He is undoubtedly one of the better-known faces and leading lights in Nigeria’s private equity industry. So, when Dr. Akintoye Akindele, a Partner at private equity firm Synergy Capital speaks everyone, especially small businesses seeking funds to scale up their processes, listens. Chairing one of the sessions at the Duale, Ovia & Alex-Adedipe (DOA) Inaugural Business Series, Dr. Akintoye took time out to highlight several gaps (and how to bridge those gaps) in the current pitch to private equity investors by most small business owners. The conference had as its theme Investment in Nigeria’s Telecommunications, Media and Technology Market (TMT). =”1″}
With over USD 500m worth of investments under the management of his firm Synergy Capital and a decent percentage of it in TMT, Dr. Akintoye had the benefit of experience to back his advice. In his opening comments, he quickly added Payments to the TMT acronym making it Telecommunications, Media, Technology and Payments (TMTP). In his view, there are four questions to be answered by any business owner seeking funding from private equity investors and these questions are;
1. What is the commerce behind the idea?
2. What is the business model to exploit the commerce?
3. What is the capital structure for the commerce?
4. What is the investor return?
He continued by detailing how unaware of these questions a lot of small business owners are when they go seeking for capital to scale up their businesses. As a result, only very, few of them get beyond this first stage of questioning more out of not being prepared for it than anything else. He cautioned that the private equity investment process is rigorous and can be lengthy depending on the nature of the business and its complexity but with proper advisory services to hand hold the business owner these hurdles can be scaled as indeed many have. He also added that among other things, the private equity investors would also want to know exactly what activity it is that the business does, why that activity is relevant, why the private equity investor should care about it and where ultimately the business is going.
Speaking to the packed audience that had gathered for the conference at the Wheatbaker Hotel in Ikoyi, Lagos, Dr. Akintoye mentioned execution and growth as two critical things that investors look out for while considering whether to make an investment or not. Execution, he said, answers the people question in the business which is, who are they? What is their track record and what is their capacity for implement the business goals successfully? While growth relates to the nature of the market that the business serves and answers the scalability question, is the business scalable? Taken together a positive response to these questions by the small business firm is a huge step towards successful fundraising.
Before closing the session, the Synergy Capital Partner explained briefly the literal difference between a Series A and Series B funding rounds in private equity parlance. He remarked that in a Series A funding round, the business owner is simply selling a story, a vision of the future. In a Series B funding round, it is a reality that is being sold as per what did you achieve with your Series A funding?
He took some time out to also respond to the often-asked questions of why the returns cycle of private equity funds in Nigeria is shorter than what obtains in the European and US markets. According to him the average age of the Nigerian entrepreneur is much higher than that of his European or US counterpart many of whom launch their businesses while still in school as opposed to Nigeria’s late-stage entrepreneurial situation. In addition, he posited that Nigeria not only came late to the private equity party but did so with an overdose of historical debt lending background driven by the safety net of collateral and as a result, the country’s private equity industry is still developing the financing know-how for early-stage businesses.