Ownership And Control in Nigeria: Before You Sign That Investment Document

Ownership And Control in Nigeria: Before You Sign That Investment Document

These companies have one thing in common: investor-founder relationship is sub-optimal, BusinessDay notes.

The situation is also extended to the health sector. PathCare, founded by Richard Ajayi, a renowned Lagos-based medical doctor, was acquired by Europe’s largest lab operator Synlab in 2017. Synlab, owned by private equity firm Cinven, did not publicly announce how much it invested in PathCare, which, as of that time, was Nigeria’s largest private pathology laboratory company.

However, Ajayi had said the company bought back a 26 percent stake held by PathCare South Africa, its former parent company, year before the Synlab deal, according to a Reuters’ report.

I help founders with clarity and visibility to  navigate the challenging waters of venture capital and private equity worlds. Under our private client services, we provide that leadership.  Founders, you need experienced and sharp minds, with a core entrepreneurial antennae even though they may not be heavyweights in the home soils of moneymen.

As you sell part of your company and the investor brings the funds, unless there is  a clear understanding on the values derivable, bad things will happen. Yes, after the press statements and media interviews, companies have to be built. So, as you rush to declare a new fundraise, remember that by next quarter, you MUST answer what you did with that money. If not, there would be trouble.

While it is easy to think the investor is a bad guy, always be reminded that the investor is just doing his or her work. Yes, most times, they raise money from others to invest in companies. In other words, investors are also companies who have to answer to their  limited partners.

What is it the venture capitalist or the private equity firm bringing to that business? Do you know that investor very well? Have you done your due diligence? Note this: some of the draconian terms and clauses in that document is because the investor is trying everything possible to protect his or her  “money”. That does not make him or her bad. It is your responsibility to explain and provide assurances so that both can attain a better equilibrium with lesser stress.

As this happens, I call on the Federal Government of Nigeria to develop a mechanism to ensure that close to N10 trillion we have in pension funds can be used to support growing startups in Nigeria. Yes, if we commit just 5% for credible growth startups in Nigeria, the pressure to raise foreign funds, at all costs, will go since there would be an alternative capital within Nigeria.

Sure, we need to make sure we do not play the lottery with pension funds. Yet, Nigeria must work out a way to change the funding climate.

At Tekedia Mini-MBA, we are preparing project champions and founders on ways to avoid founder-investor frictions by nurturing them on the legal mechanisms of markets.

Next week in Tekedia Mini-MBA, we will be looking at Business & Commercial Law, and Contracting, Negotiation and IP by two legal minds: Chukwuemeka Mbah (LLB, BL, LLM) and  Jeff Chineme Maduka (LLB, BL, LLM). After the courses, they will return for Tekedia Live. I invite you to pass through Tekedia Mini-MBA as you build. Early registration has started for the next edition.

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One thought on “Ownership And Control in Nigeria: Before You Sign That Investment Document

  1. One of the ways we can reduce unemployment in the land is by embedding professionals in various layers of our economic activities. There’s dearth of knowledge in the start-up space, agriculture/food processing space, manufacturing space; just about everything here.

    People don’t really know what we expect them to know, so the groping in the dark continues; we need to change that narrative. No need to leave too many important things to chance, we can gradually learn to institutionalise commerce here, in order to reduce losses.

    That of investing small portion of pension fund in promising start-ups has been debated before. That fear of losing is what is crippling our economic advancement. With good data – taking cognisance of retirement and disengagement rate/pattern, we can model the the portion of the pension funds that won’t be accessed by their contributors in another decade, from there we can fund start-ups and give them velocity.

    I do think that imagination and creativity have become stale in the land, and it’s very pathetic.

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