Seven24 needs to construct a pipeline of enterprise scouts for Africa

For the reason that capital rush of the zero-interest price period of the early 2020s, which noticed buyers improve their urge for food for riskier bets,  Africa’s enterprise capital trade has slowly solved its expertise drawback. In the present day, native buyers account for almost 40% of the whole funding that African startups obtain yearly. 

A few of this progress has been pushed by the rise of enterprise capital-focused coaching programmes corresponding to Dream VC, Included VC, and Immerse VC, which have helped professionalise the trade by instructing new VC staff find out how to function as enterprise capitalists and, in some instances, assist individuals safe jobs with VC corporations. 

However whereas these programmes have centered on VC employment as a complete, none have been devoted to enterprise scouting, an entry level that may be part-time, decentralised and assist entice extra overseas buyers to the continent. 

Benjamin Udokwu, a former founder and advisor, is attempting to repair that with Seven24 Ventures, a program designed to show Africans find out how to be enterprise scouts. Enterprise scouting is the method of discovering and evaluating promising early-stage startups on behalf of a enterprise capital agency (or angel syndicate) earlier than these startups are extensively identified or formally fundraising. 

Udokwu grew to become a scout himself after Gopaxy, his retail tech startup, failed in 2019 on account of an absence of capital. “I even joined Founder Institute’s very first cohort in Lagos to check the thought higher, nevertheless it nonetheless didn’t pan out,” he stated. 

That have led him to co-found Climatr, an environmental and sustainability consultancy, and finally uncover the access-to-capital challenges confronted by different early-stage founders between 2020 and 2021. Udokwu’s scouting started with casual conversations on LinkedIn and developed right into a handbook strategy of discovering VCs and cold-messaging them about offers. 

For this week’s Ask an Investor, I spoke to Udokwu about his motivation for beginning Seven24 Ventures, how the scout academy addresses access-to-capital challenges confronted by underrepresented founders, the traits of an ideal scout, and customary misconceptions about deal sourcing.

This interview has been edited for size and readability.

Why did you begin Seven24? What hole did you see that you simply had been attempting to fill?

Again in 2019, there weren’t many individuals into scouting. Again then, it was like 4 individuals doing scouting throughout Africa, even together with North Africa. Scouting wasn’t a mainstream factor.

It appeared like we had been gatekeepers, and naturally, that got here with sure privileges. However I’d obtain calls recurrently asking for recommendation on find out how to enter enterprise scouting. 

I believed, ‘Why hoard the information?’

The ecosystem is rising. 2019 isn’t 2026. The amount of startups launched every single day, each month, is very large. 4 individuals can’t cowl Nigeria, not to mention West Africa or sub-Saharan Africa. The market is big. It made sense to disseminate the experience and expertise we’d constructed, usher in passionate individuals, and move the baton—to allow them to do greater than we did in serving to underrepresented founders get visibility, entry to capital, and funding to develop their companies.

How are scouts usually compensated?

There are totally different fashions. The mannequin I began with, and nonetheless use, doesn’t cost upfront. A founder doesn’t pay me to start scouting.

As an alternative, we agree that if any introduction I make results in an funding, I take 5% of that particular test. For instance, if a startup is elevating $500k and I carry an investor who places in $100k, I take 5% of that $100k—that’s $5,000. I’m not taking 5% of your entire spherical—simply the portion I sourced.

Some scouts or companies cost upfront—$2,000, $5,000, or generally $10,000. I don’t like that mannequin as a result of as soon as you’re taking cash upfront, you’re beneath stress to “ship” an funding despite the fact that you don’t management the ultimate choice. If not one of the VCs make investments, it may well injury your fame.

My method protects fame: no upfront price. I get you entry. If it ends in funding, you pay. I’ve personally onboarded and launched over 150 startups to VCs by way of my community.

What are you optimising for with Seven24?

Two issues: extra offers and higher offers.

Extra offers within the sense that VCs can have a extra strong pipeline to guage earlier than concluding whether or not there’s high quality within the ecosystem. And higher offers, as a result of the difficulty is usually not deal shortage—it’s visibility to nice offers.

I spoke with a VC agency final 12 months. Their plan was to spend money on, say, 10 offers, however they ended up doing 4 as a result of they felt they didn’t have entry to high quality alternatives. My conviction is: the offers exist. Many founders are constructing superb issues, and plenty of outstanding VC corporations don’t find out about them. They go for the standard suspects—people who find themselves already seen on main platforms—however many underrepresented startups aren’t seen.

What we’re optimising for is entry to high quality, underrepresented offers. If we practice 10–15 high quality scouts throughout markets—say South Africa for instance—they will plug into native ecosystems and highlight founders that may in any other case be neglected. VC corporations profit from a stronger pipeline and usually tend to meet their annual funding targets. It’s a win-win: extra founders get funded, and VCs have a greater, extra strong deal pipeline.

What makes an ideal Seven24 scout? 

First is market curiosity. Nice scouts are endlessly interested by industries, tendencies, and market behaviour inside their ecosystems. Curiosity helps you notice early alerts that different individuals miss. It’s best to have the ability to take a look at historic information and present tendencies and perceive the place the market is tilting so you may place your self to supply the most effective offers.

