Navigating the VC Landscape: Insights from the AWS Startups Women’s Demo Day in Lagos
The AWS Startups Women’s Demo Day in Lagos, organized in collaboration with Ajim Capital, served as a platform for female founders and investors to discuss the current challenges in the venture capital (VC) landscape. The event highlighted the stark contrast between last year’s fundraising successes and the current climate, which has become increasingly difficult for female entrepreneurs.
A Shift in the Funding Narrative
Chioma Okotcha, the chief operations officer at fintech startup PayHippo, poignantly captured the mood of the event. Reflecting on her experiences, she noted, “It used to be all success stories last year.” This year, however, the narrative has shifted dramatically. Investor appetite has diminished, and the fundraising journey has become more arduous for many founders, particularly women.
During a fireside chat moderated by Eunice Ajim, founder of Ajim Capital, Okotcha was joined by fellow entrepreneurs Damilola Olokesusi of Shuttlers and Omoyeni Olulana of Flex Finance. Together, they shared their experiences of navigating the challenging funding atmosphere, emphasizing the need for resilience in the face of adversity.
The Tough Road to Fundraising
Olokesusi, who successfully raised $1.6 million in 2021 and followed up with $4 million this year, expressed her surprise at the difficulties encountered during her latest fundraising round. “I didn’t think it would be hard to raise money again, but our last raise this year was the toughest,” she admitted. This sentiment resonates with many founders who have found the current year to be the slowest for deals since the pandemic, both in volume and amount.
The global economic downturn has had a significant impact on investor behavior, particularly towards female founders, who historically receive less than 2% of total investment in Africa. This statistic underscores the precarious position of women in the startup ecosystem, making events like the AWS Startups Women’s Demo Day all the more crucial for fostering dialogue and support.
Strategies for Overcoming Challenges
Olulana shared her experience of pitching to approximately 2,000 investors to secure funding for Flex Finance. She emphasized the importance of resilience, advising fellow founders to “isolate the no’s” to avoid discouragement. “Those can be very disempowering, especially when you say it’s only happening because you are a woman,” she cautioned. Instead, she encouraged founders to cast a wide net and reach out to as many potential investors as possible.
Oyin Solebo, managing director of the Techstars accelerator in Lagos, added another layer to the discussion by noting that deals are taking longer to close. Investors are now asking tougher questions, such as whether startups are experiencing unmanageable demand or if their revenue is consistently increasing. This shift in investor expectations reflects a broader trend where growth-stage startups are facing increased scrutiny, leading to a more cautious investment environment.
The Investor Perspective
The challenges faced by founders are mirrored by the pressures on investors. Egunjobi, a representative from a VC firm currently raising its second fund, highlighted the myth that money flows easily to investors. “Investors, like founders, are also being extremely careful with money as they need to return profit back to their investors,” she explained. This careful approach is essential for securing follow-on funding and maintaining investor confidence.
Egunjobi also pointed out the need for more local investments in the VC landscape. With 77% of capital coming from foreign investors, she argued that there is a pressing need for indigenous funds to gain traction. While there are numerous angel networks across the continent, the current level of local investment remains insufficient to support the growing number of startups.
Preparing for Uncertain Times
As the funding landscape becomes increasingly unpredictable, some founders are contemplating a future without further VC investments. Olokesusi, who has a history of bootstrapping, emphasized the importance of focusing on customer relationships. “My customers are my best friends, not investors,” she stated, highlighting that a loyal customer base can provide the financial stability needed to sustain operations.
Okotcha echoed this sentiment, advising founders to maintain a tight grip on their operating costs, regardless of their stage in the startup journey. “Pay attention to the cost of payroll, technology, rent, etc. This can help you stretch your resources for longer,” she recommended. Despite the challenges, she revealed that PayHippo plans to raise funds again, albeit with a different perspective on the process.
The AWS Startups Women’s Demo Day in Lagos not only provided a platform for sharing experiences but also fostered a sense of community among female founders navigating the complexities of the VC landscape. As they continue to face challenges, the insights shared during the event will undoubtedly resonate within the broader startup ecosystem, inspiring resilience and innovation among women entrepreneurs.