An Investor’s Perspective on Optimising Capital Through Crisis with Eghosa Omoigui
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:
- How founders should approach fundraising in this down market
- Tips and best practices for managing and optimising capital
- Working with your current investors and your board to get through the crisis
- Lessons learned from the ’08 financial crisis and how they can be applied now
- 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
- 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.