Nigerian SMEs are not investible – FirmCore Capital

Investors cannot invest in many small and medium enterprises (SMEs) in Africa, founder and managing director of FirmCore Capital, Obinna Isiadinso, has said. He made this declaration while speaking about entrepreneurship in Africa at a recent forum held in Lagos.

He said that in order to attract investments African entrepreneurs must make sure that their company is one that investors can invest in. According to him, investors are willing to take risks with their money and invest earlier in a company that is investible.

“Investors don’t just provide funds, they tie it to future potentials,” he added.

He identified several challenges militating against investments, including the inability to access domestic or foreign markets and inadequate managerial and technical staff. Other challenges are lack of seed and early-stage funding; limited informal and formal support systems; poor regulatory framework and low cultural support.

Isiadinso urged African entrepreneurs to clearly understand the various stages and determine what is needed at each stage. The stages of entrepreneurship process he said included idea formation, idea/team development, start-up, product development, revenue generation and profitability.

Besides, he also mentioned that investors make investments in six stages: pre-incubation, incubation, seed, first round, second/third round, final round. As investment moves from one stage to the next, he said risk decreases and value increases.

“Sit down, think, plan and understand what is needed at each stage,” he told entrepreneurs. He urged them to find ways to position their businesses for the long term. He said stakeholders in Africa’s SME sector have a lot of work to do to develop entrepreneurs with high impact.

“Government needs to come up with initiatives for the system to produce high impact entrepreneurs,” he said. Isiadinso advised African governments to learn from the entrepreneurial ecosystems in Brazil and Turkey.

“Entrepreneurial ecosystems are not created overnight. Buenos Aires took 15 years for a rich network to develop; Silicon Valley took a few decades. In the case of Buenos Aires, entrepreneurs from three companies comprise a significant share of the network activity,” he said.

He also said infrastructure initiatives such as incubators, accelerators, large companies, investment funds and service suppliers are complementary to the efforts of high-impact entrepreneurs.

“The infrastructure initiatives provide mechanisms for high-impact entrepreneurs to realise their importance, activate the ecosystem, and multiply their impact. High-impact entrepreneurs should be encouraged to become investors, mentors and board members to leverage the human capital that they have accumulated through their experience and network,” he said.

He encouraged African governments to design policies that will facilitate the growth of entrepreneurial ecosystems by empowering private actors rather than public ones. “Enable high-impact entrepreneurs to be successful and reinvest back into the ecosystem,” he said.

However, there are still major investments taking place that give hope to stakeholders. These include Kenya’s BRCK that solves internet connectivity problems in remote areas ($1.2m); Nigeria’s leading online retailers Konga ($25m) and Jumia ($35m); Paga, a leading mobile payment provider and Rancard, a leading mobile cloud solutions provider.