Angel Investing Areas

I’ve been an angel investor for over 10 years. I try to invest in areas where I have have some sort of asymmetric advantage; usually in specific areas where I have knowledge and experience or people who I know well.

Here are some areas that I’m super excited about and actively investing.

Crypto / Web3

I think crypto/Web3 is going to change the way we build and consume products in many different industries across the digital and physical world. It’s going to be a multi-decade long shift and I’m excited about engaging with and supporting the community at all levels (more here).

I’ve been investing in chains and tokens since 2013 (starting with BTC) and played a more active role in DeFi towards the the end of DeFi summer in 2020. I now spend time every day learning about new projects, buying tokens, yield farming and providing liquidity for projects that I plan to support over the long term.

I’ve also started started making equity investments in Web3 companies and I’m particularly excited about companies that are innovating in:

  • Future of finance (DeFi, Emerging markets)
  • Content creation and ownership (NFTs, marketplaces)
  • Gaming (collecting, competing, play-to-earn)
  • Community (DAOs, creators, contributors)

There is still much to learn and much to follow as more innovation happens — this is just a starting point and I’m sure this list will continue to evolve. I’m mostly chain agnostic, but particularly excited by some of the possibilities that are unlocked with faster, cheaper protocols like Solana.

Example companies include Ponto (backed by Polychain and General Catalyst), Mirror (backed by USV and a16z), Topos and Paysail.

Future of Work

I think that the way we work is going to change fundamentally; jobs will be unbunded, people will collaborate digitally (natively), and more creators will be able to monetize their passions. These shifts are being accelerated by Covid-19 and it’s incredible to see all the innovation happening here.

Tools for Work

As more knowledge work becomes distributed, more work will happen in the cloud. I believe we’ll look back in 5 years and be shocked at how inadequate our tools were in 202I. There are three areas of innovation that I think are especially exciting:

  1. Communication & Collaboration: I think the best tools will seamlessly work in person, hybrid & remote as well as synchronously and asynchronously (Slack is a great example). If we reduce the mental load as to “which tool is right for which situation” work will be more fun and productive for us all.
  2. Orchestration Layer: As we use more and more tools to build products together, each of these tools will need to communicate with each other better (using APIs) and we’ll need some common standards to make this happen effectively.
  3. Community: We will need better tools to build genuine deep relationships for organizations (internally and externally) – people desire to find community and their tribes and invest deeply in these communities.

At Automattic, a fully distributed company for 15 years with over 1400 people across 85 countries I helped make P2 which is the internal tool we used to power distributed work at scale and so understand this space as both a user and a builder. I’m also a productivity nerd, tools enthusiast and product manager so love meeting startups innovating to make work better — although incredibly competitive, some new products will be built that we’ll use every day for work.

Example companies include Remotion, Aviyel, Claap, Playbook, and SkillMagic.

Tools to Create

Creators of all kinds, from all over the world are now able to make a living through (side) hustles/projects over traditional employment. There have been great improvements in creator tools (and reduction in cost) and access to large audiences through distribution channels (albeit through mostly closed networks – Twitter, Instagram, YouTube). I worked at Automattic on WordPress for the last few years and 43% of all websites in the world are now made using WordPress, an open source project to help folks create their online presence.

The tools that creators need to power their workflow, improve production quality and engage their audience are going through rapid innovation and improvement. The best creators will also want a more direct relationship with their community and want to capture more of the value they create over paying a large share of this value to these discovery and engagement platforms.

Example companies include Ribbon, Slerp, Contra and Mirror.

Tools for Gamers

I believe that making games is going to be as easy in the future as making a website today. There is a ton of innovation in both the tools both for gamers and game developers and I’m excited to support building this future. I tend not to invest in game studios but look for products that support the growth of the overall gaming industry instead. I spent five years making games at Pocket Gems, where our games reached hundreds of millions of users and it was one of the most fulfilling professional experiences I’ve had to date.

