Matching deals on the African continent – How We Made It In Africa

We talked to How We Made It In Africa and Chipo Muwowo about matching deals across Africa. Full article below:

Tell me more about Orbitt.

Lanre Oloniniyi (Co-Founder): Will Hunnam, my co-founder, and I come from a background of originating deals across Africa. We worked with investors seeking opportunities across the continent and helped introduce African companies to global investors. As many investment advisors on the continent would know, there are certain challenges to this model of deal origination. After a number of years, we began to ask ourselves a few fundamental questions: “Why is there a structural mismatch in capital allocation across Africa?” “How can we reduce the time and cost of deal origination?” “How can we reduce the friction points within the typical transaction cycle?” It was this line of thinking that led to the idea behind Orbitt and the reason why we think it has value in the African ecosystem. We believe Orbitt can solve many of the challenges faced by global investors seeking investment opportunities in Africa.

Was your previous work with established private equity funds?

LO: It was with UK-based family offices. Prior to that, I worked in finance and mergers and acquisitions in the oil and gas sector. And before that, Will and I managed a portfolio of companies on behalf of a family office that invested capital across Africa, mostly in mining and oil and gas. We came across a lot of friction points in our work and saw the need for a tech solution having sourced a lot of interesting opportunities that didn’t fit the investment mandates of our investors due to geography or sector misalignment. That’s the underlying thesis of why we designed Orbitt and how the platform is already helping to address some of the challenges of originating and doing deals in Africa.

What’s your business model?

LO: As it stands, we originate investment opportunities and receive a transaction fee when the investment is made by the matched investor. But that’s a stop-gap. Longer term, we will be introducing a subscription model.

What is Orbitt’s geographical footprint? Are you just in London or do you have offices in Africa too?

Ahanna Anaba (Transactions Analyst): We’re in London, but because of the nature of what we do as a tech company, we cover Africa and the global markets where our 450-strong investor base are located. We have deals coming in from all over the continent and we have partnerships with strategic financial services intermediaries across Africa’s key business centres. On top of that, we travel back and forth to the continent, while being in touch with our current and prospective users on a day-to-day basis.

LO: And we’re here in London for several reasons. Mainly because a significant number of our platform investors are based here or have representative offices in European cities. London is also one of the most vibrant fintech hubs in the world. That said we are currently exploring setting up offices on the African continent to increase our reach – either in Mauritius or South Africa. The Orbitt value proposition is an African solution and we are one of the only pan-African fintech companies out there. A lot of companies in the African fintech space are in very interesting verticals that are often confined to individual markets or regions. We have users from Cape Town to Cairo, Lagos to Nairobi, and everywhere else in between.

When people sign up to your platform, what can they expect?

AA: There are three different account types on the Orbitt platform. First is the investor; these are typically institutional funds looking for companies to invest in. Second is the intermediary; this includes corporate, legal and other investment services providers. Lastly, there is the fundraiser; a business owner trying to raise funds for his/her own company or a CEO/CFO raising capital for the company they work for.

The platform is not an open marketplace where you can log in and see all the active transactions. We’ve designed it in such a way to prevent investors seeing opportunities until they put up a mandate. Even then, they are only shown deals that match their investment criteria. If an investor puts up a mandate saying they are looking for agriculture deals in South Africa, for example, their mandate will say ‘South Africa, Agri deals’ and the approximate amount of money they are looking to deploy. A matched investment opportunity will appear with high-level information such as the amount of capital the investee is looking to raise and what type of capital they are looking for. If the investor is interested, they will request more information through the platform. Both parties can then start sharing information having already agreed to a standard Orbitt NDA when registering on the platform. This makes the process significantly faster and we’ve managed to make the platform secure and private so that people feel a lot more comfortable with that.

LO: This is one of the other nuances of what we’ve developed in terms of focusing on the African market. Whilst there are quite a lot of other tech platforms facilitating transactions, a lot of them operate in quite an open marketplace manner. We know that this wouldn’t work in Africa because of the high value placed in confidentiality and proprietary deal flows at the moment.

How do you vet the people signing up to the site?

AA: Before we approve our platform users, we talk them through what the platform is, what we actually do, and how we can help. Our aim is not necessarily just volume; we want valuable users. We pride ourselves on being able to put up deals which are ‘investor-ready’. That said, we are approached by the occasional company owner who has a good idea of how to position their capital raise but may require additional services such as a debt guarantee. This is where our relationships with investment intermediaries come in. We refer advisors to company owners to help them package the opportunity into an ‘investor-ready’ format. Subsequently, when the opportunities are ‘investor-ready’, we fully onboard them onto the platform and help them find investors.

Typically, who is signing up to the platform?

AA: At the moment, the majority of our users are intermediaries (45%). Investors account for about 30-35%, and the rest are company owners.

In terms of regions, where are you seeing the most deal action from?

AA: I would say it’s split between West, Southern and East Africa. Country-specific: Our top five countries are Kenya, Mozambique, Zambia, Nigeria and Ghana.

LO: In addition, we’re seeing a lot of activity coming from North Africa with a growing number of interesting deals in Morocco and a strong user-pool in Tunisia and Egypt. In the SADC region, we have some good agriculture, hospitality and logistics opportunities in Mozambique and Zambia. We also have a lot of new users interested in the technology, mostly coming out of East Africa where the investment community are tech-friendly and don’t feel the need to meet before they share information and deals. For us, this attitude is very important in terms of our overall vision of digitising the African investment ecosystem. We’re constantly on the lookout for partners and collaborators to achieve this.

You’re obviously capturing quite a lot of data which provides opportunities for new ventures. Do you have any idea what direction you might take?

LO: Invariably, we are always re-imagining how Orbitt will morph into a data resource. But predictive data and analytics will be the standout value-add in the future. A high percentage of the reports produced in the African investment ecosystem focus on historical information – they’re backward looking. But because of the nature of what we’re capturing – key data on investment demand, supply and interaction – we will be able to predict certain indicators such as investor demand per region, specific country transaction volume, and what type of capital will grow fastest.

How are you measuring the success of Orbitt?

LO: Due to the nature of being a multi-sided platform and a first-mover in our space, proof of concept is very important. Having validated this through successfully matching deals, we’re now looking at two core KPIs: User growth, which continues to be over 15% month-on-month, and investor engagement, which is currently hovering around the 85% mark. This means that the quality of deals is high and over four of every five opportunities we show our investors elicit interest.

What impact do you feel Orbitt will have on the industry as a whole?

LO: We believe in the efficient capital allocation and that matching companies to the right type of growth capital builds resilient economies which, in turn, creates employment. A robust business environment is crucial for the African continent and that’s how we see our contribution to Africa’s economic development. On an investor level, our goal is to transform the way transactions take place. We don’t want to replace traditional deal-making but rather enhance the whole investment process to increase FDI into African companies and drive economic growth across the continent.

Obviously, there are many exciting opportunities ahead, but are there specific threats to the business that you can already foresee?

LO: I think the obvious threats will be the ‘grown-up’ platforms out there coming to the African market. But like every threat, we see it more as an opportunity. Instead of starting from scratch like them, it’ll be a potential value-add for us.

Via How We Made It In Africa