Nigerian movie mogul raises $2 million more for local angel investing
When I last saw Jason Njoku it was over a nice glass of wine in a restaurant in San Francisco. The time before that, he was bribing a Nigerian vigilante gang to release me. Such are the two poles of the worlds Njoku inhabits building his Nollywood video site, iROKOtv.
When he was starting iROKO, he went around asking wealthy Nigerian friends for angel investments and "they all basically laughed at me," he says. "They said there was no money in what I was doing." The market has disagreed: In its first year, iROKO was on a $1 million run rate off of YouTube ads, and since then Tiger Global invested $8 million.
The only reason Njoku was able to get the company off the ground to see the validation was that a friend of hism Bastian Gotter, was willing to liquidate some of his savings to bootstrap it. Even raising $5,000 in Nigeria was impossible, Njoku says. And if he'd been able to find it, he would have had to give up 35 percent of his company or more because capital is so scarce.
Now that Njoku has had some success -- at least in terms of getting traction, global press, and major investors -- he wants to help other Nigerian Internet startups prove whether their ideas are great or crazy. He, Gotter, and his wife Mary Remmy-Njoku have started Spark, a Lagos-based company that invests in Nigerian Internet startups.
The trio launched Spark three months ago with a $1 million fund, and this week they announced that they've raised another $2 million, thanks to individual investments from friends in Singapore, London, and Africa. The money will be used to keep fueling nine existing investments, and more in the future.
The company is similar to a Betaworks or Science where the collective does more than just give startups cheap office space. Only the things a Nigerian company needs are different than ones based in New York or LA.
Things like electricity. "If you want an office in Lagos, you have to pay two years rent upfront in Chad," Njoku says. "If you want constant electricity you have to pay for that. One of our biggest expenses is diesel for the generator. It's the size of a 4x4, and costs $25,000 to power a good sized house. We spend $5,00-$7,000 just to fuel that thing."
Some of the more promising bets are hotel-booking sites Hotels.ng and a redBus for Nigeria called bus.com.ng. As those domain names imply, Spark is investing in companies that are focused squarely on the Nigerian market.
Nigeria is one of the largest countries in the world with 170 million people. The average age is 19 years old, and the mobile penetration is 110 million phones. There are 60 million people online now, mostly from mobile. That will increase going forward.
It's large and incredibly neglected. It's not just than an Expedia won't take the time to go around to local hotels without Internet connections to sign them up the way Hotels.ng did. It's also that Nigeria is somewhat of a digital island cut off from most of the online world.
A lot of the world's online goods and services aren't available to Nigerian entrepreneurs and consumers. Because of the stigma of widespread scams, many global Internet companies block Nigerian IPs. They won't bank with Nigerians or even ship packages there.
Njoku experienced this first hand when he tried to operate iROKO on YouTube. Among other frustrations, Google routinely cancelled his keyword orders, because he had a Nigerian IP. Now, the company is operating on a $5 a month subscription model, but it's frequently had to charge customers six months at a time because banks see that the company is based in Nigeria and stop payments. "You can't even get a PayPal account in Nigeria," he says. "It's just very easy for global companies to ignore Nigeria." Even mobile companies didn't focus there until South Africa's MTN proved it was a juicy market.
There are clearly a lot of hackers and scammers in Nigeria, but that's not all there is. Njoku wants to help the real entrepreneurs take back the company's online reputation.
It's certainly an Internet market unlike others, but the strategy is as risky as it is novel. The Internet will certainly transform Nigeria and Sub-Saharan Africa at some point, but Njoku may still be premature. Even the bulk of iROKO's revenues and viewers come from outside Africa, because access to broadband in the country is still so weak.
But here's the thing: Great entrepreneurs don't typically do what makes sense, they do what's needed. "There is never going to be an established tech scene without angel investors," Njoku says. "Angel investing is stupidly high risk in Nigeria. We are trying to de-risk it. We hope if we have some successes, people will be slightly less apprehensive about putting money into the startup scene here."
There's a social mission to his investment as well, given the country's chronic unemployment and young population. "One thing that Nigeria has massively underperformed in is creating jobs for young people," Njoku says. "Half a million people graduate here every year but there are no jobs for them. Telecom, banking, oil and gas have all slowed their growth. The Internet is the one bright spot. It's a young person's game, and it can create a lot of jobs."
Spark has 130 employees, and plans to have 200 by the end of the year. He cites the Samwer brothers' company Rocket coming into the country a little over a year ago. They've hired 1,000 people in Nigeria since then, Njoku says. "There are plusses and negatives to Rocket, but anyone employing young people in Nigeria has to be seen as a good thing."
[Image via iROKO Partners]