Example companies include Start Playing Games, Metafy and Vungle (sold to Blackstone in 2019).

Emerging Markets

I believe that there will be significant value created in global, and particularly emerging markets over the next decade. The data point to more and more entrepreneurs building businesses in their home countries (even after a tier 1 US education #novisas) versus trying to build their companies in entrepreneurial hubs like Silicon Valley e.g. over 40% of Y Combinator founders are now international, and the vast majority want to build their businesses in their home markets.

Africa

There is great potential for technology to power the growth of Africa – many young people ready to work (median age of 19), increased urban mobilization (45% living in cities by 2025), high smartphone penetration (50% and growing fast) with digital finance access, and increasing capital and talent flows into African technology hubs. I grew up in Kenya, worked in mobile money across Africa and have been an active investor on the continent for 7 years; it is now more than half of my seed investing activity.

I run a fund (with external investors) to support this thesis and have written about it here, if you want to learn more. It’s never been a more exciting time to invest in technology companies in Africa 🙂

Example companies include: Flutterwave, Sokowatch, mPharma, and Shara. Full list of 40+ companies here at https://www.mushaventures.com/africa.

Global (mainly Asia)

I’m also investing more foundational startups all over the world (mostly in Asia) and my general approach is to partner with a local seed fund or angel investor and build a strong relationship with them as both an LP in their fund and co-investor. I have started implementing this approach in Indonesia (Intudo), India (iSeed), and Asia (Iterative) and am learning more about the Pakistani venture ecosystem as well.

I believe that the best SAAS companies in the world can come from anywhere as long as product quality and sales (team with experience in western companies helps) is world class. If these companies are based in countries with cheaper technical talent they can offer products at lower cost and win sales against similar companies who are building in markets like the US. I’m also excited about foundational fintech rails in each market (where local norms and regulation are distinct).

Example companies include: Cashfree, Guidewheel, SalesKen, and Everstage.

Amazing People

As much as I enjoy investing in areas where I have specific understanding or theses that I’m exploring, incredible people are a trump card.

If I know the founders well or someone in my inner circle can vouch for the founders I’ll often invest as long as I believe that the market is big enough. Ultimately, and especially at the earliest stages, people are most important and amazing people are difficult to find.

Examples of companies founder by people I know well because I collaborated with them closely in the past include Heron Data, Rinse, ID.me and many others.


If you’re interested in talking about ideas in these areas please feel free to reach out on my website (https://www.mushaventures.com/contact). I often co-invest with a close group of angels, Village Global (where I’m a Network Leader) and Sequoia Capital (where I’m a Scout).

Democratizing VC Investing in Africa

Most people don’t have access to investment opportunities in either emerging markets or private markets. Access to early-stage investing (venture capital), in particular, requires prohibitively high minimum amounts of capital, and emerging markets investing requires specific knowledge and access. While it would be rational (both for diversification and long term gain) for many investors to have part of their capital allocated to these segments, most investors are over-exposed to both traditional asset classes (public equities/bonds) and their home markets and lose out on the benefits of diversification. This needs to change. 

I strongly believe that there is a tremendous market opportunity in African entrepreneurship and technology over the next decade. I’ve been an active angel investor in Africa for six years (and a global angel investor for ten years). I’ve set up a rolling fund focused on Africa to offer more investors in my extended network access to early stage investing in Africa. 

This new fund is my small contribution towards democratizing access to global, private markets which have long been difficult to access. It has some additional benefits, including over 10x lower minimum commitment amounts and 10x lower management fees, and I am personally one of the largest investors, which is all atypical in the industry. 

Access to private and global investments

Over the last decade, technology has enabled many notable trends towards democratization and decentralization — in publishing (blogging), television (YouTube), and radio (podcasting) to name a few. As platforms and tools continue to evolve, I believe this trend will extend to more industries (including private investing), and I’m excited to contribute towards this movement.

