Podcast

LTAD: Africans Investing in Africa is the Foundation to Building the African Startup Ecosystem

Eunice Ajim

August 15, 2022

A Tweet is just that - a tweet - to so many people. But for Dayo Koleowo, a tweet was what kickstarted his journey into the venture capital space in Africa under Microtraction.

Ajim Capital sat down with Dayo to discuss his journey in the investment and tech ecosystem.

Interestingly, Dayo, a Bachelor’s degree holder in Quantity Surveying was once a startup founder. He founded Chow Hub, which was borne out of the fact that there were no directories of restaurants to go to in Abuja. “We were like, why don't we create a directory of restaurants in Abuja where people can discover places to eat? And we started that as a directory, but it eventually morphed into having an online delivery platform where people can order food from the comfort of their zone. Whether you were in the office, at home, on the road, you could order from us and get it delivered to you.”

Eventually, the startup folded and as Dayo put it, “that was the wrong business idea to actually start because it was so tough. We didn't understand how difficult and tough building a meal delivery company in Africa, in Nigeria, where it is crazy to actually even move around”. Dayo put up a good fight though, growing revenues to about $2000 per month in 2015. He remembers telling his co-founder, “I don't know if this is going to be successful, but I know we're going to learn a whole lot.” Eventually, his cofounder left for his Master’s degree and the business had to shut down.

And so what happened after Chow hub? Dayo met Yele who is the current founding partner of Microtraction through his then co-founder. “They had worked together at Yele's previous company, Starter.  It was an entrepreneurial community platform that connected entrepreneurs to investors. And during that period, they found out that, there were a lot of entrepreneurs around, but there are not many investors. And these entrepreneurs were building great businesses, or at least they had an idea and they were working on it, but they need that first check to kind of kickstart them”.

And that was when the Tweet happened. “I love Twitter a lot. Like, I'm a big advocate for Twitter because, and I'm sure you know this, like, there's so many people you have met on Twitter. We met on Twitter. I believe there are so many people you can meet on Twitter”. According to him, he saw a tweet from Yele's, former boss, Dotun congratulating Yele for starting a new fund.

Immediately after Dayo saw that tweet, he reached out to his close friend in Dublin and said, “We have to reach out to Yele. This is a great opportunity for us to be part of something really great, right”. For Dayo, he was seeing a great opportunity and he was going to take it.  He sent a mail and a follow-up email and by August 2017, he was joining Microtraction.

Dayo talked about what his experience in those first months was like. “So when I joined, I was more of an analyst associate at the time, and we did a lot of the work. When you're an associate analyst, you're assessing companies, you see companies daily. I just kept on seeing and with Microtraction, we have an open application process”. They saw a lot of fintech companies around savings, investments, building wallets and building alternative financial services to the banks. It was during this time they made investments into Cowrywise and Buycoins.

He talked about how easier it is for startups to raise money than VCs, “I can tell you, as an emerging market fund manager, it's a difficult thing to raise money. It is. I actually found out that it is easier for startups to raise money than for VCs to raise money. Because it's on a different level. You're being DD’d not because of the premium loan, but even because of the market that you're trying to invest in. And if you don’t have a track record, then so help you God, because you're going to be DD’d on every investment that you have made. And so it's a lot more work and a lot more defensibility that you have to do to get LPs in. And it's just an interesting experience. We wanted to prove that our thesis was right and we wanted to start small. And so luckily for us, we were able to kind of get that money together. It wasn't easy, though.”

No sooner than later, they put up a proper company structure in place but Dayo acknowledged that it took a lot of time and a long learning process. “It takes some time and just trying to understand, what entity should I use, where should I open it up? You're like how should I make these investments, how do I take in money from both local and international investors? But guess what? Today, we're raising the second fund.”

Dayo hopes the tech ecosystem in Africa grows, and he wants more Africans in the Diaspora to invest in Africa. He says, “There are opportunities for you to get involved in Africa, by starting as an angel investor. There are so many angel groups out there where you can start investing as little as N500,000. If you're in the business space or start-up or like you're an operator that really thinks you have access to great deals, front manager and VC might be the way to go. And if you make really good money and you don't want to deal with the individual companies, Microtraction is there and you can invest as an LP.”

As always we wrap up every podcast with the last question about the African Dream. And for Dayo, African Dream is, “The dream for me, for Africa, especially really in Africa in general, is to have an accelerated economic development that affects truly, truly every African on the continent. And I believe with the work that I do and the fusion of innovation, technology, capital, and our biggest resource, which is human capital, we can lift a lot of people out of poverty into a freedom way of life, where they can actually be free to do whatever they want to do. That's the dream I have for Africa”.

For Africans by Africans - empowering the next generation of African founders.

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