about was tech in Africa. I was obsessed. When you find that purpose to which you are unwaveringly committed, you can be relentless in your commitment to it. Each time I had a meeting I realized I am just simply a warrior for this and just another person who is actively contributing to the development of the ecosystem and the development of the continent, and it has nothing to do with me. Also, taking it a step back and looking at the practical numbers. It’s okay if I’m going to close 1 in 10, and probably at the beginning of the fund, maybe close 1 in 30. It was just a numbers game. So it's okay that I got one rejection and I’m probably going to have 20 more before I get a yes. Instead of looking at it like I’ve failed, I just saw it as simply a numbers game to get to the end goal. Additionally, in each investor conversation, I realized I’m having an hour or two with somebody who’s an expert, who’s been engaging with people in this way, in this capacity for so long, who I can take tangible advice from. I mean, I got to stick with my fundamentals, but really allowing the opportunity to essentially have consulting sessions with experts. I always tried to take something tangible away from each one of those meetings. And if not, a piece of advice, then maybe they’re connected to someone or at least an opportunity to expand my network in some way, or develop a relationship.
Ben: Did you ever consider stopping?
Maya: No. No, because nobody’s done this before. We’re bringing investors from the US and elsewhere, and driving venture capital dollars to the ecosystem. In 2016, there was only $129 million that came into the whole continent. Compared to last year when we had our very first portfolio company sell for $200 million plus. Then, there was about $4 billion plus, including the IPOs that happened last year. Imagine how little capital there was in 2014, 2015, when we started probably $5, $10 million coming into the whole African continent. So really starting from scratch.
Ben: What’s it like being in Nigeria as a venture capitalist? Tell us about the ecosystem.
Maya: Like I mentioned, in 2016 there was $129 million; in 2017 there was about $560 million; in 2018, $1.2 billion; in 2019, $2.2 billion, and last year $4 billion plus. So every year it’s about two times VC dollar growth. So every time I come home from fundraising travels or what have you, there’s an immaterial difference in the way the ecosystem appears and the opportunities that exist; the growth is incredible. Additionally, I can’t compare it to anything else. In other ecosystems I go to, we’re dealing with issues like, ah, my internet is slow today, or I don’t like having Subway for lunch. But on the Continent, it’s regulators materially transforming a whole industry overnight because of their lack of understanding of how technology works, or you’re trying to build your business and the central grid shuts down, so you have to figure out how to get a generator while there’s a fuel shortage. Before you can even think about your business and customers, having to solve for a thousand things and still being able to build wildly scalable businesses, is incredible resilience, steadfastness, and just ingenuity. At every point in time, you’re going to come up with a boundary and an issue, and the way that the entrepreneurs we work with, and frankly, Nigerians and Africans at large, just hop right around it and continue on is incredible. It’s never, woe is me or this terrible. It’s just an automatic brainstorming session a hundred times a day.
Ben: That’s great. So tell me, is there any sort of learning that you have from how you found the people that said yes? It is a little bit of a needle in the haystack game, so can you touch on what you have learned about your value proposition over time?
Maya: Typically people say you need your large ticket anchor investor, they say your LP terms, and then you go from there. But the way we did it was to shop our own LPA and sign a bunch of smaller tickets until they become cumulatively the size of an anchor, and then go into the bigger ticket LPs. I’ve seen founders do it the same way we have done, and though it’s not market, it’s not traditional, it’s absolutely above board. For example, we have the Nigerian sovereign investment authority, and we are the first VC they’ve ever backed in history. However, they were the very last investors. We crafted our LPA together with our first investors of $500,000 ticket sizes. And then we shared them with all of these different, smaller ticket friends and family, then with former clients from the advisory firm, and together, there were a couple million dollars. So, as far as non-traditional ways to get to the yes, you can start with your friends and family and just look at it as a cumulative anchor, essentially.
Ben: How do you manage the inherent challenge of when you have markups, and then you have previous investors who were there, but you’re still fundraising against the markups? Did you get any pushback on that?
Maya: No, because our initial investors understood the benefit of having those larger institutional investors on board. Africa is trending right now, but who knows what’s going to happen in two years, so, it was essential for us to have large-ticket LPs who had invested interest in the success of our companies and were invested with us. Our initial angel investors were completely okay, as I also had personally taken the profits from our advisory firm, invested them in deals, and when we launched the fund, rolled those into the fund at cost. And so it was, I did it, so you’re doing it, so that we can have the best interest for all or for the collective.
Ben: If you did it all again, what would you do differently?
Maya: I think I would not spend so much time trying to convert people who had no understanding of what was going on in Africa. I did, and I started from scratch with people who thought Africa was a big jungle without any power. Having to work through those conversations took me around 9 to 12 months. But now it’s, if you don’t understand, I don’t need to have these conversations with you. There are enough people who have that open-mindedness or enough information and are actively seeking this. So, as opposed to trying to force and change the tides, being able to just go with the flow and find the people who are already in the space to be interested in an easy conversion.
Ben: That’s great. Any other hacks or tactics you think people ought to know if they’re starting new funds?
Maya: Yeah. With our fund, there are four parts to it that are the most important. There’s the deal-sourcing part of it, the investment process (actually getting the deal done, being kind to the founders wiring the money within 24 hours of closing, signing docs, etc.), there’s a portfolio support side of it, and there’s the LP correspondence side of it. And really, if you can focus on ensuring that you have key talent in-house that focuses on each one of those, that’s really the key to success. I think it took us a long time to really figure out even what is important in a VC fund because I never worked in VC before launching one. The story is I just wanted to be an analyst and no one would hire me. And so I was like, you know what, I’m just going to do this. There was a time when I did just want to be a venture partner and analyst while running the advisory company, and I couldn’t get in. So it was time for me to start my own. So definitely understanding the importance of each one of those parts, in addition to, from the very beginning, understanding your competitive advantage. Why is your firm uniquely positioned to add totally unique value to your portfolio companies?
What sets us apart in the ecosystem is we’re respectful and kind to founders and look at them as somebody for whom we work. We are providing a service to them, and if they don’t like us, then we are out of business. We are laser-focused on portfolio support, how we get everyone, even our limited partners, to be adding direct value to our portfolio companies. You position the negotiations, the dynamic, the relationship entirely differently if you’re seeing them as your own customer.
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The Tipping Point Series (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”). Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers.
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