Access to private investments is becoming increasingly relevant and important; public equities are now more concentrated than ever, and actively managed public funds have been replaced by ETFs. This Morgan Stanley report summarizes the increased capital allocations over the last decade towards private investments driven by technology investing — and these investments have historically been impossible to access for all but the very wealthy, or large institutions (pension funds, endowments, etc).

Source: Morgan Stanley

Most individual investors have access to more limited set of assets that they can access and they are therefore excluded. This results in individuals being overexposed to the most liquid, tradable assets (e.g. public equities in the USA). 

In addition, individual investors are typically over concentrated in their home markets (real estate, stocks, etc) relative to their net worth – foreign markets are harder to understand, and can be legally complex. I believe that there will be significant value created in global, and particularly emerging markets over the next decade. The data point to more and more entrepreneurs building businesses in their home countries (even after a tier 1 US education) versus trying to build their companies in entrepreneurial hubs like Silicon Valley and USA. Over 40% of Y Combinator founders are now international, and the vast majority want to build their businesses in their home markets. This trend has been accelerated by Covid 19, and the rise of distributed work which allows for much better labor mobility regardless of physical location. 

Source: Vanguard for public equities 

AngelList (Rolling Funds) have built tools for angels to accept small amounts of capital from external investors, and invest this capital globally, which was previously difficult and expensive previously. My rolling fund was developed to democratize access to investing in private markets (venture capital) in Africa. I will provide further details on this in the next section. 


Investing in VC in Africa

There is significant market potential in Africa – many young people ready to work (median age of 19), increased urban mobilization (45% living in cities by 2025), high smartphone penetration (50% and growing fast) with digital finance access, and increasing capital and talent flows into African technology hubs (e.g. Nairobi, Cape Town, Lagos).

This year we finally saw the start of technology company exists, where seed investors realized over 30x their capital. Stripe bought Paystack ($200M), WorldRemit bought SendWave ($500M) and GoDaddy bought Over.

I am passionate about advancing the technology ecosystem in Africa. I was born and raised in Mombasa, Kenya where my family has lived for five generations. I have a strong network of co-investors and local entrepreneurs, several of whom are investors in this fund. I’m a Kenyan, a product manager, and an entrepreneur, and my experience (including building technology products in Africa as an operator) allows me to have empathy for founders on their journey. 

I’ve been personally investing in technology companies in Africa since 2014 through Musha Ventures, and am now excited to allow others to participate in these deals. Over the last six years I have backed 35+ African companies in 8 countries with an IRR of over 36% (based on future fundraising rounds) and MOI of 1.7x. The portfolio includes companies like Flutterwave, mPharma, Sokowatch, Branch, Twiga and Kobo360.

Here are some of key details:

  • 10x+ Lower Investment Minimums: Investors are able to invest in this fund with as little as $2.5k per quarter whereas most VC funds have a $250k+ minimums for LPs. Investors will need to meet US-Accredited Investor requirements to participate.
  • 10x Lower Management Fees: The fund has a management fee of 0.2%, to cover basic running costs, which is 10x lower than the industry standard. This further helps to align incentives; I earn carry when investors make positive returns. 
  • Alignment of Incentives: I’m personally one of the largest investors in the rolling fund, as this is an extension of my existing angel investing. This is not funded through deferred management fees, it is capital that I wire into the fund just like every other investor.
  • Consistent Investment: I intend to invest conservatively and consistently into companies across Africa over many years. It’s very hard to ‘time the market’ and so we will instead focus on factors we can control like amazing entrepreneurs, evidence of traction, product quality and delighted customers.
  • Investing in B2B: We are focused mainly on startups that serve other businesses — particularly fintech, marketplaces and software as a service technology companies. We may make the occasional consumer investment, but business is the initial foundation.
  • African Entrepreneurs’ Fund: For entrepreneurs building businesses focused on Africa (and particularly portfolio company CEOs), they are able to invest in the fund with no fees or carry. This is my attempt to pay it forward, and also to get even better deal flow from my network due to further aligned incentives.

