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SMEs: Seek Angel investors, not banks, for funding – Expert warns

Budding entrepreneurs who attended the first edition of the Nigerian Small Business Summit on the 24th

August at the Landmark event centre were warned to stay away from bank loans at the start of their

businesses. Mr. Kushal Dutta, Managing Director of Africa’s number one hotel booking portal Jumia

Travel Nigeria, gave the warning during a panel discussion on the science of SME’s success in Nigeria.

Dutta said seeking for Angel investors in Nigeria to sponsor start-up businesses and provide needed

capital is a better alternative to approaching banks for loans, in view of the usual banks’ high interest rate

and short repayment period which might kill the business at birth. He also mentioned that approaching

companies that might be interested in investing in scalable businesses is also plausible, citing MTN’s






On the viability of copying a successful business model, Dutta was of the opinion that it is absolutely not

wrong to do so but the new business must ensure it is offering a proposition that the existing businesses

are not already offering. This way, he said, “you can stay on top of your game and only expect that

customers will come chasing after you.”





Amongst other practical business advices the Jumia Travel Nigeria MD gave, was a reiteration on the

danger of expanding a business when customers’ demands cannot be met. “If you know you cannot meet

customers’ demand, do not expand because one happy customer will tell three people about your great

product and customer service. But one unhappy customer will tell 50 other people about his




Other discussants on the panel included Rajiv Das, Category Global Marketing Director, Africa Region for

Unilever; ChizorMalize, Managing Partner, Brandzone Consulting; and AbasiamaIdaresit, CEO of


Small business ideas in Nigeria is a gathering of business experts sharing successful examples (mostly

from India and local examples), to set up learnings and energize Nigerian SMEs to create the needed

jobs and provide stability at this period of economic downturn. The event is put together by Gemciti, a

brainchild of David Okeme, President of Advertisers Association of Nigeria.

Who Are Venture Capitalists?

Monies which are invested in a commercial venture with a highly uncertain chance of success are called

risk capital.

A Venture capitalist in Nigeria is an investor who either provides this risk capital to startup ventures or

supports small companies that wish to expand but do not have access to the equity markets.Venture

capitalists are willing to invest in such companies because they can earn a massive return on their

investments if these companies are a success. They also experience major losses when the startup they

invest in fails, but venture capitalists are wealthy enough to take risks associated with funding unproven

companies that appear to have a great idea and a great management team.

A venture capitalist in Nigeria is an individual who makes investments in business ventures and

provides capital for a start-up or an expansion. Venture capitalists by virtue of venture capital seek a

higher rate of return than would be expected or given from traditional kinds of investments. Usually

venture capitalists look for 25% returns and higher in exchange of funds.

In addition to funds provided, they also provide much needed expertise by providing knowledge, expertise

and experience in business management to mentor and nurture companies for the growth of their

business which can vary between 3 and 7 years.

The failure rate of venture capitalists investment in startups is usually very high and can range between

20 to 90 percent thereby putting them into a huge loss of their investments.

What Venture Capitalists look out for before investing in a startup?

• Company Vision

• Existing Problem

• Solution

• Team

• Timing

• Market Size

• Competitors

• Marketing Strategy

• Budget /Purpose of Fundraising Round

• Timeline

• Business Model

• Others

List of Venture capital firms that have Investment strategy in Nigeria companies include US-based Tiger

Global who invested in Jobberman.

Rocket Internet has invested in Jumia, Easy Taxi, Kaymu and Jovago.

Sometimes the Best Investment Strategy is to 'Do Nothing'

Followers of financial news may have heard increased chatter about “reverse churning” recently–that is,

advisors putting their clients’ money in fee-based accounts but doing little or no trading in the account,

creating the appearance that “nothing” is being done on the clients’ behalf. This is controversial because

the nature of the accounts allows the advisor to collect a fee regardless of activity. When the Securities

and Exchange Commission fined AIG last month, alleging it had levied unnecessary fees on mutual fund

clients, reverse churning was part of the charges.

To be clear: advisors should always act in the best interests of their clients, and doing any kind of duping

or manipulation simply to gin up unnecessary fees is absolutely wrong. That said, the idea of advisors

being fined for having too little activity in their clients’ accounts is a curious one in the current market. If

you’ve invested in U.S. stocks over the past seven years, “do nothing” is probably the smartest strategy

you could have had.

Let’s recap. The market turmoil caused by the Financial Crisis reached its peak in March, 2009. The S&P

500, having fallen more than 50% from its high, bottomed below 700. Right now, the benchmark index is

hovering around 2,050, meaning it has roughly tripled since that time. If you kept your head about you

during the crisis and bought when fear was at its highest, you’ve seen incredible gains, particularly on a

total-return basis.

Furthermore, some volatility aside, the market’s path since 2009 has been pretty much straight up. Even

the past 12 months–which has seen two corrections, or drops of 10% from a peak–has demonstrated a

persistent upward bias. Despite concerns over China’s growth, the oil market, Federal Reserve policy and

earnings growth, indexes aren’t far from record levels, and the long-term outlook still looks strong. Had

you entered the market at any point since the market bottom, you wouldn’t have been faulted for sticking

to a “buy and hold” strategy.

