An Investor’s Perspective on Optimising Capital Through Crisis with Eghosa Omoigui

“The funding market has become more demanding of performance, talent, and opportunity.”

COVID-19 is dominating the news and many industries have begun to feel the impact. The crisis continues to have unpredictable effects, and as a result startup founders may struggle to raise capital in the coming months. Endeavor invited Eghosa Omoigui (Founder & Managing General Partner, EchoVC Partners) to host a session on best practices for managing and optimising capital during a global crisis. As a seasoned investor, Eghosa shared practical tips on how entrepreneurs building businesses in Africa can navigate the fundraising landscape and an insider perspective on:

1. How founders should approach fundraising in this down market
2. Tips and best practices for managing and optimising capital
3. Working with your current investors and your board to get through the crisis
4. Lessons learned from the ’08 financial crisis and how they can be applied now
5. Practical tips on modelling your exposure and scenario planning to deal with the effects of the crisis

How are investors thinking about the microenvironment?

• In the past 2 months, the global stock market has experienced an overall drop in activity, but Nigeria has still not been hit by the long-run effects of the crisis.
• The global stock market represents individual stock and asset classes (retirement, pension, etc.). When those markets decline, public confidence declines as a whole.

“Global markets get a cold; emerging markets get pneumonia.”

• This recession has shown the level of debt and loans that many companies and countries take on.
• Nigeria’s debt to GDP ratio is too high, meaning that the government could start to react in different ways to protect the overall balance of the economy.
• African companies have historically been anti-fragile, meaning that they have done well in the midst of constraints.

We are heading into a recession. Does the recession become a depression?

• All industries have been hit: tourism, hospitality, healthcare, retail, manufacturing, etc.
• Everyone is talking about demand, nobody is talking about supply, yet there is evidence of significant disruption in the supply chain.
• “Good companies will close down, great companies will last”.
• Have a key team of advisors who can tell you how to manage your business.

Founders need to ask themselves these questions

Entrepreneurs must re-think how they can go into the market with their best foot forward.

• “How does life adjust going forward?”
• “What am I in business for? Who am I in business with and what are their expectations going forward?”
• “Does this company in its current state represent an outcome that represents my best effort?”
• “How can I tell my story?”

5 Tips for Entrepreneurs

1. Should you be fundraising?

• Assess how much runway you have.
• The funding market has become more demanding of performance, talent, and opportunity.

2. Evaluate your business

• What are you in business for?
• Do your customers still exist? If your customers are challenged financially, your business will feel the impact.
• Will your customers exist in 6 months?

3. Talk to your existing investors.

• Who am I in business with and what are their expectations going forward.

4. Start every day in empathy mode.

• Pause and figure out what you’re going to do.

5. Take data and synthesise it quickly.

• In markets like Nigeria, windows open and close very quickly.

Watch the full video here.