I believe in the power of being transparent, which I hope will allow me to build new relationships and deepen my current relationships – it’s why I’m publishing this openly. 


Want to learn more? 

If you’d like to get in touch please fill out this short form and I’ll reach out to you so we can get to know each other better. 

If you’d like to see more detail on the fund (market opportunity, detailed investment history and fund terms) please check out the rolling fund page (https://angel.co/v/back/musha-ventures). 

Investing in Africa

Once when I was 6 years old, sitting in the car with my father in city traffic, a homeless boy about my age knocked on the window. My father opened the window and handed him some candy. Then he turned to me and said, “You are sitting here and that little boy is out there. I hope you appreciate it was luck of the draw and you will do something good in your life.”

I was born and raised in Mombasa, Kenya and my family has been here for 5 generations (since the 1850s). I grew up in relative privilege compare to most Kenyans. I remember that moment quite clearly even now, over 30 years later.

I’m frequently asked ‘why’ I invest in startups focused on Africa. There are many reasons for my interest in investing in Africa, and I don’t pretend that I invest out of altruism, but I think this is what led to my interest in supporting early stage entrepreneurs on the continent.

I always liked maths and science and studied engineering at university. This experience taught me to approach problems from first principles and think through effective systems. I don’t really have skills that I can directly help people (e.g. a doctor), so I needed to approach the problem space differently. In my early 20s, I realized that entrepreneurship and technology could drive economic development, in a relatively capital efficiency manner. I started building my career in technology, starting at Google in London. After spending time at Index Ventures and learning about venture capital, I realized that, with even small amounts of capital, you could have outsized returns both in terms of value creation and impact.

Technology entrepreneurs create products that improve the effectiveness for people and businesses, and create new jobs with new skills. Given all these benefits I decided to start investing in technology companies in Africa after ‘learning to invest’ in silicon valley as an angel through my own fund, Musha Ventures, starting in 2011. As an inexperienced investor, I tried to maximize learning per dollar invested, as I did not have a lot of capital. I stayed disciplined by writing investment memos (that no one read), conducting reference checks and completing annual reviews for every company. 

In 2014, there was not much capital available for early stage entrepreneurs in Africa and even today in 2020, there is still a deficit of capital available for those who don’t have the right networks. With small investments I am hopeful that I’m able to have an outsized impact on this ecosystem. Even when I don’t invest, I try and give entrepreneurs feedback, be clear on my reasons for passing, or share articles or advice that I think might be valuable to them. 

There have are some early positive signals; my Africa portfolio has rougly doubled in value (on paper), and the companies have created thousands of jobs, enabled new startups to exist, and improved efficiency in archaic supply chains / markets. Despite these early signals, it’s still very early in the life of the venture capital ecosystem in Africa and it’s still unclear if these companies will endure and to have a lasting positive impact on the economic development and people’s lives in the markets. Only time will tell.

My plan, which has remained consistent over the last 5 years, is to continue to think very long term and invest consistently and conservatively in early stage (mostly B2B) technology businesses in Africa and support entrepreneurs doing the hard work along the way. 

State of Tech in Kenya

Note: I wrote this about 9 months ago after spending most of 2015 living and working in Nairobi. I have had enough people express interest in reading my notes that I thought I would share broadly.

Summary

  • I lived Kenya over the last 6 months and left feeling inspired. I believe there is tremendous opportunity for awesome entrepreneurs to build products for the East African market. In particular, I would be well suited to focus on something that bridges the gap between the West and Africa 
  • There is a lot of raw talent, fundamental problems that need solving, and plenty of enthusiasm and excitement around building technology companies
  • There are few excellent company builders / focused executors and a lack of a proper seed/venture firm or decent incubator. ‘A’ level entrepreneurs (silicon valley, local or elsewhere) who have built a successful business are sparse
  • Access to seed and early stage capital is difficult and the fundraising process is suboptimal due to the lack of proper local vc funds which leads to entrepreneurs chasing short term revenue and lack of focus on the long term objective – funding/focus is a chicken/egg problem

