Ebube eyed Ope as he grabbed another bottle of beer. “Guy, can we talk business first? You know you’re not lucid when you drink and discuss business, then you’ll be saying I made decisions without your knowledge.” “You too dey worry jo. I can hear you, and you can hear me. You were talking about the loan, right?” Ebube shook his head. He had spent the last twenty minutes trying to convince Ope that seeking investments from venture capitalists was the next best move they could make. Their tech business revolved around an app for hiring mechanics and buying vehicle spare parts. “Like Uber, but you’re hiring mechanics and buying shock absorbers on it,” he had told Ope at a night club one year ago. Initially, Ope had talked down on the idea, but once he got sober and realised its potential, he began to expand it. Through user-generated reviews, the best mechanics could be hired by regular Lagosians who were tired of money-fleecing, incompetent mechanics.
It was Ope who came through with the capital to create the app, launch it, and execute the marketing strategy. Ebube dealt with the everyday running of the business, interacting with the web developers and UI/UX designers, HR consultants, accountants, administrative staff, wholesale spare parts vendors, customer service representatives, digital marketing experts, and others. So far, it had been successful, but the demand for mechanics outweighed the number of mechanics they had vetted on the app. Now they needed to add more mechanics to their list and do so while ensuring geographical diversity, expanding access to other states of the country.
This required a greater marketing strategy, more customer service representatives, an in-house marketing department, a physical office, a full accounting department, in-house UI/UX experts, and a host of other departments. “We need to go all out or shut it down,” Ebube said.“People have started hounding us on social media. The wait time to get a mechanic is now between eight to ten days. People can’t wait that long, and our mechanics are getting burned out. They want more money or fewer demands. If we do this, we’ll be running the business at a loss. Right now, the business is weighed down by inefficiency. We’ve tested the model; we know it works and we have the results to show. Venture capitalists are already reaching out to invest in the business.” “Really? And how much control do they want? 100%?” “Of course not.” Ebube was tired of having this conversation. Still, he explained again to Ope that venture capitalists would typically get about twenty percent or less equity in exchange for financing and that they could retain this equity for three to seven years, after which they would sell their stake in the company for three to ten times its worth.
At this, Ope yelled.“Are we mugus? Three to ten times its worth?” “At this time, it won’t matter because the company would be standing firmly. Look, it’s more than the money they would give us. They would also provide business support services like advice on record keeping, accounting, marketing strategies, and so on. They can help guide our business plan and even mentor us on management.” “We don’t need advice on management. Bro, you’re already killing it.” Ope slapped his back. “Look, let’s not get involved with all these people who just want control of our company. I know we need money. Let me talk to my guys and see how much I can raise.”“We need more than your guys can raise. We need millions of naira to set this thing off right.” Ope was offended. “And how much can your own guys raise?” “This is bigger than how much our guys can raise. Look, it will even give us credibility if a company like Investment One backs us up. Imagine the headlines on Twitter and LinkedIn!” Ope laughed. “I’m happy to announce that…”
They both chuckled, and Ebube hoped he had finally gotten his friend on his side. “We don’t need these guys, Ebube. Let’s find our own money and maintain full control.” “Guy, if we borrow from your guys, do we have full control? Don’t they ask you for updates?”
“Their name is not on paper. Na we get the full business. See, I don’t want to talk about this again. I’m tired, abeg.” Ebube closed his eyes. They were so close to vast opportunities that he could almost feel it. It frustrated him that Ope could not see them — that Ope could, in fact, hardly see opportunities. A year after their app first launched, an international company reached out with an opportunity to sell second-hand cars through their app, but Ope refused to do business with them because “their offer wasn’t good enough.”
He was certain that another company would make another offer. No other company had made such an offer.This lost opportunity had affected Ebube for a while. He had resigned his full-time job as an architect to build an opportunity he thought had real potential. Ebube often considered their inability to agree on critical decisions, wondering how many more opportunities would bemissed because they couldn’t see the same thing. What sort of financial future would he have with a partner who was close-minded to change and expansion? Was there a possibility of him launching his own app and seeking out similar opportunities?Beside him, Ope started snoring loudly, mouth open.