The question we should ask: Is this market unique or are investors generally smart to “do nothing” with

their holdings?

The answer, as is all too often the case, is much more complicated than a simple yes or no. In addition to

personal variables such as the investor’s time horizon as well as Investment strategy in Nigeria, risk

tolerance and cash on hand; market and economic conditions must be taken into consideration. Seven

years after the crisis has ended, and with the Federal Reserve beginning its path toward normalization of

monetary policy, the environment is likely changing, and will probably require a more active hand in

portfolio management going forward. And while odds are pretty good that stocks in general will be higher

in a decade’s time, performance divergence in various markets and sectors is equally as likely.

In times of uncertainty, you want your advisor to step in and protect your holdings. And your advisor

should generally be reviewing your account to ensure it is allocated and diversified appropriately for the

economic environment. But when the sailing is generally smooth, as it has been over the past seven

years, it shouldn’t be a problem if your advisor declines to make changes just for the sake of making

them. As a matter of fact, convincing fully invested investors not to act turns out to have been the most

profitable advice in recent years.

Crowdfunding: Why Startups are ignoring the Risks and Betting the Farm

Crowdfunding, peer-to-peer lending, social finance, however you choose to describe it, is settling into its

stride and evolving into a well-established industry. Last week, Seedrs went further, declaring that

crowdfunding had come of age, with results of its portfolio update report showing better annualized

rates of return than most other asset classes, since its platform launched in 2012.

Even more encouraging is the World Bank forecast that global crowdfunding will reach $90 billion by

2020, though at the current growth rate, many believe this figure could be reached by 2017. Then you

cast your mind back to Europe’s biggest Kickstarter project, the Zano mini-drone, that crashed and

burned last year, leaving many of its 12,000 backers, who’d put in £2.3million ($3.5 million), with nothing,

and the crowdfunding cynics saying ‘told you so’.

The crowdfunding dichotomy is puzzling; mature enough to be considered almost mainstream, yet still

fraught with risk, as highlighted by the Zano failure. Nevertheless, for many Crowdfunding startups in

Nigeria is still their best and possibly only hope of getting products to market.

Entrepreneur and founder of Fonesalesman BavanPalasanthiran’s first campaign, for iQi Mobile, a

wireless charging product, surpassed its Indiegogo funding target by more than 500%. Two years on,

Fonesalesman is a leading supplier of wire-free charging solutions globally, expanding to the US,

Spain, Italy, Germany, France, Japan and Canada.

Nigeria Government needs to put in place appropriate framework for crowdfund in Nigeria. Nigeria needs

to take advantage of the crowdfunding market.

4 Ways to Create a Winning Business Startup Idea

The idea of starting a new business is attractive to a growing segment of the population. This includes

ambitious college students who like the idea of being in control of their own destiny rather than being at

the mercy of an uncertain job market. It also includes downsized corporate executives, stay-at-home

spouses and people who are frustrated with their current jobs. Yet in order to start a successful business,

you must first have a viable idea.

Very often, your first Small business idea in Nigeria for a startup turns out to be less practical than you

originally believed. To use a typical example, people who enjoy relaxing in their friendly neighborhood

cafes often think, “owning my own coffee shop would be the ideal business for me.” But when they start

crunching the numbers and look at the start up costs, demographics and likelihood of success, they

realize that it wasn’t such a great idea after all. So where do you find profitable ideas for a startup,

assuming that you don’t have a great deal of capital to invest? Here are some possibilities.

Look at Your Existing Skill Set

This may be your former career, your college major or your favorite hobby. When you know a great deal

about something and/or you are passionate about it, your chances of success are far greater than if you

have to learn everything from scratch. Of course, some types of knowledge are more marketable than


When considering your skills, talents and interests, take inventory and consider what sort of activities and

areas of knowledge that have fascinated you since you were a child. Areas where you’ve acquired some

degree of mastery are the best candidates, but even a strong interest can be a good starting point for a


Seek Potential Partners

Sometimes it’s advantageous to start a business with a partner who can supply something that you are

lacking. This could be capital, experience or a certain type of specialized knowledge. Partnerships must

be entered into with extreme care, as all parties must bring value to the new business.

Identify a Need, Desire or Problem

It’s a cliche of business that solving a pressing problem will make you a fortune. This is true, but only as

long as you have a solution that can be translated into a product or service that can then be offered at a

price point people will find acceptable. People have all kind of problems, from lack of time to physical

ailments to difficulties in their relationships.

Differentiate Yourself

Even if you’ve found something that you’re good at that solves a problem, fills a need or fulfills a desire,

you still have to demonstrate how your business differs from the competition. It’s extremely rare to have a

business with no competition, which is why so many business leaders stress the importance of having a

unique selling proposition.

If you are looking to funding your business, you consider talking to an angel today or register or connect

with angle investors on

Address: 2, Montgomery Road, Yaba, Lagos.

Phone: +234 706 281 0851

Email: [email protected]