What’s your background and how did you end being an angel investor?
My main background is more than 30 years from management consulting, dedicated to the intersection between business models/ business strategies and enterprise architecture/ technology strategies. During these years I have also been founder and co-founder of some companies, mostly within consulting. Two years ago I decided to put a 50% time limit on consultancy work, and to use the other 50% as a mentor for entrepreneurs and investor in early stage companies. Since that I have been quite heavily involved in the Norwegian startup space, and have had some involvement in other Nordic and Baltic countries (Denmark, Finland, Estonia) and in the Pangea Accelerator in Kenya.
How many companies have you invested in and what sectors?
Since I started my ‘angel investor career’ two years ago I have made 18 investments. Three of these are through accelerators where we have made syndicated angel investments in five very early stage companies in each ‘batch’, and two of them are through early stage accelerator funds with 12 companies. So the number of companies is therefore higher than the number of direct investments. E.g., the single syndicated Pangea investment covers two companies in Nairobi, Tozzaplus and Onesha. Most investments are within B2B software, where I can contribute most based upon my own consulting experience.
Have you had any bad investments and what lessons did you learn from this?
When you invest in startups, at any time there is an ongoing crisis in at least one of the companies you have invested in. This is a part of the game, and a key lesson learned is simply to be prepared for it, both mentally and through active risk management. My undisputable worst investment was a social entrepreneurship company I started myself 9 years ago. And I cannot blame anyone other than myself that I did not succeed in making this profitable over time, despite all good intentions and careful business planning. So far, none of the 18 recent investments have ‘gone west’, but I definitely do not expect all of them to survive.
What’s your advice to angels who are just beginning their investing journey?
First, I think it is necessary to ‘learn by doing’. I do not recommend sitting on the sideline waiting for the first ideal investment case, but rather enter the learning process through making 3-4 very small investments that you are mentally prepared to lose.
Secondly, learn from and cooperate with other angel investors. So be active in communities like Viktoria BAN, do investment through syndicates rather than alone, participate in company reviews, and use available best practices for valuation, investment terms, due diligence and other key themes that you need to know about.
Thirdly, plan for creating a portfolio of at least ten investments rather than just invest in a few startups. This is simply down to statistics: a number of the initially promising companies will not make it, and it is difficult to spot the winners and losers up front.
What’s your take on the East African market from an investment perspective?
I’m still in learning mode and expect to be in this mode for quite some time. Up to now my only East-African involvement has been with a small portion of the startup ecosystem in Nairobi, so I cannot say that I currently have a good enough understanding of investment opportunities in Kenya, and definitely not in other parts of East Africa. But there are some striking examples of how you have skipped complete generations of legacy technologies that we still struggle with in Europe, like the rapid development of mobile banking in Kenya. Some countries also show promising initiatives aimed at actively supporting the startup ecosystems, but the current lack of seed and pre-seed capital makes it extremely important to develop communities of angel investors. Overall, I think that the investment potential in East Africa is promising and potentially huge, but the road to get there is definitely not straight-forward and free of risks.
How do our local angel networks differ from angel networks in Europe? Or what could they learn from their European counterparts?
I have just recently become a member of the Viktoria business angel network, so my knowledge of the ‘internal workings’ of this organization is still limited. But it seems like Viktoria BAN does a lot of what is considered ‘best practice’ among business angel networks in Europe, like having an extensive training program, active networking for syndicated investments and strong practices for due diligence. Compared with business angel networks in the Nordics, the most striking difference is that there are far fewer business angels in Kenya, and that you seem less willing to enter (high-risk) pre-revenue startups. But this is probably just a question of time. Many business angel organizations in the Nordics use FiBAN as a model for developing their local BANs, and I am sure Viktoria BAN and other Kenyan networks could also get supplementary ideas from the Finnish practice. E.g., to establish a very structured process for managing the deal flow of investment opportunities, supported by automated tools.