[Exclusive] Interview with veteran Nigerian investor, Olumide Soyombo

Olumide Soyombo is one of Nigeria's leading Angel investors.

In just about seven years, he has invested in 26 companies that are still active including Paystack which was acquired by Stripe.

In a conversation with Benjamindada.com, Olumide explained how he invests and gave some practical advice for young founders and investors.

Detailed below are excerpts from the conversation with Olumide Soyombo. The conversations have been edited lightly for clarity.

Your Medium post tells all the good investment stories, but people want to know the full gist. What are the things you look out for before investing in a company?

I think for me, because I invest very early, the first thing I look out for is the person. What has this person done? What do I know about this person? And what, what's this person's approach to problem-solving?

People building stuff don't really know what they're doing, per se. They have some view of what they are doing, but it eventually changes. So, anytime you see any startup trying to raise money with all those projections, I know that for me, it's a work of fiction because most times, you don’t even know what the business will end up doing.

So, for example, if you look at the PiggyVest team, when I invested in them, they were building something called Push CV, but then they ended up with PiggyVest.

But then it was the team.

You knew that this team could iterate from problem to problem. They could go from problem to solution on different problems.

So, it was really about the team. That's the first thing that strikes me. What is the calibre of this person? What has this person done before? What risk has this person taken on themselves before they tried to build the business?

And then yes, we always look at the market, and eventually, the product. But we always start with the person because the product will most likely change.

Since founders are the most important aspect of a startup, what specific characteristics do you look for in the founders you invest in? Are you looking for technical founders?

I usually like teams more than solo founders. And I think technical co-founders are key. I prefer technical founders/co-founders because it reduces the raise amount.

Imagine if you have to raise for your development and you are outsourcing to a dev shop or to India. That increases the amount that is needed to raise to prove viability. So yes, we like technical founders as part of the team.

Interesting. You mentioned that you invest early; how early do you typically invest?

I am usually the first money in, which is quite early, so that’s pre-seed round. But the person must have built something or done something already right. The person has formed the thesis and started building something along those lines. The person has taken the risk on themselves; before they ask anybody to do something with them.

In summary,  I'm usually the first cheque.

So, are there cases where you’ve turned down investment in a startup because you are not the first cheque in?

No, obviously, sometimes I'm not the first cheque in, but I'm usually maybe the second or third cheque. I don't have to be the first cheque in most times, but I mean, I'm part of the early cheques.

I'm not going to invest $50k in a Series A company. It’s already far gone. I’d rather spread my $50k around to other companies that are raising under $5 million.

What critical advice do you have for younger investors? Or what do you know now as an investor that you would have told your younger self?

It's okay that you have $10,000 to $15,000 to invest in a startup. If this money goes, will it affect school fees or the next rent?

I think the first part of your question is different from the second part of your question. The advice I'd give people younger investors is different from what I would have told myself years ago.

I get a lot of requests with people asking me, "Olumide, I want to start investing. I’ve seen what’s happening in this ecosystem. Next time you’re investing, carry me along."

And I’m laughing because the first test I ask anybody who wants to invest is "It's okay you have $10,000 to $15,000 to invest in a startup. But if this money goes, will it affect school fees or the next rent?”

If losing that money will affect your livelihood or your quality of life, then you are not ready. It's probably still too early for you to invest.

For Angel investing, you have to invest at scale for you to make any profit. If you're investing $5000 in one company every five years, the upside is limited. It has to be done at scale, investing in several companies.

I like what Future Africa is doing and what Jason is doing with InvestZilla, even Ventures Platform, although they have a larger entry size. With these syndicates, people can invest smaller amounts, between $5000 to $10,000. But my take is that, it has to be money you can afford to let go.

If it’s not money you can let go, you shouldn’t be investing in African startups.

Duly noted, so what sectors are you optimistic about in Nigeria and Africa?

For me, it is not about sectors. What I'm excited about is the quality of talent that will come out from several companies and build different things. That's what I'm most excited about.

They’re the ones who determine what sectors will become viable. A sector can be viable, but the entrepreneurs you meet might not be the right people that you think can execute. Quality entrepreneurs will drive some of the sector “invest-ability”.

For example, we are seeing some ex-Paystack engineers going ahead to start companies. Likewise, ex-Jumia, and ex-Iroko. These are people who have gained product management experience at these mid to mature startups.

