The Managing Partner of EchoVC, a Nigeria-based Information Technology company, Eghosa Omoigui, tells OZIOMA UBABUKOH that investing $50m on technology start-ups will reduce Nigeria’s dependency on oil
What is your take on Nigeria’s potential for bridging the digital gap in Africa?
Given the enthusiastic, intellectually curious and ambitious nature of most Nigerians, including their rapid adoption of new technology, we absolutely believe Nigeria and Nigerians have a tremendous opportunity to bridge the digital gap in Africa.
Can you name any strategic tech solution that could leverage the nation’s leap to the technological future?
We see a few turbocharged engines of growth that can power the nation’s leap. Immediate solutions that come to mind include accessibly priced connected devices and broadband Internet connectivity to accelerate access to education, e-commerce and global information sharing. We believe the fundamental needs must be addressed first.
Apart from funding challenges, what would you consider as constraints on the path of Nigerian companies to maximise the potential and latent advantages?
Uneven electricity supply and a lack of cheap reliable Internet, the expensive rents and service charges for office space, difficulties of recruiting, hiring and retaining qualified talent, burdensome incorporation, licensing, tax and regulatory processes, etc., put significant strain on the already challenging life of an entrepreneur. They face friction every day. We find it remarkable that, despite all these, many are still able to succeed and create opportunities and jobs.
So, what do you make of the recent National Software Development and Incubation Programme mooted by the Federal Government?
We are very excited about this programme. As you are aware, the Federal Government’s objective here was to create appropriate policy and guiding framework to enable what we believe to be the next-generation strategic pillar of the economy, i.e. technology. In setting these guidelines, the Ministry of Communications, in partnership with the private sector, introduced an initial set of technology incubators (IDEAHub), which would offer free/cheap working space, Internet access, training and mentorship to budding software entrepreneurs and developers. This first leg seeks to address some of the friction points that our tech Small and Medium Enterprises face. Another leg of the programme was to create a pioneering Information and Communications Technology Innovation Fund (also to be funded by the Ministry of Communications through its agency – the National Information Technology Development Agency), which would help fill some of the financing gaps that these entrepreneurs face when seeking seed finance. Following a public procurement process, EchoVC was selected to be the exclusive manager for the ICT Innovation Fund, in recognition of our broad experience in funding and supporting ICT entrepreneurs at their earliest stages of development. These two legs of the programme are incredibly important drivers of the Public-Private Partnership-supported innovation and significant job creation and we are deeply appreciative of the public sector support so far. We call on the Federal Government and the Ministry of Communications to ensure that IDEAHub and the ICT Fund continue to get funded and expanded, as the demand for the value the two vehicles bring is almost insatiable. We feel the Ministry of Industry, Trade and Investment as well as the NSIA and CBN should consider investing funds into these efforts as well.
Do you envisage a possible policy somersault to undermine the ICT entrepreneurial projection for the country?
No, we don’t believe that will ever be the case. We are extremely confident that policy makers are increasingly more understanding of the value that technology brings. There will be no sector of the economy that technology will not disrupt through the application of tech-powered innovation, none whatsoever – from agriculture to hospitality, media to retail, health, transportation and education. This is a Gross Domestic Product-sized opportunity. While technology adoption tends to happen at a faster pace with the younger demographic, no one will be left behind. So, we can expect more favourable policy frameworks that recognise the power that technology will bring to improving efficiency, making our people more knowledgeable, creating high-quality jobs, and delivering happiness.
Deal sourcing, implementation and valuation represent the core-areas of concern for venture capitalists, how can the process be smoothened out?
With an increase in the quantity of quality venture capital investors in the ecosystem, it is our belief that many of these issues will be smoothened out organically. In our experience, the best deal sourcing comes about through word of mouth referrals (or peer to peer sharing) or through leads from other investors. The issue around valuation will slowly be solved by educating fellow investors who are new to technology start-up investing. In the meantime, we spend a great deal of time helping entrepreneurs identify the appropriate type of investor, educating them on the processes involved in securing venture capital for their start-ups and explaining potential alternative sources for funding dependent upon their needs. On valuation and entrepreneurs, education is key. Entrepreneurs are very optimistic and so their valuation expectations tend to mirror their level of optimism. But company building is a very hard work and many successful companies didn’t succeed on a straight line – so recognising that it is a long road to hoe and being smart about pricing the opportunity for investors is an important skill of great entrepreneurs. We feel that as part of our role to develop a healthy, vibrant and sustainable ecosystem, we can share our experiences and mistakes, both in this market and the United States and Asia, so that they can learn and not hope to repeat. As we like to say, we want to fund entrepreneurs that make (and learn from) new mistakes, not repeat the same old ones.
What places EchoVC partners on the pedestal for excellence?
We have a uniquely qualified and experienced team of investors from Silicon Valley with global knowledge and understanding of technology start-ups. Our founding teams come from top tier venture capital firms in the Valley (Intel Capital & Founders Fund) and have seen hundreds of successful (and failed) entrepreneurs and companies over the past two decades. There is currently no other venture capital firm with the background we have working on the ground and investing in Nigeria. In addition to our differentiated experience, we are also strong believers in the ability of Nigerians to create innovative ICT solutions and companies that can meet local and global demand. We fund and we mentor.
You are proposing to invest about $50m on tech start-ups in the country at a time when there is so much uncertainty surrounding the economy, what is inspiring this decision? Is this really the best time to invest in the country, especially in the tech sector?
As Nigeria seeks to lessen its dependency on oil, we feel this is a critical time to invest and support the Federal Government’s initiatives to cultivate and develop the ICT ecosystem in Nigeria and broaden the composition of economic drivers within the country. As we have seen in Silicon Valley over the past 40 years, the ICT sector has the unique capability to revolutionise a country and create innovation in areas previously undiscovered. The introduction of mobile phone technology to Nigeria is a classic example of the gigantic shift ICT can instigate in an economy.
Nigerians are some of the cleverest and hardworking entrepreneurs we’ve seen. They want to create a brighter future for themselves and generations to come. Technology can help them do just that. We have also seen that the very best time to invest in high quality ICT entrepreneurs is in the context of fear and uncertainty. We are very committed to seeing this happen in Nigeria. For now, what we see is a mismatch of conviction between entrepreneurs and investors. We share the same levels of conviction that our local entrepreneurs have, and are here to stay. Make no mistake; we are not in the business of giving grants. Our model is designed to invest in successful companies that can generate positive returns to our investors, the company founders and employees and the ecosystem at large.
Access to funding is one of the greatest challenges of most tech start-ups in Nigeria. As an investor, what do you look out for before committing your funds and what can start-ups seeking investment learn from this?
Generally, we look for entrepreneurs that share similar characteristics to entrepreneurs we have seen grow successful companies in the United States and other markets. They tend to share a similar DNA. We look for intellectually curious entrepreneurs who are committed to the problem (but not necessarily the solution) they are solving, innovative and creative in their approach and humble enough to understand there is always more to learn; especially when starting a new company in a difficult environment like Nigeria. We believe that these entrepreneurs exhibit conviction that outpaces their humility and humility that outpaces their execution. But all these elements are exhibited 24/7.
copyright by Lerato Lee