The Investors' Corner — Peter Oriaifo, Principal at Oui Capital

"I want to apply for Oui Capital's internship." Oluwasanmi (a friend of mine) said, rightfully pronouncing Oui as /wi:/.

"We?" I asked, referring to the English pronoun.

"Yes, Oui.” Oluwasanmi replied, maintaining the /wi:/ pronunciation. "But as in the French word meaning yes." He continued, explaining how he'll love to kickstart a VC career by interning at Oui Capital, an early-stage venture firm.

Intrigued, I visited Oui Capital's website, and while navigating the team page, I stumbled on Peter Oriaifo's profile. "Ah. Impressive." I exclaimed when I saw that Peter had executed over $1.0 billion in deals as an investment banker.

So when I started The Investor Corner several months after I had first seen Peter's profile, I decided I would feature him in the series. I was curious about Peter's transition from a successful investment banking career into VC and how he leads investments at Oui Capital. However, I never had a chance to satisfy my curiosity until Benjamin Dada introduced me to Peter in January 2023.

With an available time slot of 30 minutes, I envisaged a short conversation. But in a surprising turn of events, Peter and I spoke for over two hours. Keep reading to see the highlights of our discussion, including some of his thought-provoking opinions on the African tech landscape.

Like startups, like venture firms

Although we spoke at 8 pm WAT, Peter appeared to be in a work mode at the start of our call. So this got me interested in his typical day-to-day life. How does a principal at a leading fund II spend his day?

"My days are usually busy. It's almost like I'm in a startup," Peter said, "And when you think deeply about it, running an emerging venture firm isn't dissimilar from running a startup. Like startups, we have products in the form of investments (placing money into startups that fit our investment criteria), portfolio support (providing strategic support and resources to portfolio companies), and ecosystem engagement (building relationships with other investors via conferences, fireside chats, etc)."

Peter then delved into the nitty-gritty of his workdays. "I usually start my days by 4 am. First, I read the news, check my email, and set priorities for the day. Afterwards, I take a number of internal meetings, most importantly weekly investment team round tables where we discuss inbound deal flow, qualified deals, first calls, due diligence and more."

Internal calls aren't all that comprise Peter's day. When he’s not conducting research or leading deal execution, he is taking external calls with founders. He explained, sounding excited, "I dedicate some hours to give founders detailed feedback on their pitches. This feedback usually comprises what could be improved. I think it's important to have a proper feedback loop for founders because you can't fix what you don't know. To him, raising money is much like running a startup me is an iterative process - there's always room to improve.

I'm big on helping founders get better because their success, regardless of whether they become a part of the Oui Capital family or not, is an ecosystem win. After all, it validates the overarching thesis that African entrepreneurs are worth funding.

On top of those tasks, I work on a platform aka portfolio support, assisting our founders with fundraising, financials, talent, and go-to-market strategy.

Additionally, I'm constantly engaging with other ecosystem stakeholders at all levels, from startup operators to other investors and regulators. Through this I get a “360-degree view” of the startup ecosystem, allowing me to make better-informed decisions with respect to investing and supporting founders.

New year, new beginnings

As if Peter's days aren't exciting enough, he intends to make them even more interesting by spending more physically than online. In his words, "My schedule is going to change this year as I'd like to spend time physically in each of our primary markets in Africa." I just hope Peter takes pictures of these moments, so we know how his plan turns out.

From Lagos to Yankee, then Lagos… again

Nothing demystifies the wonders of life as much as stories do. With a beautifully told story, everything makes sense. The highs. The lows. The in-betweens. They all start to make sense as stories provide the ultimate context, immersing you in the behind-the-scenes.

And so, when I got the chance to speak to Africa-focused investors every other week, I made it a mission to always know the story behind their success. How did it all begin?

In my usual fashion, I nudged Peter to share his story. Not only did he not shy away, but he also owned his privilege, deviating from the trite "grass-to-grace" plot. In his words:

"Growing up between Nigeria and The Netherlands, I was lucky to have access to extremely successful entrepreneurs and executives who helped expand my worldview. Seeing people close to you achieve some semblance of success (however we choose to define it) makes you feel like, "hey, I too can do this!”.  After wrapping up my secondary school education in Lagos, I moved to the U.S. for college. There, I earned a bachelor's in business administration at  American University and pursued an investment banking career after graduation. I owe my interest in covering financial institutions as an investment banker to an uncle who had built several banks in Nigeria - we would always say banks are at the cornerstone of a well-functioning economy, so I immersed myself in that world".

But what Peter didn't foresee was falling in love with fintech. According to him, a highlight of his investment banking career was working on the first-ever sale of a bank to a fintech company in the U.S., when Jiko acquired Mid-Central Federal Savings Bank. A second deal he worked on in the space involving Radius Bank (now the banking arm of Lending Club) led him to deepen his interest in fintech, eventually leaving investment banking for tech.

"My journey in tech started at RSM US LLP, where I was a consultant performing valuation analyses - from seed-stage to IPO - for technology and life sciences companies, private equity, and venture capital funds. This was a life changer as it exposed me to the good and bad of deals. But interestingly, none of my clients, many of whom created phenomenal businesses, many of them unicorns and decacorns to this date, looked like me. It was clear black founders did not enjoy much of these successes."

Peter continued:

"That was an odd experience because I was used to seeing successful black entrepreneurs back in Nigeria. Coincidentally, my parents instilled this mentality in me that it's easier to build something of consequence back home in Africa because opportunities are vast. So when I saw the  disconnect in the U.S. startup ecosystem, I thought that was the best time to leverage the experience, knowledge and connections gathered in the West to build back home."