The late afternoon sun beat hard on Babatunde’s neck. Two of his star actors had waltzed in three hours late, effectively shifting their schedule to the hottest time of the day. They were shooting an outdoor scene in the market, with the cast running to and from the market. The star actress, who had come late, had complained several times about the dirt on the ground, her co-actor, and the heat. “Producer, please, I need to rest.” “Producer, I need something cold to drink, abeg.” “Look, Producer, can’t I work with someone else?” In addition to her constant complaining, her acting was subpar. Babatunde cringed every time she tried to speak like an American with her thick Oyo accent. He thought he would tell her off the next time she complained, but he knew he couldn’t afford to do so. She was not the most popular or loved actress, but she was popular enough to get more viewership on his YouTube video. More viewership on his videos meant more viewership on paid advertisements, which would result in more revenue.
An argument had ensued across the street, distracting his crew. A young woman and an elderly cab driver were arguing over change. The man reminded him of his father. They were back to fighting again. Earlier that morning, his father had asked when he was going to get a proper job. As always, he reminded his father that he was employed, even though the rewards were slow in coming. His father had laughed his dry laughter and told him he could see from his seat of experience that he was doomed for failure. Of course, this had resulted in bitter words and ended with him storming out of the house. Sweat streamed down his back and into his shorts. Babatunde kept hearing his father’s words: “You don’t have any financial plan. When will you wake up and realise that if you don’t plan, you will fail?” It was similar to what Saheedat had said. He had tried to talk to Mawon about Saheedat, and he wasn’t sure how things were between them anymore. It had started well, with him admitting that she was probably right about his lack of financial planning, but he mentioned Saheedat so often that Mawon eventually asked: “I thought you said this Saheedat woman is your neighbour? It seems she’s more than that to you.” He had feigned anger, but that had only infuriated Mawon. “Do you think I’m a kid? Am I not a woman?” Eventually, he had agreed that he admired her — a lot. “But maybe I do because she reminds me of you. I think you two would get along. She knows so much about money. Let’s ask her to teach us. Don’t you want to leave this place?” That had calmed her anger, but they barely said more to each other afterward. It had been two days since they’d really talked, and she was still replying in monosyllables. Babatunde shoved his thoughts aside and called to the cast and crew.
Mawon got a promotion. She now worked as the executive assistant to the MD and earned forty percent more than she was earning at her previous level. Babatunde was happy for her, but he was concerned about her new work hours. They no longer saw each other as often they used to, and she now worked far too late into the night. But what really bothered him was how often she spoke about her new boss. He was either complimenting her organisational skills or her astuteness. “Reggy makes me feel like I have a lot to offer,” she had said a few days ago.“You seem to talk about him a lot these days.” “Yes! That’s because we work together, duh!”
“You didn’t talk about your old boss as much…” “Are you jealous?”
“I’m not. I swear. I just sometimes wonder if I should be worried about this new guy.”
“I just admire him a lot. There’s nothing to worry about.”
“You admire him?” “Yes… That’s what you told me when I asked about your neighbour.”
They laughed about it, and although Babatunde was still worried, he saw an opportunity to bring up the conversation with Saheedat again. Surprisingly, Mawon agreed.
Her smile faded as she talked about her aunt’s latest demand — a contribution toward the construction of her father’s property in their village. The demands kept piling up. Babatunde wished he could invite her to live with his family, but he knew his father would never agree. “I don’t want anyone to accuse me of kidnapping someone’s daughter,” he would say.“I saw a place online today. A one-bedroom apartment with a full toilet and bathroom and sitting room. The kitchen is so nice and spacious. There’s even a garden just beside it. It’s behind the main building.” “How much is it?”“It’s about five hundred thousand naira.”
“That’s not too bad. Talk to the agent. Let me see how much I can raise.”
