There are very few active investors on the African continent, who can claim they were there on day dot, attempting to raise funds for startups before there was any global interest. But Maya Horgan Famodu is one of them.
The founder of Ingressive Capital, one of Africa’s most active early-stage investors, Horgan Famodu is now well established within the continent’s startup space, and is on the verge of unveiling a huge new fund. Yet the journey to get here has not been an easy one.
She told episode eight of Disrupt Africa’s “The month in VC” podcast series, powered by Katapult Africa, Hlayisani Capital and ARM Labs Lagos Techstars Accelerator, that she was born in the United States (US) to a Nigerian father and an American mother, and grew up “really poor” in rural Minnesota.
“We struggled for the basics, and I was always invited to the gifted and talented programmes but I wasn’t able to participate because we didn’t have funds to do so. So I grew up knowing the feeling of having the capability to do something great, and the desire to do something great, but something outside of your control is preventing you from doing so,” she said.
“In my instance it was the resources, and so that was a driving factor through growing up – how do I unlock resources? Because I know I’m not the only one who’s this hungry and this under-resourced.”
A scholarship took her to college, before she undertook a pre-law programme in Cornell. She then worked briefly in private equity research before launching her first company. This was in 2003, and was a US$50 million Africa fund.
“The questions from the investors were more like, “can Africans read?” or “how are they going to be developers if there’s such low literacy rates?”, instead of, you know, “what was the most recent liquidity event?”, or how much funding has come into the ecosystem this year?”. Fortunately things have changed but it was really hard back in the day,” Horgan Famodu said.
Coupled with the fact she only had a few months of professional work experience, this meant the fund never got off the ground. So instead she launched an advisory company – Ingressive.
“The offer was for investors to come to Nigeria, come to Africa, and we’ll show you the ecosystems, and we’ll help you make connections with the local ecosystem and local venture capital firms. I’ll help you make your first investment,” Horgan Famodu said.
The company took off, working with the likes of GitHub and Figma, and even running African strategies for companies over one or two year subscriptions.
“That company was profitable and so I was able to start investing the profits from that advisory firm into technology companies in the ecosystem and built up a portfolio, and eventually our clients had enough confidence in the ecosystem and in our ability to pick and choose,” said Horgan Famodu.
With the help of its client base, it launched Ingressive Fund I.
“Our limited partners are really focused on later-stage investors who have the capital to be able to do the follow-on rounds in our early-stage portfolio companies. Because when we started there weren’t a whole lot of investors in the ecosystem, we could do the pre-seed investing, but who’s going to do the follow-on, and how we going to realise liquidity? So we really built it into our limited partner base, both how we’ll realise liquidity by passing these deals on and exiting through secondaries, and having a pipeline to growth-stage investors who can take these companies on to exit,” she said.
The company then launched a non-profit to help train more Africans in tech skills, before rolling out Ingressive Fund II, which is about to close. In all, across all its vehicles, the company has so far made 46 first-cheque investments. It has followed-on into about 20 per cent so far. Fund one was worth US$10.2 million, and when it closes fund two will be worth around US$50 million.
“We target pre-seed, really early-stage companies. Sometimes these are paper napkin. We have a small allocation for those sort of “moonshot” paper napkin ideas. But mainly the bread and butter is the company’s first 6-to-12 months of launch – they are generating some revenue, and have some sort of demonstration of product-market fit. They’re focused on a big market. They want to expand across the continent but haven’t yet, and we’re one of their first investors and they need assistance to raise from international capital sources,” said Horgan Famodu.
It invests in Nigeria, Kenya, Ghana, Egypt and Morocco as its core five markets.
“We do opportunistically look elsewhere, but those are our core markets. We want to invest in countries that have similar infrastructural issues, so that companies can expand from one geography to another, and be solving similar challenges of a similar consumer demographic,” said Horgan Famodu.
As far as sector, it slightly differs per market, but then high level policy is that Ingressive invests in “GDP transforming technologies”.
“We look at B2B solutions that help an African nation own more of its value chain, from resource extraction to end-product sale. So that could be B2B financial services, trade finance, logistics solutions, or basic tech-enabled solutions for traditional industries. And then on the B2C side we’re targeting this burgeoning tech-enabled youth demographic. Everyone knows the statistics about Africa – 1.2 billion people; the fastest growing population in the world; the fastest growing GDP… You have this very young population, this very fast growing population, very high rates of urbanisation and tech-enablement, and now also have decentralised education.”
That means, even if you’re living in a rural village, with limited resources, you have access to the tech ecosystem on the continent. This represents extraordinary potential, and it is this that Ingressive is investing in. Though Horgan Famodu says she “loves all her babies equally”, a few portfolio companies do stand out, primarily Paystack, which was actually Ingressive’s first fund investment, alongside Carry1st, Bamboo, Mono and Jetstream.
Talking of Paystack, this was just one of three exits from Ingressive Fund I, through which it did 26 first cheques, and 13 follow-on.
“The first one was Paystack, which obviously 100 per cent of that sold for cash, and the second one was an East African fintech company. That’s not public, and we were given the option of shares or cash. We decided to take shares in the parent company which were now owners, and we’re really excited about that. The third one was a private sale. And we have had offers for some of our high-growth oversubscribed Series A and Series B portfolio companies. We have had the opportunity to exit 100 per cent of our shares through secondaries, which is our intended exit strategy,” Horgan Famodu said.
Ingressive, then, stops investing at Series A, and then passes the investments along to its LPs, 80 per cent of whom run the world’s leading investment firms. Horgan-Famodu said Ingressive is an active investor, and has a partner dedicated to portfolio support. She said the company’s audits had proven its approach was appreciated by founders, and much of its deal flow comes from founder recommendations. The major benefits of an Ingressive network, aside from cash, come from its network of LPs, and the fact the whole team is made up of operators, who can help ventures with scaling.
One thing likely to prevent startups from scaling in the next few months is the lack of global liquidity, but in spite of the slowdown, Horgan Famodu is still buoyant on Africa.
“What I’m seeing from being on the ground is that foreign investors are still looking to back African technology companies, because their own ecosystems have so materially slowed down.The fundamentals are still growing on the continent. You still have exploding populations; you still have fast-growing consumer demographic or consumer bases; you still have GDP expansion,” she said.
One benefit of the reset is that lessons will be learned around the need for ensuring African startups have proper compliance and financial reporting.
“A consequence of so much capital coming into the ecosystem so quickly, without more focus on the fundamentals, is that in the news recently we’ve had a number of cases of businesses who were not properly overseeing their financials or the compliance element of their business,” said Horgan Famodu.
“That’s because they found product-market fit, and started scaling extremely rapidly. They had some drop-in investors and some local investors come into the companies who just incorporated the typical “hey, send me your quarterly numbers, let me know whatever your core metrics are”, and that’s that. And there does need to be a development in the compliance and in the financial reporting of the companies in our ecosystem, just like in other ecosystems. So that is one thing that’s been sort of a big shift. This year it is about how we set up the important foundation from a compliance perspective and from a reporting perspective, with thoughtfulness about the long-term trajectory of the business.”