Brass and Mono are prime examples. The founding team are ex-Kudi and ex-Paystack, respectively.

You'll find some quality founders leaving well-grounded startups to start their own things in different industries. And for me, that would drive my investment in those industries, as opposed to the industry’s marketability in itself.

From looking at your portfolio of 26, it looked like there was a bias for FinTech

(laughs) It just happened that way. It wasn’t intentional.

Our readers want to know how many bad investments you have made. Can you share with us?

In Nigeria, when you find out that a founder has gotten a job somewhere else. That's how you know the company is dead. Since they’ve not formally announced that they’re dead, I can’t be the one to make that statement.

I read a quote that said, “there are no good investments; there are only companies you should not have invested in and companies that you should have given more money.”

I like the quote because it is funny and true.

There are companies I should not have given any money to and just given it to Paystack. The money I gave to Paystack should have been more, so there’s no good investment at the end of the day.

I won’t call them bad investments because it's expected that these things will happen. I would say that it's part of the lessons learned.

For example, if you've seen a trend with one or two startups you've invested in before, you can then spot that trend in another company you have invested in now and tell the founder, “Hey, you're doing this wrong”.

Also, people have asked me to write about some of the companies I’ve invested in that failed because I only listed active companies. I can't write about those companies because even those founders have not come out to say that they've quit those companies and that they are doing something else.

I invested in a fashion e-commerce company, and the founder discovered it wasn’t working. She told the investors that this thing isn’t working and she's moving on. She became MD of another company, but she has not come out to say the company is dead.

There has been no postmortem to say the company is no longer operational, and the founders have moved on. I can't be the one to call it out. There are several other companies like that.

In Nigeria, you find out that a company founder has gotten a job somewhere else. That's how you know the company is dead.  Since they’ve not formally announced that they’re dead, I can’t be the one to make that statement. That’s why I don’t really write about them.

For me, we need more people to talk about these failures, even though we don't like talking about them.

The truth is, when the investor stops receiving certain updates, they can already tell that there’s a problem. That’s how you know the company is failing—they stop giving updates.

The founders are thinking in their head that this month has been bad, but next month should be better, so they end up kicking the can down the road until they get caught up in that hole. But it’s better to open up and tell investors what is happening. Nobody will kill you.

One of the things I figured is that there is a telltale train when you stop hearing from the company, which means something is really wrong. Next thing you know, the founders have gotten paid employment, or someone has moved to Canada.

This hits home for us because we were trying to find information on companies that shut down in 2020, and there was nothing. And we were sure there were several companies because of the kind of year 2020 was.

Nobody wants to talk. You just find out that the founder has started working somewhere else.

Another of our readers wants to know what your biggest investment regret is?

The biggest regret is not giving Paystack more money (laughs)

Haha, interesting. I’m sure if we asked what your favourite investment is, it would be Paystack too.

It would actually be PiggyVest, especially in terms of the transition from how we started. We both grew together. They were the first set of investments I made. Then, I had a (business) card with PushCV and even with PiggyVest.

I have a special affinity for them because we built together. We went through the ups and downs. I saw the growth from day one to where they are today. They’ve grown as human beings and as founders and are now going ahead to invest in other companies. Odun has started something called FirstCheck.

Seeing that growth and knowing where we started from is just inspiring. So, they have a special place in my heart.

Interesting. Hope you gave them enough money?

Haha. Yes, I think I did.

So, away from investors, what’s your advice for founders looking to raise money?

If you’ve not made any sacrifices, you can’t ask someone to come and do the same for you. Nobody is going to build your business for you at the end of the day.

I think the first thing is, having a strong enough thesis that you believe and the ability to communicate that in a very clear way. There are some founders you sit down with, and you hear their thesis about the market and the problems they’re trying to solve, even though you disagree with it, the way they’ve communicated it and the clarity of their thought process just inspires you.

The second would also be that you need to take a risk on yourself first. You can’t say you’re trying to build a company, but you’re still going to keep your day job until the thing takes off. It doesn’t inspire confidence in the investor taking a risk on you.

So, what risk have you taken on yourself? What sacrifices have you made to get that company where it is today?

If you’ve not made any sacrifices, you can’t ask someone to come and do the same for you. Nobody is going to build your business for you at the end of the day.

Thank you, Olumide, for taking the time to talk to us.