Biola Alabi has seen early-stage investing in African startups from all sides. She started as an angel investor, along with her first cheque going to Massive Cabal Media, TechCabal’s dad or mum firm. She later led angel syndicate offers with different angels earlier than transferring into enterprise capital, investing with corporations like Acasia Ventures, and now at Delta 40.
Earlier than she started backing African startups, Alabi labored as a regional advertising supervisor at Bigwords, an American startup that raised $80 million to construct an internet textbook market earlier than shutting down throughout the dotcom crash of the early 2000s.
That have left a long-lasting impression—she and her colleagues solely learnt the corporate had misplaced its funding by means of information studies—and later impressed her funding in Massive Cabal Media, pushed by a perception within the significance of transparency and resilience in startup constructing.
In 2003, fuelled by a want to work on the continent, she took up the place of Africa Regional Director for Sesame Workshop, creators of the favored youngsters’s present “Sesame Road”. Nevertheless it was her subsequent job as a managing director for Multichoice, the most important pay-TV operator on the continent, that introduced her reputation as an operator. It was throughout this time that she started investing in startups.
All through her funding journey, Alabi’s thesis has constantly rested on a number of key pillars. She locations robust emphasis on founders and assesses their expertise, dedication to the issue they’re fixing, and resilience within the face of challenges. As she as soon as put it to a founder: “Why ought to I not count on you to depart in a 12 months if a $2 million a 12 months supply from Google comes alongside?”
She additionally appears to be like for early indicators of traction, valuing real-world use circumstances, precise customers, or references who can testify that the product is fixing an actual drawback. “There’s no enterprise and not using a buyer,” she advised TechCabal over a name.
Given her background in subscription companies and media, Alabi prefers to fund corporations with a number of revenue streams and expects any startup she backs to reveal that it operates in a big, scalable market.
TechCabal spoke to Biola Alabi to grasp her funding method, thesis, and her recommendation for angel traders.
This interview has been edited for size and readability.
You had a profitable media profession. At what level did you realise you wished to start out doing angel investing?
I’m unsure you truly realise you need to do angel investing. I feel, loads of occasions, angel investing involves you. I used to be several types of investments, and round that point, I began assembly founders by means of mentorships and different engagements. Then folks simply began pitching me. I’m not even positive precisely the way it occurred.
It began with organising a gathering with me and telling me what they’re engaged on, and asking for my help. That’s how I wrote my first cheque and the way I began angel investing.
Massive Cabal’s founders got here to me for an angel investor who also can mentor and make investments. I beloved what they have been engaged on. I felt it was actually vital—particularly for the ecosystem—so I invested.
After which from there, another person mentioned, “One in every of our angels…” and extra folks began pitching me. I finally began becoming a member of angel teams, and that’s how I grew to become a member of the Lagos Angel Community.
How have been you capable of put your self on the market to even be able to mentor folks, and able the place folks might pitch to you?
As a result of I’d been within the media, folks already knew me as a frontrunner. I had been doing loads of talking engagements. I used to be additionally very keen on how I might help entrepreneurs, particularly within the artistic sector. For me, that was actually one of many essential issues I used to be engaged on on the time.
There have been lots of people creating content material, however the query was actually, how can we monetise this content material? I used to be serving to folks perceive monetisation from a broadcasting perspective, the alternatives obtainable, and why they need to license their content material to us as a broadcaster.
As a result of I used to be main conversations on the continent about creating alternatives within the artistic economic system, I used to be already seen. There have been fairly quite a lot of folks I used to be both mentoring by means of work or by means of my workplace, after which the phrase simply acquired out. Individuals who have been beginning new corporations started reaching out to me. I feel it was only a pure evolution in my management journey.
Are you able to stroll me by means of your expertise as an operator, as somebody who has labored within the media house and throughout completely different sectors? How did that form the way in which you consider startups?
For me, once I’m an organization, the very first thing I give attention to is the client as a result of and not using a buyer, there’s no enterprise. Somebody needs to be prepared to purchase what you’re providing.
I’m all the time making an attempt to grasp how the client thinks, why the client is shopping for this product as an alternative of one other, and whether or not there’s early traction. A variety of occasions, you’ll discover corporations which were making an attempt to construct one thing, however there’s simply no traction. That often means the market isn’t responding, and so they want to determine find out how to pivot or what to vary.
I’ve labored in subscription companies, so I additionally like to grasp the income mannequin. In my broadcasting expertise, income got here from subscriptions, sponsorships, and airtime gross sales. I’m all the time seeking to see what the a number of methods are by which the startup generates income.
Then I take into consideration the folks main the corporate: Can they really make this occur, and might the folks constructing this go all the way in which?
