Three year before Oui Capital, a venture capital firm in Africa, invested $150,000 to acquire a 1.2% stake, managing partner Olu Oyinsan, met Tosin Eiolorunda. He immediately recognized that there was something special about him.
His understanding of the banking technology stack and payment architecture was impressive. Oyinsan remembered that he knew he had something exciting in store.
Oui Capital and investors such as Global Ventures, Soma Capital and Kepple Africa were convinced that Moniepoint’s $12 million valuation post-money was a bargain, given its traction, financial discipline and financial discipline. Oyinsan stated that they thought the engineering team was very strong. “We bet superior engineering would solve the problem at the time which was high failure rates in transactions and we were right.”
One month before that round Eniolorunda informed TechCabal Moniepoint was heading to become a unicorn. When it became a [unicorn]three years later, Oui Capital returned $8 million, enough to return its initial investment twice.
It may not have been a better time for Oui Capital to return its fund — a rare feat among VC firms — as it could raise its third fund in this year. The fund currently invests up $500,000 in African startups at an early stage.
TechCabal interviewed Oyinsan in order to learn how the firm met Moniepoint founders, made an investment, and built their business. first fund. This interview has been edited to make it shorter and clearer. You invested at an estimated value of $12.5 million. How did you negotiate the terms of your entry and which key elements in the deal worked to your advantage?
Deal was undervalued. This was during the 2019/2020 boom, when valuations were high. Moniepoint was growing at a rate of about 5% per year. At that time, $12.5m was a reasonable price.
At the time, the company was already generating between $700k to $1 million in revenue. The valuation multiples at that time were at an all-time peak. We were able to take advantage of the fact that the company had a relatively low VC funding history and that we could have set it up for multiple funding rounds. The founders were also very pragmatic, and valued quality investors over valuation figures. You believed in Moniepoint since the very first day. What made you so sure?
These people had something that no one else did, and they knew how to build businesses. The team was mature from their previous work, so it wasn’t the first day of their journey. It was just a different direction.
Our DNA matched theirs. The Ivy League or YC-backed founders were often considered successful back then. TeamApt is one of the first companies that reached this stage without YC. This proves my thesis that great entrepreneurs exist outside the traditional circles.
During that time, major fintechs were backed by YC, including Paystack Flutterwave Kuda and PiggyVest. Many investors followed this pattern: if your company wasn’t backed by YC, then you wouldn’t receive a high valuation. We acted on our conviction. We saw an opportunity and went all in.
Beyond investing, I did advisory work, created the first investment memo and set up the Data Room with a Deloitte Consultant I hired. The goal was to create a funding path: seed, Series B, A, etc. Companies that skip steps often struggle. Investors are hesitant to write a large check if your company has never raised capital. Even if your metrics are at the Series B level, they will hesitate. Investors play a key role in moving companies to the next funding round.
When did you realize that Moniepoint was a fund-returning venture? Was there a particular point when everything changed?
From day one we had a strong belief in this company, and we accurately predicted its potential. In our initial investment memo, we had stated that COVID-19 was going to change the game at Moniepoint. The company grew by about 1000% in COVID, followed by CBN’s cashless policies that helped them grow every year. We knew that we were onto something at this point. It was only a matter time.
Your shares were sold in the $110 Million Series C round. Why? Why not wait longer? How did you decide the amount to sell?
We wanted to show our continued belief in future growth of the company while retaining enough ownership. We sold enough to satisfy limited partners and return the entire fund, while keeping the remainder to enjoy the ride and continue the Moniepoint tale. Was there any pressure on LPs to cash in?
There were some pressures from LPs, especially those based in Nigeria who are not familiar with venture capital. Oui Capital was for many of them their first investment into a VC Fund. The majority of Nigerians tend to invest in shorter-term funds because government policies and economic indicators can change so quickly. Some global investors didn’t mind a longer hold period. It’s our responsibility as fund managers, to find a balance that is in the best interest of our LPs. I believe we have done this.
Returning the first fund is extremely rare. What would you distill your success down to?
Good portfolio construction. Even if you invest in a unicorn, your money will not be returned. The most important factors are the amount you invest, your timing, the valuation of entry and your ownership stake.
Before writing a check, it is a good idea to have an idea of what the outcome will be. In our investment memo we projected the company’s valuation at a billion dollars, and the expected returns were mapped out. Portfolio construction is ensuring that the risk is justified if everything goes well.
Venture capital is a decision-making process. You decide whether you want to make riskier bets earlier or invest more later. If you enter at Series D, the majority of growth is already captured. It’s important to create a portfolio that balances risk, time and ownership stake.
