APRIL 17

Question H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

IE Business School Essay

Candidate Moyosore Babalola

Program Global MBA

2PageApril 2017

Table of Contents

Introduction• Africa – the last frontier for venture capitalists…• Nigeria – half a yellow sun…

Greatest Challenges Facing Venture Capital Sector in Nigeria• Nigeria puts the “R” in “Risk Capital”…• Cracking the tough nut…

My Role in the Medium Term• The pieces to the puzzle…• The challenges with deal sourcing…• My potential solution to the challenges…• Why I am qualified to implement the solution…

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

3PageApril 2017

GDP of USD481.1 billionNigeria

GDP of USD330.8 billionSouth Africa

1IntroductionAfrica – the last frontier for venture capitalists…

Emerging opportunities in Africa are attracting interest from foreign investors looking to capitalize on the continent’s growth prospects. One of the countries with significant investment opportunities is Nigeria

What makes Africa the new frontier

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

1Average GDP growth rate above 5%

over the last five years

2Natural

resources and large

undeveloped land area

3Population of

over 1.1 billion people with ~40% under

the age of 17

4Growing

middle class with improved

disposable income

5Over USD30

billion inflow of Foreign Direct

Investment 6Improved political

stability and democratic governance

7Improved

communication and transport infrastructure

8Improved regulatory

environment

Africa’s Economic Power Houses

GDP of USD314.6 billionEgypt

Note: Gross Domestic Product (GDP) figures are as at 2015. Source: World Bank Data Bank

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Average GDP Growth Rate of 6% over the last five years

GDP per capita of

US$10,093

Federal Government Debt(% of GDP)

Interest rate spread

Population size of 160 million. 1 in 2 of which are between the age of 15 and 65 years

Life expectancy 52.8 years

Labour force 55.8 million people

Market capitalization US$53.8 Billion

Over 100 million units of equity securities traded every day

Foreign reserves of US$30 billion

Foreign Direct Investment inflows US$3.1 billion

CO2 Emissions

95,650 kt

Arable Land (% of land area)

Internet Users 47.4 per 100

people

Electric power consumption 141.9 kWh per capita

Poverty gap at $3.10 per day

1IntroductionNigeria – half a yellow sun…

Nigeria ranks high in key economic, financial, environmental and social indicators. However, poverty and infrastructural indicators show significant areas for improvement

Nigeria

Indicator Ranking in Africa

GDP size 1st

Population Size

1st

Foreign Direct Investment

6th

Ease of Doing Business

37th

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

37.3%

10.4%18.9%

29.3%

Deposit rate

Spread Lending Rate

10.5%

Source: World Bank, Central Bank of Nigeria and Nigerian Stock Exchange

Source: World Bank

Legend

Economic Indicators

Social Indicators

Financial Indicators

Environmental indicators

Infrastructure indicators

Poverty indicators

5PageApril 2017

Tedious Deal Sourcing Process

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

• Although venture capital firms receive numerous unsolicited requests for investments, many are not suitable to the firm’s investment objective

• Venture capital firms in developed markets utilize multiple mediums, including social media, to find deals. However in Nigeria, venture capital firms rely heavily on their investment team’s network to find suitable deals

Limited Funding from Local Limited Partners

• More than 70% of limited partners are American or European investors. These investors invest either in US Dollar or Euros and expect to receive returns on investment in the same currency

• Investing in Naira creates the possibility of losing returns due to changes in foreign exchange

NINVESTMENT CRITERIA

investment criteria one

investment criteria two

investment criteria three

investment criteria four

x x

x

2Greatest Challenges Facing Venture Capital Sector in NigeriaNigeria puts the “R” in ”Risk Capital”…

Portfolio Company

Private Equity Firm

Receives funds in USD

Receives returns in Naira

Makes returns to limited partners in USD

Invests in Naira

Weak Execution Capacity of Portfolio Company

• Many management teams in portfolio companies do not have the full skill set required to successfully execute and grow a business idea

• As a result, venture capital firms have to nurture portfolio companies which involves significant allocation of professional resources

Limited Viable Exit Options

• Typical exit options are a sale through an Initial Public Offering, a sale to private investors and a management buy-out

• These options involve significant costs or have a low probability of leading to reasonable exit valuation

Common risks involving venture capital Investment opportunities are magnified by the cost of doing business in Nigeria

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A number of solutions to the challenges are being implemented. These solutions can be improved to achieve greater results and resolve the problems at hand