That’s what I’ve seen constantly, whether or not it’s within the corporations I’ve labored at or with founders I’ve met: to get something achieved inside an enormous organisation, you need to perceive who you’re promoting to, how a lot you’re promoting, and whether or not you will have the individuals who can execute and see it by means of. It’s the identical mentality I convey to evaluating startups.
Was there a selected second or a selected deal that made you realise that Biola Alabi might immediately speed up a startup’s progress trajectory?
After I invested in TechCabal, I invested in a number of different corporations. A few of them I invested by means of syndicates, some I invested immediately, and a few I even led the syndicates. However I feel the second that stood out was when Massive Cabal Media was going by means of its management transition.
I held the founding group’s hand by means of that transition to a brand new CEO, and managing that course of made me realise that, sure, I positively have the flexibility to deal with disaster administration and drive a disaster to a constructive conclusion.
Main that change and making certain we achieved an amicable separation have been issues that, as an operator, you take care of each day. However for a startup, it’s usually the primary time they’re going through challenges like that.
Serving to folks perceive find out how to navigate that scenario gave me actually good perception into how my working expertise could be extraordinarily helpful for CEOs, particularly once they’re going through working challenges.
What did your first few angel investments train you?
They taught me loads about transitions and in addition about what it takes while you’re making an attempt to refocus an organization for progress. That was such a significant and academic expertise for me.
I feel the very first thing I learnt is that there needs to be belief between the founder and the investor. It’s important to belief the group, and you need to work out early find out how to get to a spot of belief.
One other factor it taught me is that you are able to do all of the evaluation, you are able to do all of the reference checks, but when one thing nonetheless doesn’t really feel proper— if there’s one thing holding you again a few deal— it’s good to take note of that feeling.
I’ve achieved offers as an angel the place I felt one thing holding me again, however I nonetheless wired the cheque anyway, and I did find yourself regretting it.
Is there any particular instance that involves thoughts? You have been mentioning the way you had preliminary doubts and ultimately went forward—something you may share?
We invested in an organization the place we had achieved our due diligence. One of many angel traders who launched the deal to us was somebody extremely revered. They mentioned they’d achieved enterprise with the founder at their first startup, and so they vouched for the founder’s integrity, particularly in how the founder had transferred shares into the brand new entity we have been investing in.
This very well-respected investor had additionally achieved a follow-on funding into this new entity that the founder was constructing. However one thing stood out to me. Once I met the founder, they dropped some massive names. I occurred to know one or two of these names, so I known as them. And whereas it wasn’t like they gave me a nasty reference, it took them a really very long time to even recollect who the founder was.
There was a misalignment between the connection the founder had offered and the way in which these folks truly remembered it. In a single case, the individual didn’t even actually bear in mind the founder in any respect.
I attempted to brush it off, pondering all of us meet so many individuals, perhaps it wasn’t an enormous deal. Nevertheless it gnawed at me. I didn’t like that the tales didn’t align, particularly as a result of while you’re investing so early, references develop into your lifeblood, your lifeline.
Anyway, we invested—me and my syndicate—and it’s positively a kind of investments you look again on and assume, “I ought to have trusted my intestine.”
What has been your most significant win as an angel investor?
My most significant win remains to be to come back, however we’re in some actually nice corporations that I’m tremendous enthusiastic about—some by means of syndicates, and a few by means of particular person investments I’ve made.
For instance, an organization like TechCabal—I invested individually first, after which did a follow-on as a part of a syndicate, as a result of we would have liked to do a follow-on at a really important time within the enterprise. I feel it’s a enterprise that’s extraordinarily impactful. I’m very happy with that funding and the work it’s doing within the ecosystem.
I additionally invested in an internet financial savings and funding firm. They’ve since been acquired, so we have been capable of have a partial exit there, however they’re nonetheless rising, and I’m nonetheless very impressed with their progress.
I’m invested in a few fintechs throughout West Africa which are rising very quick. Each time I get their month-to-month studies, I’m blown away. I’m very enthusiastic about loads of my present investments—some in e-retail, some in fintech.
As for the issues that haven’t achieved so properly, I’ve additionally been capable of study fairly a bit from them. One factor that’s changing into clearer to me is the large alternative from a B2B enterprise perspective, and in addition B2C. I feel B2C is coming and goes to be an enormous alternative, particularly in commerce enablement. That’s one thing I haven’t achieved sufficient of as an angel, and I’d like to see extra attention-grabbing alternatives in that space.
Virtually each ecosystem begins with commerce, after which strikes from there, as a result of commerce unlocks lots of the challenges in an ecosystem. Then fintech follows, as a result of fintech has to unravel the largest commerce drawback, which is funds. These are usually the primary waves.