Mawon squeezed him tight in gratitude. She started to talk about how free she would be and what it would mean to her if he could get the money. Babatunde had sworn that
he would not ask his father for money, but he was willing to do this just once more. Surely, the old man had some money hidden somewhere that he could loan him.
Babatunde met Ebube at the car park. They would often say hello when they bumped into each other, but they’d never really conversed. Babatunde was about to head into the house when he noticed the look on Ebube’s face.“You look tired, bro.” “I am. I can’t lie. I’m in a sticky situation.”“Woman trouble? A problem shared is a problem solved.”“Not woman trouble. Business trouble actually.” Babatunde could see Ebube’s hesitation. “I may not be a business person, but sometimes I dey try get sense.”Ebube chuckled. “Okay. So here’s the thing. I’m in business with someone, and I want us to take things to the next level, but he doesn’t see what I’m seeing.”
“Guy, you sure say no be woman matter you dey try code for me?”
Ebube laughed. “I know it sounds like it, but it isn’t. We have venture capitalists who are interested in our product, but he doesn’t want them involved because he wants us to
have full control of the company.” “So these venture…?” “Capitalists.”
“Yeah. Are they giving you money?”
“Yeah, a lot of it. And mentorship and networking opportunities too.”
“Then just do it.”
“I can’t just do it. It’s a partnership.”
“Then buy him out.”
“Where do I get money to buy him out?”
“These venture people get money, abi? Let them buy him out. Make him an offer he can’t refuse.” “Wow.”“I tell you say sometimes I dey try get sense.”
Reflections
Venture Capital
Venture capital (VC) is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that are believed to have long-term
growth potential. Venture capital firms open a venture fund through which they raise capital from investors referred to as limited partners. These funds are then invested in promising small businesses. The limited partners are typically institutional investors such as insurance companies, pension funds,sovereign wealth funds and even high net worth individuals (HNIs).The venture capital firms who manage these funds are referred to as general partners. The investments they make are typically in exchange for minority equity, which is a 20% or less stake in the company. As companies grow, they go through different stages.
Funding provided to these start-ups may focus on the following stages of company development:
Seed Stage: Capital provided to an early-stage company to be used for product development, market research or business plan development. It is often the startup’s first official round of funding. VCs are typically given convertible notes, equity or preferred stock options in exchange for their investment.
Early Stage: The early stage of venture capital funding is intended for companies in the development phase. This stage of financing is usually larger in sum than the seed stage
because new businesses need more capital to start operations once they have a viable product or service. Venture capital is invested in rounds, or series, designated by letters: Series A, Series B, Series C and so on.
Late Stage: The late stage of venture capital funding is for more mature companies that may or may not be profitable yet but have proven growth and are generating revenue. Like the early stage, each round or series is designated by a letter – Series D, Series E and Series F are more common.The investment horizon for VC firms can be anything from three to seven years, and upon exit, they expect to sell their stakes in these portfolio companies for a return of at least three to as high as 10 times their investment. Exits for VCs happen when the company they’ve invested in is successfully acquired or public, or when they sell their
stock to other investors called the secondary market. Upon exit, returns are distributed to the limited partners who are invested in the fund. Investment One Venture Capital (Vencap) provides the following services to portfolio companies:
Finance
• Investments through equity, debt and hybrid instruments after the completion of a detailed due diligence on companies and founders.
• Investments in early-stage companies and the provision of growth capital to help businesses scale and take advantage of market opportunities.
Business support services
• Holistic review of business idea and business plan guidance.
• Advise on record keeping, general accounting,budgeting, marketing strategy, etc.
• Mentoring programme which provides SMEs with requisite management skills needed to grow worldclass institutions and access to a wealth of experience and networking opportunities.
What are Vencap’s sectors of interest?
• Fintech (Financial technology companies)
• Agriculture (Agritech, Agro-processing)
• Education (Edutech)
• Healthcare
• Energy (clean and renewable energy)
