The decision of Nigerian VC fund 440.ng to scale back their accelerator programme this year in favour of a shorter Deal Weekend may have looked like the beginning of a slowdown. Not so, at least for co-founder Chika Nwobi.
Nwobi is well known in the Nigerian startup scene as founder of L5Lab, which has a number of prominent companies in its portfolio, notably Jobberman and Cheki.
One of the biggest bits of news from the African tech investment ecosystem last year was L5Lab launching a joint venture with 88mph to launch 440.ng, aimed at investing in Nigerian startups. The joint venture held its first accelerator last year, investing in nine companies.
This year, however, 440.ng has scaled back, dropping the accelerator in favour of Deal Weekend and so far investing in only e-learning startup DavtonLearn. But according to Nwobi the change is a deliberate reaction to circumstances, and one he feels will prove beneficial to all involved.
“I’m happy with the decision that we’ve made. We wanted to spend our time a bit more efficiently, because we already have nine early-stage partners,” he told Disrupt Africa.
“Looking at the pipeline there are a lot of guys at very early-stage, a lot of accelerators, and not that much in the Series A area. We thought we might as well do this. It also gives us the opportunity to work with slightly different companies in a slightly different environment.”
Having extra time to work with a smaller amount of companies also fits in with the 440.ng approach to investing, according to Nwobi.
“We’re very, very active. We support them in terms of strategy, feedback on product, access to partners and channels. We’re quite involved compared to a foreign or local VC,” he said.
It also allows Nwobi to become more personally involved in the pipeline, putting into good use his experience in the tech sector in Nigeria.
“I’ve been in tech in Nigeria for 15 years, so there’s few entrepreneurs that I don’t know personally,” he said.
“If you look at 440.ng, I don’t think I knew any of those entrepreneurs before. But now for Deal Weekend the deal sourcing process was more like a typical VC. We still ran the online applications but we put in time to network.”
The 440.ng joint venture was an initial two-year deal that would allows L5Lab to focus on venture building as opposed to seed investing. Though it has invested in South Africa’s BabyGroup and took part in the 88mph DealWeek in Cape Town, Nwobi said L5Lab was now more focused on incubation. It has been working on new businesses, some of which are now going into pilots.
“The decision to do the joint venture with 440.ng was driven by a strategy to focus L5Lab on incubation and platform building, as opposed to investing,” he said.
“The intention was to do venture building better and do investing better. And 88mph had experience of running an accelerator programme. If the intention is to run an accelerator programme we’re better off running it with 88mph as a joint venture.”
However, whether the accelerator itself is the right format is something Nwobi said is yet to become clear. “We don’t know, we will see what comes out of it at the end,” he said.
It is also unknown as yet whether the two partners will decide to raise a formal fund, but Nwobi said either way they will continue to collaborate.
“Kresten (Buch, 88mph founder) and I get along well and I’m sure we will continue to do things together,” he said.
The nine startups 440.ng invested in last year had aheavy leaning towards e-commerce, which Nwobi said reflected the applications pool.
“We had a feeling that niche e-commerce is a viable business in Nigeria. We’ll see whether that turns out to be well-founded or not,” he said, adding he himself was most comfortable working with consumer-facing businesses.
“I tend to be more comfortable with things I understand very well. I have more experience in telecoms and things that use telecoms as a channel. I like to think I can add a lot of value to those businesses,” he said.
Nwobi does not rule out future investments in other sectors, however, though he does have some specific criteria in terms of the types of startups he likes to put money into.
“Generally speaking, I like teams of two or more. But if there’s an entrepreneur that is experienced that matters less,” he said.
“I need to see where the cash is going to come from in the short to medium term. I don’t want to invest in a company that requires millions of dollars to become cashflow positive. And I like it to be something that I can help outside of cash. If I can’t help, the team can probably do better by looking somewhere else.”