2Greatest Challenges Facing Venture Capital Sector in NigeriaCracking the tough nut…

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

Make it Easier to Source Deals by

Minimal information required for venture capital firm’s investment

screening stage should be provided

Encourage investment by local institutional investors

by

Pensions Fund Administrators (PFAs) may become active

investors if regulators could insure investments to minimize

the PFAs’ risks

Engage individual investors by

Existing structures such as mutual funds or crowd funding, can be modified and used to create a

vehicle for individuals to invest in new ventures

Improve execution capacity By

Non-core functions such as accounting, finance and human resources can be outsourced to

professionals to streamline management team’s focus

Curating information on investment opportunities

Implementing additional policies to

minimize risk exposure

Creating investment structures within

their reach

N

Outsourcing day-to-day operating

functions

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My Skills and Experience

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

3My Role in the Medium TermThe pieces to the puzzle…

The Challenge I Plan to Overcome How I Plan to Solve it

My role in the medium term will involve providing a viable solution to the problem of efficient deal sourcing. My solution is in form of a curation website – Argo, that is being developed. My ability to successfully implement the solution will involve applying my business skills

and experience.

Efficient Deal Sourcing

Deploy Argo – a curation site

Skill Set/ Qualifications

Strength

Investment Banking

Consulting

Bsc Degree

MBA Degree

8PageApril 2017H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

3My Role in the Medium TermThe challenges with deal sourcing…

Tedious Deal Sourcing Process

What makes deal sourcing tedious is the amount of time and resources required to find suitable deals given the preset investment criteria, the limited access to information on private companies, and the process of filtering through unsolicited opportunities

1. Challenge for small teams with a limited network• The quality of deals venture capitalists find depends on their networking skills and

experience in the industry• An established team with a wide network has a clear advantage over less a

established team

2. Limited information on opportunities• Most venture capital opportunities are private. As a result, there is limited

information available for venture capitalists to assess the opportunity before committing resources

3. Evaluation Process• Filtering through a pool of opportunities requires a significant amount of time from

the investment team to narrow down to the deals that fit the pre-defined investment criteria

9PageApril 2017

3My Role in the Medium TermMy potential solution to the challenges…

My first contribution to solving the challenges of venture capitalist in Nigeria is to deploy Argo – a web-based deal sourcing platform. The platform will help bridge the gap between investors and entrepreneurs

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

• The platform will have user generated content and logically predicted content• The user generated content pages are currently being developed as shown below. Users will be investors (i.e. venture capital and private

equity investors) and entrepreneurs• Subsequently, the logically predicted content page will be developed to identify emerging opportunities using data analytical tools

10PageApril 2017

Profile• Over six years full-time

investment banking and corporate finance experience in Nigeria

• Supervised teams of up to ten (10) analysts and associates

• Technical skill set includes financial modelling, valuations, M&A advisory, debt and equity capital raising and transaction structuring

• Career objectives include applying soft and technical skills towards closing private equity transactions, successfully complete a rigorous MBA program and the CFA exam

• Background in Economics with minors in Finance

Education and Experience

Leadership Competencies

Oral and Written Communication

3My Role in the Medium TermWhy I am qualified to implement the solution…

I have a strong background in corporate finance with over six years experience in investment banking, consulting and private equity. Completing a rigourous MBA programme will provide the additional management skills that I need to implement the solution

H. What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

• Obtained a Bsc degree in Economics

• Elective courses in Corporate Finance, Financial Management and International Finance

• Developed a financial model for a Pension Fund Administrator (PFA) and advised the parent company on divesting its stake in the PFA

• Coordinated the buyer’s due diligence process on the proposed merger between Sterling Bank of Nigeria and First Rand Bank of South Africa

• Completed the CFA Level I Exam

• Led the establishment of a commercial paper desk in CardinalStone Partners. The desk issue over N800 million (USD5.3 million) in short-term debt loans to SMEs

• Advised Asset and Resource Management Company on its Euros7million acquisition of Mixta Africa

2008

2011

2011

2011

2012

2015

• Successfully complete an MBA program

• Complete an elective course in Enterpreneurship and basic software programming

2019

Business CompetenciesFinancial modelling

Business valuation

Due diligence

Deal Sourcing

Debt and Equity financing

Deal Structuring

Personal Competencies

Problem Solving

Result Oriented

Decisive

Supervising Others

Positive Mindset

Focused

Open-minded

InnovativeInsightful

Passionate Confident