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Home Business News

Andela explains startups’ preference for Venture Capitalists over banks

Fakoyejo Olalekan by Fakoyejo Olalekan
May 22, 2019
in Business News, Company News, Small Business, Tech News
Andela
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In January 2019, Andela secured $100 million from foreign investors, thereby continuing a trend that has long characterised the Nigerian startup space.

Private Equity firms have gradually become the only accessible source of capital available to Nigerian Startups with growth potentials, even as the relationship between commercial banks and small and medium businesses continues to deteriorate.

Why the VC Cravings: Nairametrics spoke to Andela’s Marketing and Communication Manager, Olayiwola Osoba, to better understand the preference for Venture Capitalists. According to him, banks are known for stringent timeframes unlike Venture Capitals whose interest in startups is to invest rather than just being the lenders; a position banks prefer to take.

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Most startups also perceive banks as being overly concerned about interests and the need to meet debts deadline instead of expressing actual interest in the growth of companies. They are also quick to collect collateral when debt obligations are not met on time. Consequently, this has led to the rise of private equity firms in Nigeria who are willing to invest in startups and ensure their growth.

“Those are the guys (Venture Capital) who can actually give you what you need to do what you actually want. Venture Capitalists wouldn’t give you fund and then say they need their money back in the next six months.

“They are also investors, they have vested interest in your company. So it only makes sense for tech companies to actually meet with venture capitalists as opposed to going to the banks. And it amounts to the step in the right direction.”

Past Developments: Recall that in 2018, a total of $178 million was raised by 148 Nigerian startups in 166 deals involving more than 90 private equity firms. In 2019, Andela got a fair share of the pie by securing $100 million in a Series D funding led by former US Vice-President, Al Gore’s Generation Investment Management, as well as other investors.

Andela’s plan for the $100m: The tech company plans to invest in talents and create an enabling environment for its software engineers across Africa. In other words, the company will increase its workforce to meet the growing list of partners and demand for software engineers across Africa and the world.

Among its plan is the Software Engineers to the power of X campaign which was launched on Tuesday, May 22, 2019. Osoba explained to Nairametrics on the sideline of the event that this is one of the ways Andela is effectively utilising the funds raised so far this year.

About the Software Engineers X campaign: The tech company is creating another entry point into its workforce of developers which is over 700 across six countries. The X campaign will enable middle and senior-level engineers to join Andela.

The company’s workforce model has, so far, entailed the recruitment of zero-experience developers who typically go through Andela‘s boot camp prior to joining full time. The company has partnered with various universities in the past such as Unilag and Uniben to source for software talents.

Why the change in recruitment model? The market is in need of more software engineers, even as some of the experienced ones do not have the opportunity to invest their skills in a digitised world. This is why Andela is providing them with the opportunity whilst also meeting the growing demand.


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Tags: Andela's fundraisingAndela's Software Engineers to the power of X campaignNigerian Startups and Private Equity firmsVenture Capitals and Private Equity firms
Fakoyejo Olalekan

Fakoyejo Olalekan

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: fakoyejo.olalekan@nairametrics.com.

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Comments 2

  1. emmanson says:
    May 23, 2019 at 3:45 pm

    thanks for the right up. very insightful.
    your permission
    to use it as a research topic.

    regards

    Reply
    • Emmanuel Abara Benson says:
      May 24, 2019 at 2:04 pm

      Okay. Please, reference us in your bibliography.
      Many thanks.

      Reply

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