Microtraction: Trusting the entrepreneur, the idea and the market in good faith and helping raise $10m in follow-on

Microtraction, could be called the stepping stone into getting into YCombinator (Silicon Valley-based Startup investor) seed investor base on their track record. Most startups they invested in have been able to get into YC. In this Chat with Dayo Koleowo, the partner, we asked about their thinking when it comes to writing the first checks for entrepreneurs in Nigeria.

Below is the interview;

VentureHunt: What’s the link between YC and Microtraction? Do you hold special classes for your startups to be able to make it through YC?

Dayo Koleowo: Our relationship with YC is pretty informal, we do not have any official relationship. What has really worked for us is that we understand the ethos of YC as well as understand the local market. YC doesn’t have the exposure to the African market because they are not on the ground like us and other micro VCs on the continent. However, because our criteria are similar and we look out for the same things when making investments despite being in different locations, the chances become a little higher for our portfolio companies to get in. 

We do not hold special classes for our startups. What we simply do is go through their applications and help them review it. We also connect them to YC founders who can help them prepare for the video interview if they do get to that stage.

VH:What’s the success rate of the startup’s post-pre-seed in raising additional funds?

DK: 100%. All our companies have raised follow-on funding after our initial investment. They have all raised a sum total of about $10m.

VH: Market dynamics; based on recent investments, MT has invested a lot in Fintech, how much attention is given to other sectors? Do you actively pursue deal flows from other sectors?

DK: It is important to note that we are sector agnostic despite the investments in a couple of fintech startups. One of the most important things for us is the quality of the founders and these founders have generally focused on providing fintech solutions. In general, from an overall economic development perspective, regions like West Africa, and some other parts of Africa are still developing their capital market. Some of the basic and of course important problems such as consumer-level payments, credit, etc. are still being solved for. 

The flow of money is very critical to the economic development of the continent. So what tends to happen is that founders and companies decide to solve a problem but find out that their scalability is linked to the flow of money. When financial problems are solved it then becomes the foundation for other things to be built on top of. Classic example – imagine Nigeria without Paystack & Flutterwave, some companies will never have been started.

In summary, the same attention is given to all sectors. We will support and back founders who are solving the biggest challenges on the continent, regardless of the sector.

VH: Your portfolio has proven true to your mantra of a solid technical co-founder as part of the founding team; how flexible are you these days if the idea is awesome but the founders are not technical, do you invest still and ask them to figure out the technical bit?

DK: It is very difficult to build something without some level of expertise. We are in the business of tech. Any team building a tech business or tech-enabled business has to have some level of technical expertise. It is not just about what our criteria is, it is also about ensuring you don’t outsource your tech development. As a previous founder, I understand how expensive and time consuming it is to outsource your tech development. 

So for us, having 2 – 3 people in the team with a technical founder is always a winning combo. If we come across a great idea with no technical founder, we will only invest if the non-technical founder is willing to have a co-founder down the line. There are exceptions but we like to stick to our mantra.

VH: We have gone through your portfolio, you currently have like 9 startups, are there any others you want to share?

DK: None at the moment.

VH: Logistic is going haywire across the market, what your view and is it something you are looking at?

DK: We are always looking at different sectors. The logistics/transportation industry is a very interesting one and similar to the way fintech is being approached. Moving people or goods around is still difficult and if solved for it will open up interesting ideas that founders can build on top of that. Definitely a space we are keeping an eye on.

VH: There seem to be lower than average activities on the seed side in the country, what’s your view around this?

DK: There will not be enough seed activity if the pre-seed activity is not vibrant. We need more folks to bet on very early-stage startups for the seed activity to pick up. After all, it is the pre-seed startups that stand a chance to become seed startups. That is why we are focused on this very important stage of the venture chain. 

VH: What are your expectations generally about the Nigerian and Africa tech ecosystem?

DK: My expectation is to see a vibrant and successful Nigerian and African tech ecosystem where problems are being solved and the economic development is rapidly growing. This can only be achieved through the stakeholders – entrepreneurs, founders, investors, service providers, etc. We have to work together, educate each other, and build an ecosystem that will outlast us. 

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