ie business school essay - question h
TRANSCRIPT
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
7PageApril 2017
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