I nonetheless assume there shall be massive waves in well being. In fact, everyone seems to be speaking about AI, in order that’s apparent. But additionally, I feel there are enormous alternatives in information. Sadly, I’ve not but discovered the suitable information firm to spend money on as an angel. However as a VC, we’ve been capable of spend money on some tremendous attention-grabbing AI and information corporations.
You didn’t point out what you’d say was your hardest loss?
I don’t ever actually consider them as “powerful losses” as a result of, as an angel investor, I’m not investing my children’ school fund in these offers and I all the time inform those that generally my cheque is so small that I even inform the founder, “I don’t know if you’d like this examine—it’s very small.”
A variety of occasions, when individuals are elevating these early angel rounds and so they actually need an advisor, they’ll take what I prefer to name these “Mickey Mouse checks.”
Anytime you need to do a write-down, that’s a loss.
I feel the hardest losses are when it’s fraud. I’ve had an expertise with that, and that’s a troublesome loss, as a result of it’s actually an integrity subject. It makes everybody doubt themselves, who they’re, and the way they make selections. It’s important to evaluate your course of once more and be sure to are process-driven and that you’re making funding selections based mostly in your rules and your funding thesis.
These are significant wins and hard losses. How did they form your funding intuition?
They make it easier to spot patterns, and so they additionally make it easier to begin to construct your confidence. You begin to study when to take possibilities, when to not, and whether or not you want extra time. I don’t rush investments now. I do know folks need you to hurry investments, however I feel that throughout the 2020–2021 period, there have been so many rushed offers.
There was an funding I made in a widely known founder who was beginning one thing new.
The valuation didn’t make sense, however we have been form of banking on this being a repeat founder. Ultimately, it simply didn’t work—we ended up having to do a write-down.
It was achieved as a syndicate, and loads of angels, particularly new angels, have been very upset. This was additionally a time when lots of people have been sitting at house, so there was loads of idle capital being deployed, and we had many new angels becoming a member of syndicates. Serving to new angels perceive the true danger concerned has been an enormous a part of my studying, ensuring they perceive the time it takes.
Angel investing is affected person capital, and having transitioned from angel investing into VC, I actually perceive now the significance of angels. I worth angels, however I additionally perceive the worth of affected person capital. Early on in our ecosystem, folks thought investing in startups was going to be like investing in oil and gasoline offers or treasury payments, so that they anticipated fast returns.
These experiences formed me to grasp that angel investing requires persistence. It taught me the significance of getting a course of, trusting that course of, tweaking it as wanted, and in addition understanding that you simply’re making dangerous bets—and hopefully, high-risk, high-reward bets.
How do you method conviction while you’re writing small private cheques? What are you optimising for, and what conviction are your investments based mostly on while you’re writing these small cheques?
Staff and traction. Primary is, who’s the group? Is it a one-woman present, a one-man present, or is it a group of actually attention-grabbing characters fixing an important drawback?
One other factor with angel checks is that I’m all the time asking: what are you fixing for, and why is it vital? I additionally ask folks laborious questions. As an illustration, there was a founder I used to be speaking to—a PhD from an Ivy League faculty—and I mentioned: “Why ought to I not count on you to depart in a 12 months if Google calls you with a $2 million-a-year job?” as a result of that’s the form of individual they’re.
How they reply that query—and what they inform me about why this drawback issues to them—actually helps me perceive if that is the suitable horse to again as a result of that’s what you’re doing: you’re determining who to again.
Then traction. I need to see that individuals are utilizing the product, that there’s some type of traction. It doesn’t all the time must be paid traction—it might simply be customers. If I can discuss to at least one or two customers and listen to how the product is admittedly making a distinction for them, that’s sufficient.
I additionally ask: who’re these folks? What have they achieved earlier than? What sort of perception or unfair benefit have they got? Generally, it’s not that they have been the primary engineer at their final job—it’s simply that they’ve a novel perception into an issue that nobody else has. I’ve seen that usually with founders who depart startups: they spot an actual hole they skilled firsthand, and now they’re fixing it.
One other factor I take a look at is: who’s on the cap desk? For instance, in case your former boss invests in you, I all the time assume, “Okay, that is enormous.” That brings loads of credibility to the desk. That is somebody who has labored with you carefully, who is aware of how you use, and who nonetheless believes in you adequate to speculate.
I’ve seen that occur loads—the place both former bosses put in a cheque and even be part of as advisers. To me, that form of endorsement early on is a really robust sign.
You moved from investing alone as an angel to main angel syndicate offers. What impressed that call?
I didn’t truly got down to lead a syndicate. It occurred nearly deal by deal. The rationale I did deal-by-deal syndicates was as a result of, after I made a private funding dedication to a founder, a few angels would attain out to me. They’d say, “Hey, I hear you’re investing. Are you able to inform me extra about this founder?”
