Nigerian Angel Investor Launches Fund for African Startups

Olumide Soyombo Launches Voltron Capital, a Pan-African Venture Firm

Olumide Soyombo is a prominent angel investor actively involved in the Nigerian and broader African tech startup ecosystem. Beginning his angel investing journey in 2014, Soyombo has provided funding to 33 startups to date.

These investments include well-known companies such as Paystack, which was acquired by Stripe, PiggyVest, and TeamApt.

Introducing Voltron Capital

Soyombo has recently announced the establishment of Voltron Capital. This is a Pan-African venture capital firm co-founded with Abe Choi, an entrepreneur and investor based in the United States.

The firm’s primary objective is to tackle the significant shortage of early-stage funding available to technology companies operating across Africa.

Investment Strategy and Focus

Voltron Capital intends to invest in approximately 30 startups. The focus will be on companies in the pre-seed and seed stages of development.

Investment amounts will vary between $20,000 and $100,000. Geographic priorities include startups located in Nigeria, Kenya, South Africa, and North Africa.

Soyombo’s Unique Background

Soyombo distinguishes himself as a founder who also invests, a relatively uncommon profile within the African venture capital landscape.

He founded Bluechip Technologies in 2008, alongside Kazeem Tewogbade. This enterprise provides data warehousing and enterprise application solutions.

Bluechip Technologies serves a diverse clientele, including banks, telecommunications companies, and insurance providers. Notable clients include major Original Equipment Manufacturers (OEMs) such as Oracle.

Despite not following the conventional path of a venture capital-backed startup, Soyombo’s experience as a founder provides a unique perspective for evaluating and supporting emerging African tech businesses.

From Startup Founder to Angel Investor

After six years, the duo transitioned into the technology sector, a relatively new field in Nigeria at the time. They began investing in startups through LeadPath, an early-stage firm established in Lagos, Nigeria.

The initial concept involved providing $25,000 in funding and guiding startups through a three-month accelerator program, culminating in a demonstration day. However, the ambition to replicate the Y Combinator model did not fully materialize, as Soyombo recounts.

“In 2014, we discovered that there wasn’t a readily available investor network to present these startups to. This often necessitated providing additional funding independently,” Soyombo explained. “We quickly realized the accelerator approach wasn’t viable, leading us to pursue individual investments. It’s remarkable how the landscape has evolved since then.”

LeadPath was restructured as a special purpose vehicle (SPV) to facilitate their angel investing activities. Over time, Soyombo initiated several SPVs for similar investment purposes. But what prompted the shift towards establishing a formal fund structure now? Soyombo clarifies this by detailing his established funding process.

Leveraging his prominent position within Nigeria’s tech ecosystem, Soyombo gains access to a significant number of promising investment opportunities. “I benefit from early access to many deals, a privilege built on my network and reputation as an angel investor consistently willing to provide support,” he stated. “This allows me to identify potential investments quickly.”

Typically, these opportunities involve startups seeking pre-seed or seed funding in the six-figure range. For example, if a founder aims to raise $300,000, Soyombo can often contribute $50,000 personally. He then assesses the startup’s potential and may invite his network of contacts to participate in completing the funding round.

Soyombo intends to formalize this informal process through a structured framework, granting each limited partner (LP) simultaneous access to his deal flow. He believes this will accelerate the capital acquisition process for companies. Notably, his experience in the corporate sector provides access to unconventional capital sources, broadening the investor base beyond the typical Nigerian tech investment community.

He positions himself as a facilitator, bridging the gap between his corporate network – individuals who haven’t traditionally invested in tech – and the startups in need of funding.

“There’s a growing sense of ‘fear of missing out’,” he noted. “High net worth individuals are now actively seeking opportunities to participate in my investments, and simultaneously, startups are seeking capital. However, I’m not aiming to manage a full-scale fund, which is why we’ve adopted this particular structure.”

Recent developments in the African tech scene – specifically Paystack’s acquisition by Stripe and Flutterwave’s achievement of unicorn status – have fueled this increased interest. Soyombo was an early investor in Paystack, marking his primary exit alongside two secondary investments within a portfolio that has collectively raised over $70 million.

Consequently, Soyombo finds it easier to attract non-traditional investors, even those typically risk-averse towards tech investments, to invest in startups.

“Suddenly, there’s widespread interest in the opportunities within this space. Individuals who previously focused on real estate are now exploring startup investments. We’re even seeing older generations encouraging their children to invest on their behalf, making the conversation more straightforward. Many are looking to diversify their portfolios and participate in this growth,” he explained, referencing the successes of Paystack and Flutterwave.

Voltron Capital will operate through the AngelList platform. Its investors include high net worth individuals and executives from banking, telecommunications, and other industries, with a minimum investment of $10,000. While resembling a typical seven-figure fund focused on pre-seed and seed-stage startups in Africa, Voltron distinguishes itself through its founder-centric investment approach.

The fund embodies Soyombo’s investment philosophy: prioritizing exceptional founders regardless of the industry they operate in.

“My focus remains on supporting promising entrepreneurs. If Odunayo, the founder of PiggyVest, were to venture into health tech or edtech, I would still invest in their company,” he stated, recalling his $1 million investment three years ago in one of Nigeria’s leading fintech companies. “For me, the investability of a sector is primarily driven by the quality of the entrepreneurs who are dedicated to solving problems within that area.”

The Need for Enhanced Support in Early-Stage African Tech Investment

According to data from Partech Africa, 2019 witnessed a peak in funding for African tech startups, reaching $2 billion. Already this year, half of that amount has been secured, with projections indicating a potential surpassing of the 2019 record.

While a significant portion of this investment is directed towards later-stage ventures – a common trend in global tech ecosystems – Africa distinguishes itself through the challenges early-stage startups encounter when seeking funding. Specifically, a report by the IFC reveals that 82% of African tech startups identify limited access to seed funding and a scarcity of angel investors as primary obstacles.

This lack of initial capital hinders the growth of many promising startups, preventing them from securing the necessary resources for early operations and revenue generation. Successfully obtaining these early funds is critical for attracting subsequent funding rounds and achieving larger-scale impact.

Voltron aims to address this funding gap. Beyond attracting local investors as Limited Partners (LPs), Soyombo explains that startups will also gain access to international capital. Choi’s role is central to facilitating this connection.

Having personally invested in 15 startups, with two successful exits, Choi brings valuable experience and a robust network within the U.S. market. This expertise will be instrumental in attracting foreign investment to the continent.

Soyombo suggests that the acquisition of Paystack by Stripe has significantly increased the attention of international investors towards African startups. He also playfully cites a tweet by Paul Graham following the acquisition, which questioned why investors would overlook opportunities in Nigeria given Patrick Collision’s awareness.

However, the investor emphasizes the rapid maturation of the African tech ecosystem as a compelling reason for optimism. He notes a consistent improvement in the quality of founders across the continent, driven by the abundance of challenges requiring innovative solutions.

“Furthermore,” Soyombo states, “as our startups become more established, we anticipate an increase in entrepreneurs launching their own ventures.” He expresses confidence that through Abe’s established connections within the U.S., Voltron can provide its portfolio companies with optimal opportunities for global expansion and impact.

Key Challenges for African Tech Startups

• Limited access to seed funding.
• A shortage of active angel investors.
• Difficulty in securing early-stage capital for operations and revenue generation.

Addressing these challenges is crucial for unlocking the full potential of the African tech ecosystem and fostering a new generation of globally competitive companies.