Early-stage investment platform Microtraction has launched in Nigeria, planning to invest US$65,000 in startups at the very earliest stage of their development.
Launched by Yele Bademosi, a former country manager of Starta, Microtraction will invest over two stages. Initially it will offer startups US$15,000 for a 7.5 per cent equity stake, followed by an additional US$50,000 convertible note at a US$1 million valuation cap in companies that show significant progress.
Bademosi said Microtraction hopes to directly or indirectly fund 1,000 startups per year at scale with this model.
“There’s a lack of early financial support and mentorship for young African entrepreneurs who have innovative ideas about how to solve some of the Africa’s largest problems,” he said in a blog post.
“Microtraction is built to solve this problem, on one hand we have a sizeable number of startups in Nigeria and Africa that possess high growth and innovative potentials but often fall short of the investment prerequisite of VC funding, due to the reduced instances of angels funding and mentors for these startups. This creates a “pre-seed funding gap” and this is where Microtraction comes in.”
Microtraction aims to to bridge this gap and make it easier for African founders to build successful startups by identifying the best early-stage, growth-driven technology businesses in billion dollar markets via an open application process.
It will then work closely with the startups, providing pre-seed funding and professional and advisory services to them, and assisting in getting startups to a point where they can raise an institutional round of funding from VCs or join world-class accelerators like Y Combinator, 500 Startups or Techstars.
“We believe our principal role at Microtraction is to increase the number of venture bankable startups across the continent, creating the market for venture and growth stage capital to follow on and ultimately bridging the pre-seed funding gap that currently exists,” Bademosi said.
“Microtraction will back founders at the earliest stages of the venture. We won’t consider anyone or project “too early”. We are biased towards technical founders due to our own experience as founders. We will invest in founders with conviction and by large prefer to be the first outside money founders raise for their venture or project.”