Angel Group Case Study: Zambian Business Angels Network
April 2021
Country: Zambia
Date founded: February 2021
Number of members: 8
Number of investments: 1
Number of deals being assessed: 1
Website: www.zban.org.zm
The Founders
Elias Chipimo and Margaret (Maggie) Shih co-founded MentorMe, an organisation offering support services to early-stage entrepreneurs, in 2019, having met while Maggie was working in programme development for the Gooddler Foundation in Zambia.
Maggie is based in Los Angeles in the United States where she is also an Adjunct Professor of Computer Science at Loyola Marymount University. She has more than 15 years’ of product development experience, including being part of several startups that were acquired.
With a background in law, banking, civic mobilisation and politics, Zambian-based Elias is multi-skilled and highly networked, and brings these attributes to ZBAN. As a former presidential candidate and one of the founders of the country’s stock exchange, his gravitas is invaluable.
About the Group
The initial stirrings of an angel group idea emerged from conversations Maggie and Elias were having with dynamic Lusaka-based entrepreneur hub, BongoHive, in 2020, as part of their year-long stakeholder engagement in developing MentorMe. In talking through the constraints on the local entrepreneurial ecosystem, entrepreneurs’ access to early stage, high-risk capital consistency emerged as an issue. BongoHive already knew there was interest in an angel fund from one of their funders, a UK-funded private sector development organisation Prospero, but the idea didn’t have a champion. Maggie and Elias put themselves forward to take on the role.
MentorMe put in a proposal to Prospero as the private drivers of the new angel network, together with the African Business Angels Network (ABAN) and BongoHive as implementation partners. “MentorMe was set up to support SMEs, and this fitted right into that plan,” says Elias. It was around this time that Maggie and Elias heard of the launch of the African Angel Academy, applied to join the cohort and were accepted. AAA became an integral part of the capacity-building to set up the new group, Zambia Business Angels Network (ZBAN). After completing the programme MentorMe won funding from Prospero, giving ZBAN resources to build out assets and start operations.
Although there have been informal joint deals done by angels in Zambia, ZBAN will be the first formalised angel group in the country. Deciding on the legal structure for the network has taken time and consultation, but since their intention is to be a conduit for investment, not a profit-taking company, they have decided to incorporate as a company limited by guarantee (NPO), called ZBAN Limited.
ZBAN will focus its investments on Zambian businesses and with an eye for impact. One of the stakeholders MentorMe consulted in the lead-up to establishing ZBAN was the National Advisory Board for Impact Investment, also supported by Prospero, which confirmed that early-stage capital was a gap in the impact investing ecosystem, and ZBAN hopes to contribute to strengthening this ecosystem.
Initial interest in joining the group was robust, with 22 people applying. These applicants were offered two angel investing masterclasses by Tomi Davies, president of ABAN, as part of the Prospero-funded activities. As is common with new angel groups, not all interested parties followed through and ZBAN currently has eight committed members. (These members will not be required to pay fees in the first year, though these will be a source of revenue later. The amount they will contribute to deals is still under negotiation.)
“The challenge really hasn’t been in recruiting people,” admits Elias, “but in sustaining the interest of those founders who had committed to being a part of this.” Ensuring that the skills of the group cover all the right areas and getting all their expectations aligned are also aspects that need to be worked on. Maggie notes that she knows people who are interested in funding African startups in the US and who would value a trusted partner like ZBAN, but that the barriers to managing these investments are currently too complex to tackle.
As the group grows, ZBAN will appoint a co-ordinator to manage communications, deal flow and activities. This important role will be funded by Prospero initially, and later covered by membership fees.
Deal-flow and Management
“We were a little naive when we committed to Prospero that we would have five investments within a year!” says Elias. With input from Tomi Davies, the AAA course and their AAA mentor, Christian Wig, ZBAN managed to re-negotiate this target to be in line with the realities of sourcing suitable companies in Zambia.
In these first few months the pipeline for consideration has come mainly through Elias’s own connections in the business world. ZBAN partner BongoHive are currently setting up ZBAN’s website (with Prospero funding) and it’s anticipated that this channel will draw more leads in future.
For the time being the group’s pipeline is managed manually. “There are digital platforms for managing deals that our mentor, Christian, recommended, but the truth is we’re just not there,” says Elias, “They’re not necessarily appropriate for our context.”
ZBAN’s current pipeline has produced one investment, into a vegan food products company. “It doesn’t meet the criteria of being tech-based with a disruptive business model – what I call ‘the usual suspects’,” jokes Elias. “But three of our founder angels were already involved in this business, so it works as a pilot investment.”
In addition, two of the founding angels have discovered a mutual business interest and gone into a deal together. ZBAN sees these inter-angel relationships as an added benefit of the network that it would like to develop.
ZBAN has not finally decided what mechanisms they will use to invest, but Maggie and Elias note that the most common way that Zambian businesses raise finance is through approaching friends who have liquidity for loans. They then often do a profit share on business won. “I’m leaning towards working with the grain,” says Elias, which means that ZBAN will likely look at debt or royalty financing, rather than equity deals.
Moving forward
ZBAN’s focus over the next year will be on refining their criteria for investment and identifying lead investors in their network. They hope to have made at least five investments in the next two years. ZBAN intends to leverage its investments with ABAN and AfriLabs’ Catalyst Fund, which will match African angel investments into local businesses (up to E10 000).
ZBAN feels it would be valuable to remain connected with a community of African angels that is active as a peer mentorship group. “We’re at the stage where we don’t know what we don’t know, and we’d like to hear what others have tried at each stage that we’re at,” says Maggie. As AAA’s network of alumni grows this is something that the Academy will look to develop.
How African Angel Academy helped
“AAA really helped us to solidify what an angel network looks like – the programme confirmed a lot of the hypotheses we had about angel networks in Africa,” says Maggie. “It helped us determine what we were missing so that we could fill those gaps. It also opened us up to the fact that there are a lot of people across Africa interested in angel investing: while these might not be the super high net-worth individuals we were hoping to source, it was interesting to see those people who are enthusiastic; mostly professionals.”
Christian Wig, a highly experienced consultant and investor based in Norway, was assigned as ZBAN’s mentor by AAA. After sharing international best practice and getting on the same page about the differences between the European and African early-stage investing ecosystems, Christian was very useful in helping set expectations for how the group would develop, giving detailed feedback and suggestions on the roadmap ZBAN presented to him.
Over the eight months of his mentorship, ZBAN “took major steps forward”, says Christian, going from an idea to a funded group with a roadmap. The strengths of this group, he says, are their “drive and passion, legal competence, and a certain access to dealflow”.