This isn’t a new position or a trendy idea about building sustainable startups in response to the current macroeconomic or funding crisis. This has been my lived experience and deeply held conviction after being a capitalist for 20 years, a significant portion of which has been venture-backed. After raising $40 million in venture capital, partially exiting a company for $25 million, and meeting a wonderful array of founders quietly building highly profitable startups across Africa, these are my distilled thoughts from 15 years of operating in West Africa.

Limited by Market Sizes

We are a poor continent. Yet a few years back, with a 10-page pitch deck and a handful of part-time engineering leads (who were still fully employed until the funding was secured so they could exit their full-time positions safely), quite a number of startups raised seed capital. Seed capital from 2020 onwards typically meant $0.25-3 million to find a path to product-market fit for your idea. For an ecosystem at such an early stage in development, this was quite remarkable. While I can understand this being the norm in North America, Europe, and Asia, where they have deep technical M&A and capital markets, it seems strange in our macro-turbulent part of the world. Iroko’s first angel investor was Bastian Gotter; he invested $200,000 (over 10+ transactions) and ended up with 50% of the equity for that. He also brought along two BP traders who invested $80,000 for 10% back in 2010 ($800,000 pre-money valuation). We became profitable at $50-60,000/month with $30,000/month in profits from that investment. At the time, that attracted the likes of Tiger Global, who then went on in that same 2011 to invest $3 million at a $12 million valuation and later led subsequent rounds alongside Kinnevik, Rise Capital, and Canal+ for about $36 million. Iroko was a relative success story for the earliest founders and investors; our angels sold their $80,000 stake for $2.4 million, and once you include the special dividends from the ROK sale, we returned about $15 million to shareholders. In the end, Iroko is a micro-profitable business largely owned by my family; my wife remains a significant shareholder in ROK, which continues to generate substantial profits to support her ongoing reinvestment in Nollywood content. During the later stages of this 14-year journey, we saw a massive surge in global funds investing in Nigeria. Africa never really had a history of building large companies let alone startups. Venture capital wasn’t going to massively change that. Afridigest captures this perfectly

What we ended up with was massive overbuilding in areas that investors were financing: fintech, trade logistics, and more. The graphic below provides some indication of that.

As a venture-backed startup, when you are hot, you are hot. I have seen with Iroko and many other startups the other side of that coin, where one day, sometimes for no reason of your own (regulatory changes, macro forces, competitor funding, or the sector becoming less attractive), your investors’ confidence wanes, and your funding requests lose momentum. The triple-digit growth demanded by venture capital usually requires them to fund those losses. And those losses can be substantial. At Iroko, there were multiple years where we lost over $5 million annually. That’s $100,000 a week. I wasn’t surprised when I saw growth-focused startup Kuda report losses of $40 million. Someone has to fund that, and if they decide they don’t want to anymore, then they will truly have to undergo significant changes to survive, if they do at all. The expensive executive team build-outs required to execute grand visions need bridging; then the funding stops. Rarely are founders able to shift gears to sustainability without causing major internal tensions (layoffs, marketing cuts, executive exits, compensation freezes, etc.); I’ve heard it referred to as the violence of startups.

Funding is down. With the anti-DEI movement from our largest Western LPs, it’s likely to remain that way for the foreseeable future. That’s okay. Nigeria still has many opportunities that require solutions built by locally aligned and focused teams. We have abundant local talent and an API ecosystem to enable motivated teams to build truly amazing local products. The challenge will always be monetization, whether local or international. Private equity has struggled to operate in Nigeria; I would argue that the jury is still out on whether the approximately $10 billion of venture capital invested in Africa over the last three years will ever see the tenfold return it requires. Aside from later stage secondary liquidity, I have yet to see a credible path to material liquidity events that change the long-term investment case for our continent, even six years after initially posing the question, “Where are the exits?”. This is a deeply worrying future for our community.

“The traditional fund life isn’t fit for purpose in Africa,” he argues, challenging conventional wisdom.

After all, if VC funds in the US are hitting the 12+ year mark consistently, then one should expect Africa-focused funds to follow that trend.

Especially given the continent’s less mature capital markets and the foundational investments many VC-backed startups in the region make to build necessary infrastructure and create new markets from the ground up.

Instead, Omoigui advocates for longer horizons similar to the “ongoing evolution of US private equity funds to 15-20 year lifespans.”

His viewpoint emerged during an online exchange around a crucial question: Is it realistic to expect $1 billion invested in African startups to yield $10 billion in returns within the typical VC timeframe?

Eghosa Omoigui – Founder & General Partner ECHOVC

Long-term, what I believe is more sustainable for the African ecosystems is creating hundreds of sustainable founders building billion Naira startups. Local currency is crucial. Pegging our success to dollar investment flows means we are building our foundation in the hardest possible mode. So what does this look like in practice? Imagine a company that, with a seed investment of N50-100 million, can generate N200 million in revenues and N50 million in profits. Now stretch that to startups that can raise N200-500 million from local high-net-worth individuals, leading to startups that can generate N500 million in revenues and N100-200 million in profits. For most Nigerian-educated founders, in a country where the minimum wage and the vast majority of citizens earn under N1 million a year, this would be a life-changing outcome. For investors, this type of company could distribute 50% of profits annually, providing a meaningful return on capital alongside the possibility of further equity gains if there were to be an exit in the future. I saw this on Twitter, and it captures the spirit well.

Jason M. Lemkin of SaaStr summarizes it aptly: “Most founders with ‘huge exits’ on paper end up with far less than expected after multiple rounds of dilution, liquidation preferences, and taxes.”

Consider these firsthand figures:

• A “9-figure exit” results in 65% going to investors.
• The remaining 35% is split between founders and the employee stock ownership plan (ESOP).
• Each founder typically takes home $4 million to $6 million after taxes.
• This process can take 7 to 8 years of your life.
• It involves endless board meetings and fundraising.
• Founders often experience a loss of control and autonomy.

In contrast, “middle path” or, in our parlance, billion Naira founders:

• Retain majority ownership.
• Build profitable businesses on their own terms.
• Operate teams <20 employees
• Decide when to exit.
• Maintain control throughout the process.
• Walk away with life-changing sums.

As Tim Ferriss pointed out, “The question isn’t ‘how can I build a $1 billion company,’ but rather ‘what kind of company will enable the lifestyle I actually want?'”

David O. Sacks (one of the prominent VCs): “For most founders, a $20-50 million outcome with high ownership is far better than a slim chance at a unicorn exit with single-digit ownership.”

Right now, the entire African venture capital ecosystem is built to produce $1 billion unicorns. In Nigeria, we have less than 10 billion dollar listed entities on the NGX (which itself has a total market cap for the 127 entities of $45B). Its a very big bridge to the gulf.

FLUIDITY is focused on strengthening trade and economic ties among our startup and technology communities in Sub-Saharan Africa and the Gulf Cooperation Council (GCC). We will gather on April 7th-8th, 2025, in Dubai, ready to explore and unlock the tremendous opportunities our regions can offer each other. [Click Here]