We sincerely want the best for our founders. There is a difference between providing support to founders and going above and beyond. Investors can give founders a map, but others will walk alongside them to their destination. When you care about their success you will do whatever it takes.
As an example, rather than just writing a cheque and stepping aside, we helped Monieoint to raise additional funding to purchase out an early investor that opposed the pivot to retailer. I interviewed a senior vice president in my living room, to help them recruit top talent. All of this was not required, but it did make a difference.
An ambitious and hungry team. A strong team can change everything. When we decided to invest for the first time, our maximum cheque size was $150,000. Initially, our plan was to invest $100,000. My partner did additional analysis the night before wire transfer and determined that we should invest the maximum of $150,000. The $50,000 extra we invested that evening is now worth one third of our current returns.
This is the power of having good people. My partner’s choice had a significant impact on our outcome. A strong team will increase your chances of winning. Some people argue that smaller funds can be easier to return. Do you believe that your $4 million fund worked in your favor or was it more due to your investment selection?
Yes, smaller funds have the potential to turn a profit because of their size. Remember that most small funds don’t return despite the fact. I think it’s easy to forget for small fund managers that we’re not in the tech business; we’re in finance. Understanding fund economics is key. You can track these to see if you are on the right path and if not, make course corrections.
Which other startups in your fund, besides Moniepoint have the potential to generate outlier results?
Our portfolio includes several companies that have fantastic returns on investments. Moniepoint, however, is the first to offer liquidity, which is important in many ways. I believe that each company has the potential to generate large returns.
What is your opinion on the timing of exits across your portfolio? Do you think African VCs need to be more aggressive about securing liquidity sooner?
The timing of exits is different for each fund, depending on how you invest at the stage, your fund strategy and whether you have a controlling or minority stake in the companies that you invest in. Our fund only targeted a 1-5 percent stake in the companies that we invested in Oui Capital Fund I, and secondary sales were a big part of our exit strategies.
What’s your playbook to get liquidity as a VC, given the state of Africa’s exit market? Do you believe that more firms should actively sell secondaries?
I have said before that secondaries aren’t necessarily the gold standard of VC exits. VCs are looking forward to exits via full acquisitions or public offerings. I think this is still the main goal of most VCs, especially those who invest post-seed. The goal is to help fund and build companies that we will be able to pass on through M&As, or public markets. Liquidity is better than none.
The second fund you closed was at $12 million. This is well below the $30 million target that you had set. Was this a reflection on investor skepticism or macroeconomic conditions? Or was it a strategic decision to remain lean?
Everything. We also didn’t want the money to be raised for 3 to 5 year as is sometimes seen in Africa. I believe it negatively impacts returns, because you can invest better as a manager when you have a clear idea of how much money you’re working on from the beginning. It helps you build your portfolio and gives you a greater chance of success. We close our funds after 18-24 months, regardless of whether we have reached our target. I consider myself to be a serial fail of some kind. I wanted $5-10 million to start our first fund, and only got $4 million. I aimed for $30 million for our second fund and got $12 million. We could aim for $100m and end up with $30 million.
Failure forward and tripling the size of our fund every time. I think raising money in Africa can be very difficult: lack of local funds, lack of exits, and general investor skepticism. Raising money as a manager of a fund is even more difficult.
Moniepoint CEO highlighted your role as a fund manager beyond capital – advisory, governance, narrative-building. How do you measure that impact?
You can only prove the pudding by eating it. We measure impact by the results and sometimes the tangible feedback of the founders who have received support. We’re proud of his testimony. How has your relationship with LPs changed since you returned Fund I? Has it made raising the third fund easier?
When we start raising again, we’ll know. Our LPs are happy as expected, and we are too.
Will Oui Capital continue to invest in fintech or do you see other sectors with potential similar to Moniepoint?
Fintech is the reason why we have the most valuable tech startups on the continent. We will continue to search for exciting fintechs that we can invest in. But again, success tomorrow will be different from success today. We will continue to look at everything that’s exciting and can deliver results for us and our investor.
Your hint at a third investment fund is intriguing. What will be different? Are you aiming for a larger fund size?
Currently, we’re deploying our second investment fund. Our sole priority is to find the best companies that can give us the same outcome as our first. Even though there are ongoing discussions, we are not thinking too much about Fund III at this time. I’m not certain about the size, but I am sure that we are seed-stage investors. We would likely stay in this stage for the next round of funding so I don’t see us raising a large amount now.
Which is the biggest misconception you have about venture capital in Africa?
A company must be a unicorn in order to be considered successful. What would you do differently if you were to start Oui Capital today?
Overall, I’m pleased with the outcome. I probably should have started a few years earlier.