Since I already had the community with the group and I had both been a part of a syndicate or had seen the way it labored, I form of knew find out how to construction it. We might put together the papers, share them with a number of different folks, and that’s how I ended up main a number of offers.
When you do one thing as soon as, you discover ways to do it higher the subsequent time, and it turns into simpler.. Later, I additionally wished to steer a syndicate that introduced collectively traders from throughout the continent. And the explanation for that was easy: If an organization wished to develop throughout Africa, it might be actually useful for them to have already got angels from completely different international locations on their cap desk.
What’s the largest operational or mindset shift while you’re investing your personal capital versus while you’re guiding others to speculate alongside you?
I feel while you’re guiding others, you’re advocating for the deal—you’re championing it, and that’s truly how I learnt that being a companion at a VC fund could be very comparable: somebody has to champion a deal internally too.
It’s very tough for folks to get enthusiastic about one thing they will’t instantly see or contact. In a number of the merchandise I labored on—like Sesame Road—you would see the Muppets and what they do. Or once I labored with a telco like Econet, you would really feel and work together with the product. However while you’re investing early in a startup, it’s very esoteric. It’s important to assist folks envision what this might develop into.
So while you’re main a syndicate, you’re nearly one other voice on behalf of the founder. You’re saying: “I see one thing right here. I consider this group can pull this off. I’m placing my examine in—and I feel it’s best to too.”
Then there’s the operational aspect. It’s important to work out the suitable authorized construction for the group, work out who’s serving to you lead and handle the syndicate as a result of the founder can’t be sending updates to twenty completely different angels individually. Somebody has to steer.
It’s additionally vital to determine who you need to co-lead with. In considered one of my offers, I had a co-lead with me; in one other deal, there have been two others.
Getting folks to pay charges is one other problem. If you make investments solo, you simply wire your cheque and transfer on. However in a syndicate, there are authorized charges and admin charges—there’s an additional value that individuals must be coordinated round.
You even have to consider issues like find out how to deal with disputes. For instance, in a single syndicate I led, somebody had monetary troubles and wished to promote their stake. Managing that created loads of further administrative work. In a single case, we managed to assist them do a partial exit; in one other, we couldn’t.
Additionally as a solo angel, you simply write your cheque and work together when wanted. However in a syndicate, folks count on common updates and transparency, and so they count on you to have ongoing conversations with founders—even when it’s not all the time potential.
Truthfully, main a syndicate feels much less like being a person investor and extra like working a mini-fund. It’s much more duty.
Have you ever been capable of safe any exits, both by means of your private angel investing or syndicate investing?
Sure. I’ve additionally been provided a partial exit in one other deal, however I felt like we might be leaving an excessive amount of cash on the desk to exit at that time. Nevertheless, a number of the angels that invested alongside me did take that provide.
I’ve additionally been provided secondaries—some I’ve critically thought-about. I’ve exited two corporations up to now. In a single, we acquired money again. Within the different, it was a share swap, so we now maintain shares in a brand new, bigger entity.
What kind of startups do you gravitate in direction of these days?
I joined Delta 40 as a enterprise companion. It’s a local weather tech and fintech-focused fund. What’s thrilling for me is the intersection of local weather tech, fintech, and AI. I feel these areas shall be actually transformative for the continent. They’re areas the place I want we had much more traction as an ecosystem.
One sector I’ve all the time beloved however haven’t been capable of make an funding in is edtech. I’ve had loads of conversations with edtech founders. I actually love the house, however I feel it’s a troublesome sector to ship returns for traders. As an angel, you may keep in it for a very long time, however as an institutional investor, it’s a lot more durable. That doesn’t imply it’s not vital—there are simply so many challenges there.
One other space I consider is vastly under-represented is girls’s well being. Utilizing expertise to drive innovation in girls’s well being is an enormous alternative. I’d like to see extra founders growing in that house, notably options which are reasonably priced and might ship returns.
Generally, the sectors which have probably the most social influence additionally take for much longer to supply investor returns. That’s the place angel traders play a vital position—we will present affected person capital. We positively want extra angel traders who’re prepared to do this.
I’m nonetheless tremendous enthusiastic about fintech. There’s nonetheless loads of friction in funds and cross-border transactions. Simply the opposite day, I had worldwide friends who couldn’t make a easy cost with their bank card at a restaurant. That’s nonetheless an issue, and it exhibits there’s nonetheless loads of alternative in fintech.
Local weather tech is one other main space. The value of diesel in Nigeria is altering the way in which folks take into consideration power. We’re seeing so many new photo voltaic options. I consider we’ll proceed to see actual innovation in that house, and we’re already speaking to many founders constructing there.
