Venture capital firm, Voltron Capital, which helped 53 African startups scale last year through its Fund 1, is taking another approach to funding more startups on the continent this year through its Fund 2.
Despite the current economic headwinds and investors’ cautiousness, Voltron sees more opportunities to invest in startups.
According to founder, Olumide Soyombo, “a bearish time is an interesting time to build.” He believes that an entrepreneur will always be an entrepreneur, regardless of the market conditions.
How he started Voltron Capital
In 2014, Soyombo started investing in different startups as an angel investor using money from Bluechip Technologies, a software company he co-founded. His angel investment moves led to the success of companies such as Piggyvest, Paystack, and TeamApt.
After hugely rewarding exists from these companies he decided to set up, Voltron Capital, pooling capital from friends and close associates to provide seed funding for several startups across Africa.
- “I started more like an Angel investor, using my own money, not anybody else’s money. However, while doing that, I used to get to see very, very interesting companies. And I found that the companies may be raising $200k, I’ll put in my $50k and I realised that I was syndicating deals by bringing in other investors, either traditional investors from Dubai, high net-worth individuals, or even other venture capital investors, I would then complete the round.”
- “After we had gotten some good returns from the likes of Paystack and exited some secondaries, many folks started telling me ‘hey Olumide, next time you are investing, I have my $50k, I have my $100k, carry me along. And it was from there I figured okay, why don’t I build out a fund but this time with a community-like structure of high-net-worth individuals, and family offices who are then interested in backing more entrepreneurs,” Soyombo told Nairametrics.
With its first fund launched in 2022, Voltron invested in a total of 53 startups across Africa, equating to at least one deal per week throughout 2022, thus raising the bar for venture capital on the continent. With a focus on fresh ideas, 98% of the 53 startups were at the pre-series level.
How he picks Startups: With limited track records and proof of concept, most early-stage investors in Startups rely on their instincts and first impressions of co-founders to pick which startups to invest in.
Soyombo looks for unique insights and domain expertise in the team, and for the entrepreneur to be a good fit.
- “We are usually the first or second cheques in most companies, and what I look for first is the team and the expertise of the team. What domain expertise do they have? What unique insights do they have on that problem? And what kind of entrepreneur is this person?”, says Soyombo.”
With a proven track record of success, this strategy has allowed him to identify and invest in numerous profitable startups, resulting in significant returns on his initial seed investments. It comes as no surprise that many high net-worth investors turn to him for guidance and advice on where to invest their capital.
More than just funding
Voltron not only provided funding but also guided the startups to success. Many of the startups are now in global accelerator programs, such as Y Combinator, Tech Stars, and Village Global.
Additionally, the valuations of the startups have increased over time, some by more than three times. Soyombo said that they saw 1,200 inbound opportunities and spoke to 500 startups over the course of the year, leading to 53 deals across various countries in Africa.
- “It’s a bear market now, but I think it’s also a very interesting time to build. I always tell people that whether in a bull market or a bear market, a super entrepreneur is a super entrepreneur. And good entrepreneurs don’t stop existing just because we’re in a bear market. So, we still want to back very early companies. We’re going to obviously guide those companies through their model and also focus on the positive units in the economics as soon as they can because, in the current markets, it’s going to take a longer time before you can raise follow-up rounds.
- “So we ask the companies that we’re investing in to focus on the positive unit in the economics quite early on, while they figure out their model, and not just burn, burn, burn, right. So we’re quite excited about the market. Because we feel that even though now that folks are fearful it’s still it’s time to dive in,” Soyombo said.
Voltron is building on the successes of its Fund 1 by setting up Fund 2 to help more African startups scale. The goal is to support startups from the African continent and mobilize more capital for young companies. Despite the current market sentiment, the organization is determined to continue its efforts.
According to Soyombo, the mandate of Voltron is to back early-stage companies and guide them through their model while focusing on positive units in their economics. This is especially important in the current market, where it may take longer to raise follow-up rounds. The company encourages the startups they invest in to focus on positive unit economics early on, rather than burning through funds.
- “I’m getting Nigerians to back our own startups and the reason is obviously so that when exits happen, the money comes back and remains here and goes back to funding more startups. This is why I’m very passionate and have been an evangelist for getting Nigerians to invest in Nigerian companies alongside foreign investors,” he said.
Many of the investors in Voltron’s Fund 1 are also investing in Fund 2, including high net-worth individuals and corporate Nigerians. The goal is to get many Nigerians to own their own unicorns and for the money from exits to come back and remain in Nigeria to fund more startups.
Voltron is a registered Delaware fund managed by Soyombo and is also managed through AngelList at www.angellist.com. The fund has an investment committee that vets startups and makes investment decisions.