Second is networking and relationship constructing. Scouts thrive on belief. Sturdy relationships with founders, operators, and buyers create a gentle pipeline of credible alternatives. On the VC facet, you want relationships with the fitting individuals—GPs when potential, but additionally analysts and associates who assessment offers. On the founder facet, you want belief and credibility, as a result of founders who belief you’ll refer you to different robust founders.

Third is analytical considering. Scouts have to shortly filter startups and distinguish actual traction from noise. Sturdy evaluation sharpens judgement and reduces wasted time. An awesome scout can assessment a number of decks and precisely determine which offers are really investable, however that takes years of labor.

Fourth is storytelling and communication. Scouts are storytellers. It’s not simply sharing pitch decks; it’s speaking a startup’s story so clearly and compellingly that buyers lean in and wish to take the decision.

Fifth is cultural and native context consciousness. Past numbers, scouts should perceive native nuances—regulatory shifts, sector dynamics, cultural realities—and translate these into helpful context for buyers. Traders outdoors the market usually don’t have that context, and the scout’s job is to cut back blind spots and assist them perceive what’s actually occurring on the bottom.

What a part of scouting may be taught by Seven24, and what half can’t?

The teachable elements embody networking fundamentals—the place to supply offers: conferences, personal mixers, demo days, pitch classes—and the mechanics of diligence: find out how to consider a startup, run due diligence, and write an funding memo.

What can’t actually be taught is judgement—the power to make persistently good calls about what’s really investable. Even VCs miss this on a regular basis. However scouts sit in a privileged place: you assessment plenty of offers, get actual suggestions from buyers, and, over time, you refine your judgement.

Stroll me by way of your entire scout workflow. How does a lead turn out to be an introduction after which a chance?

Once I obtain a pitch deck, I assessment a couple of key issues. First: founder background—I wish to know you’re the fitting particular person to construct what you’re constructing. Second: how novel the answer is—whether or not it’s really progressive or simply copy-and-paste. Third: traction—numbers assist inform the story. Fourth: valuation and lift measurement—as a result of unrealistic valuations received’t fly with most VC corporations.

If the deck seems to be robust, I introduce the startup by electronic mail. I write a brief blurb, connect the deck, and ship it to my contact inside the VC agency. Normally, inside a couple of days to per week, they reply with curiosity or a move.

In the event that they’re , I facilitate a direct introduction between the founder and the VC contact, after which I step again. I don’t work for the startup or the VC; my function turns into “on the sidelines”—serving to guarantee each side are responsive, data is shared correctly, and the method strikes ahead easily.

Typically buyers ask for extra context concerning the founder past the deck. The place I can, I present that context, particularly what isn’t apparent from public data. Because the dialog progresses, my job turns into eradicating roadblocks. I’ve templates— easy settlement for future fairness (SAFE) notes, convertible notes—and supplies that assist founders put together their information rooms correctly. I’ve seen buyers stroll away as a result of a founder wasn’t ready or didn’t have key documentation prepared. So I assist founders get investor-ready.

I additionally take a look at phrases from the founder’s facet. I’m extra founder-aligned; I would like founders to be ok with the deal. If one thing feels off, and if my relationship with the VC permits it, I might help negotiate or not less than flag points early. As soon as the test is minimize, the funds are wired to the startup, and primarily based on our settlement, I’m remunerated inside 5 enterprise days.

If Seven24 succeeds, what modifications in African VC?

If we succeed, it means we’ve helped ecosystem enablers—founders, operators, group builders—see that deal alternatives are already round them. They simply want the fitting construction to scout and join founders right into a VC community.

Over the following 5 years, I count on an upward shift within the variety of offers closed yearly. If Africa is doing, say, 500 offers a 12 months, a well-built scout community may doubtlessly double that quantity—or not less than improve it by 30–40%. Which means extra founders accessing capital.

What could be much more significant is seeing new gamers emerge—startups which have been constructing quietly after which out of the blue seem on the radar as a result of scouts are surfacing them. We’re uninterested in seeing the standard suspects elevate spherical after spherical. I wish to see underrepresented founders in rising markets step into the highlight—founders who’ve put within the work however haven’t had visibility.

What are some misconceptions about enterprise scouting?

One false impression is that you simply’ll discover nice offers at any tech convention. Generic conferences—the place everyone seems to be in a single room—hardly ever produce the most effective offers.

In order for you nice offers, go the place high quality founders collect: personal mixers hosted by credible ecosystem enablers who entice robust builders. That you must know who these enablers are and be in these rooms.

One other false impression is ignoring founder networks. When you scout a high-quality founder, they will introduce you to different high-quality founders. Like attracts like. Studying find out how to leverage the networks of robust founders is essential.

A 3rd false impression is that the most effective offers solely come from the “huge 4” ecosystems—Egypt, Nigeria (Lagos), South Africa, and Kenya. Innovation and progress are occurring throughout the board. I’ve scouted robust Francophone startups out of Côte d’Ivoire, Cameroon, and Benin—blue-ocean markets with much less competitors. I’ve additionally scouted robust founders in Uganda. Extra buyers are taking note of Francophone markets now as a result of many see them as the following frontier.