Startups and Entrepreneurs

  • Entrepreneurs are hungry, have lots of enthusiasm and there is a plenty of excitement in young talent who want to build something awesome.
  • Startups are solving fundamental issues vs. incremental issues in the west –  access to good education, electricity, health care and phone/internet. There are opportunities to build on top of these solutions or provide additional products and services that are already mainstream in the west – I’m particularly excited about financial services.
  • Entrepreneurs often have their fingers in lots of pies, can be distracted by too many ventures, and seem to be doing too much with too little capital and too few people. This leads to lots of half-formed businesses versus a few well built ones
    • Chasing (short term) revenue is required to grow businesses here due to lack of access to capital for early stage businesses
    • This is partly due to the opportunistic nature of working in Kenya, and more commonplace with local entrepreneurs
  • Entrepreneurs lack role models in the community that they can get mentorship from who can help them with product strategy, marketing, assembling the right team, raising funding, and scaling the business. Some missing pieces:
    • Best in class experience – understanding of what ‘great’ looks like
    • Successful Kenyan technology entrepreneurs – groups of people who have built and exited an excellent businesses in Kenya (or East Africa)
  • Foreign entrepreneurs are met with mixed feelings especially when it’s believed that they are only in Kenya for a fixed period of time. I believe that foreign entrepreneurs can add a lot of value by mentoring local talent especially if they have best in class global experience and hire local teams

Investment – Venture Capital / Incubators

  • Local funds either have very little capital to deploy or strict mandates about where they can deploy their capital because of conditions stipulated by their LPs – leads to defocusing in startups
  • Entrepreneurs looking to raise small seed rounds have a few options:
    • Raise capital from local angels who are not often sophisticated investors and often don’t understand what they are signing up for
    • Raise money as grants or from funds (with LPs who have strict investment criteria) and these come with conditions that often result in unnecessary/unhelpful changes in strategy
    • Go on long (many month) investment trips across Europe and USA which are also usually an uphill battle and often result in small ticket angels vs. larger funds
  • This current fundraising process feels inefficient and distracts entrepreneurs from focusing on their product and company from both a time and strategy perspective
  • Local incubators have unfriendly terms for entrepreneurs and are not run by successful entrepreneurs or investors
    • Incubators typically have many companies vs. a few companies with lots of mentorship and focus
    • $25k investment for 15-25% of the company plus terms which are not founder friendly e.g. ratchets, clawbacks, pushing to early exit
    • Many incubators have shut down their program as they could not find enough quality companies – I think this is in part due to the fact that they were going for scale vs. focused set of companies
  • Grant funding can be disruptive and distracting – companies are incentivised to abandon their vision in the ‘short term’ (to get the grant) and end up building a frankenstein company with multiple focuses which is hurtful in the long term

Working in Kenya – Personal Takeaways

  • Talent gap still pretty significant (orders of magnitude worse than Silicon Valley, which is not surprising) although there is thirst for learning and a no lack of young people who are not afraid to work very hard
  • Mid-Skill workers care more about job protection than innovating and often see change/removing things from their plate as scary – will they lose their job, or not be good at the new thing we need them to do
  • Micromanagement is necessary to make progress – you can’t just email people and expect stuff to get done. There is constant checking in and auditing of people’s work. The level of trust still does not exist at the same level as working with ‘A’ level talent in a place like San Francisco
  • My decision point is between spending my time training, teaching and mentoring in East Africa or or serve this market from abroad (with an already high performing team) and travel back and forth as needed
  • Local:
    • Pros: Close to market and people, can really help mentor folks, market changing fast, partnerships are easier
    • Cons: spending time on micromanagement v.s solving hard problems, personal life issues, quality of life
  • Foreign:
    • Pros: Better team quality, valuations, exit options, potential to build global business
    • Cons: not close to customers, coordination overhead, travel burden, missing important things