In a world where millions hustle to japa from Nigeria, Peter's decision to return was rather audacious. Now, the bigger question for Peter was, "how do I apply my western experience to an emerging market such as Nigeria?"

Teach me thy ways, sensei

Peter started reading everything he could on the African tech ecosystem to close his knowledge gap. He was also lucky to have contacts in the leadership ranks at startups like Flutterwave, Konga, and Helium Health. But this barely scratched the surface. There was still much to learn.

His first cold message on LinkedIn was to Olu Oyinsan, who at the time had just launched Oui Capital shortly after leaving Ingressive Capital, where he was the Vice President of Investments. Narrating how he ignited their relationship, Peter said:

"I was working as a consultant at the time when I first met Olu in Boston. Over dinner, He waxed poetic about his vision for Oui Capital. Olu was deep in the local ecosystem, whereas I had learned VC in the U.S. ecosystem and brought relationships, rigour, and analysis to the table. In a way, he was the ying to my yang. I started interning at Oui Capital on the side and I never left, even after getting accepted and attending graduate business school at Dartmouth - for most of the formative years of the firm, I was working full-time and going to school full-time."

Getting Oui Capital to say "oui"

Despite having the word "yes" in their name, Oui Capital doesn't go about investing in every entrepreneur that approaches them. In fact, the firm has only 20 startups in its portfolio. What prerequisites did these 20 companies have to qualify? I asked Peter, who leads investment at the firm. He answered in the most expressive way possible.

"First, we aren’t high-volume check writers at Oui Capital. And this isn't to say there is anything wrong with it. Instead, we concentrate capital on a select number of startups and work with them to grow. That's our approach.

Typically, we invest in pre-seed and seed companies with strong potential growth. We have an informed point of view that helps in determining which companies we would partner well with.

Above all, we prioritize tenacity and strong founder-market fit. Are the founders well-positioned to solve the problems their startup is tackling? We also look at customer resonance. Do you have a strong customer base that loves your solution? This is an important criterion because you don't want to waste venture capital building what people don't like.

Lastly, we look for strong unit economics. How judicious are they in managing company funds, and is there observable ROI based on allocated spend".

Surprise, surprise: digital commerce, not fintech, is Peter's favourite sector

When asked about his favourite sector to invest in, Peter surprised me with his answer. According to him, fintech and digital commerce are his two top-liked sectors, but he loves digital commerce even more as he believes it's the most important industry in Africa right now. Peter provides explicit reasons to back his point.

While detailing his strong reasons for advocating for digital commerce, Peter addresses key issues in African tech.

He expounds, "I know it might sound crazy to say digital commerce (any tech that facilitates the movement of goods and services) is the most important segment in Africa because trade is at the very heart of the African economy (approx. 50% of GDP). Most successful fintech companies in Africa are in the payments space because of the prevalence of digital commerce. The first wave of players built on the promise of a digital future, i.e Paypal for Africa. Now, that makes sense at first glance. However, when you analyze nuances such as the difference in internet penetration in Africa and America (~36% vs. ~90%), you realize the African market needs a more inclusive strategy.

This explains why many fintech is starting to build offline solutions (i.e., PayStack for POS, Flutterwave for offline). They now understand today’s reality that only a few Africans are online. This isn't to say we shouldn't create digital products, but rather, a clamour for startups to meet customers where they are at first. Once you've acquired and retained them, you can dig deeper. In all, digitize at your customer's pace, particularly if you're building for a mass market. This is why companies like Moniepoint succeed.

Now, serving a niche audience such as upwardly mobile millennials and Gen Zs is fine, but to really tap into the African mass market, founders have to create products mirroring the market realities.

Hopefully, more VCs in African countries, including Nigeria, will catch up and tap into the E-commerce industry, which is projected to grow by 50% by 2025.

Slow but steady

Compared to its counterpart in Silicon Valley, African VC is still in its earliest stage. Accordingly, only a few Africa-focused VC firms have profited from their investments. How long will it take for these firms to make a profit, you ask? Peter has answers.

"VC is a power of law business where we invest in a number of companies, and only a handful of them do well. So it's pretty normal for a firm to wait a few years before one or two of its companies drive attractive returns. For Oui Capital, Moniepoint was the first company that generated most of our returns on the first fund."

Big exits, small returns

Surprisingly, having a successful exit doesn't guarantee good returns. Peter described this best in this blog post.

"There must be a way around that problem, right?" I asked Peter. He replied, "Well, to solve that problem, founders have to aim for realistic valuations. By seeking high valuations prematurely, founders are doing themselves and investors a disservice. Unfortunately, it's we the investors that mostly bear the brunt of this mistake, as there are no second chances in this business. If you don’t give great returns, it’s game over"

Outlook for Africa's tech ecosystem in 2023

Before ending the interview, which had exceeded the scheduled time frame, I encouraged Peter to share his thoughts about the ecosystem in 2023. He did this concisely yet poignantly.

"2023 is when we start thinking about software differently. I foresee many software companies rethinking their Go-To-Market (GTM) strategies to increase revenue and reduce churn in this tough market environment. Additionally, growth in absolute dollar terms will be more challenging for many startups. An appreciating dollar means you have to work harder to replicate last year's performance. This is why retention and upselling matter more now than ever before. Lower demand will place a ceiling on new sales.

On top of that, capital will concentrate further on the big four markets (Egypt, Kenya, South Africa, and Nigeria). This is a hedge of sorts; in uncertain times, investors will seek to de-risk an already risky investment by concentrating capital in markets where the revenue opportunity is exponentially large. 2023 will also be a great time to focus on building a cash-flow-positive business.

With capital scarcer, talent tougher to come by, and growth becoming more challenging, we expect to see widespread consolidation, being purchased mostly for stock and some cash consideration if any."