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The journey so far: Lexi Novitske, principal investment officer, Singularity Investments

Lexi Novitske

Alexandra “Lexi” Novitske is the principal investment officer at Singularity Investments, which she launched in 2014 in Nigeria. She oversees the firm’s operations in Africa. Singularity invests in visionary entrepreneurs in technology-enabled, early-stage companies in sub-Saharan Africa.

Tell us about one of the toughest situations you’ve found yourself in, and how you overcame this challenge.

When I first moved to Nigeria I faced tremendous disapproval and biases from family and friends. My parents worried for my safety while my mentors were concerned that my promising career in the investment world would shift into charity work. While these anxieties were driven by genuine care and unawareness about Nigeria, the lack of support behind my decision to dedicate my career to growing African investments made the choice much harder.

Likewise, driving the launch and growth of Singularity Investments as a young, female outsider has drawn its own judgment locally. I regularly encounter questions like: Are you committed to long-term development or just here to cash in? Will you ever understand the culture where your investee companies are doing business? Are you strong enough to fight for your investee companies against difficult regulatory environments and dominant industry players?

To be fair, I think all of these questions are completely reasonable, and every day I believe I grow into being a much better leader who can tackle these challenges head-on. I have kept a growth mindset, and constantly try to challenge my own shortcomings by ensuring these bumps in the road are lessons that make me a better partner to the companies I invest in.

Which business achievement are you most proud of?

Several years ago I was working in Lagos, Nigeria at a private equity firm. I had already shifted my entire career to focus on investments in Africa, but I had started to notice a new trend: technology was building more connections between Africa and the rest of the world. The industry’s lean start-up model had made it cheaper to start a young tech business, and talented professionals were returning home to the continent to launch digital businesses that had the potential to make local industry more efficient, and leapfrog the infrastructure deficit.

At the time, my knowledge of tech was basic, at best, but I had a thesis for what I believed would make the next wave of change on the continent – strong talent driving new tech models in Africa would generate the continent’s next wave of economic growth. Above all, I am proud of having enough conviction in that thesis during the early stages of growth in Nigeria’s tech scene, and stepping out of my comfort zone to lead the growth of Singularity Investments.

I’m lucky enough to have had a partner and principal who also believed in that vision. I also believe that we have built a firm that not only acts as an investor, giving solid returns to our investors, but is also a valuable partner to the companies we invest in. We believe in an entrepreneur-first investment strategy, and in supporting the best leaders to grow their businesses into dominant industry players.

Tell us about your greatest weakness, and how you’ve prevented this from negatively impacting the company.

Where do I start… I’m shy, sceptical, and often spread myself too thin. Did I mention I’m also self-critical. But I think the most important weakness that any investor can recognise, however, is that we all have biases and we must be conscious of how we project those biases on investment opportunities. Everyone has his or her own experiences that have driven their personal world view. Investors often relate to people who are like them, and the business models that show applicability in investors’ current world are those that will resonate more deeply with them. I am doing business in a world that was only introduced to me five years ago. Although I feel I understand more and more about the local consumer and the environment investee companies operate in, I also recognise that I still have my own latent biases and limitations. I have learnt that the most important thing I can do to be a good investor is to ask others questions – be curious about what’s going on around me, be flexible to accept different viewpoints, and to be humble enough to admit when I’m wrong and adjust my own investment thesis accordingly.

What popular entrepreneurial advice or conventional business wisdom do you disagree with?

In Silicon Valley ‘disrupt’ is the mantra of successful tech startups. New business models with novel tech platforms are able to steal market share from major industries or even create their own independent models – often to the detriment of legacy corporations. However, I believe that in an African context, the lower barrier to entry for tech companies to reach rapid growth is often best served by collaborating with, rather than challenging, major industry players. Telecom companies and banks, for example, already engage with consumers and represent trusted brands. They also have data on their customers, which otherwise isn’t readily available in the market, as well as established relationships with regulators which can be otherwise difficult for small companies to build. Leveraging these partnerships, rather than working to unsettle large companies is often an easier go-to-market strategy for early stage companies in Africa.

In the past, I believed that replicating successful business models from other markets in a local context reduced business model risk. I thought the success of these older ventures had a good chance of being replicated in an African environment if given the right talent and financial backing. However, I have realised that the lack of infrastructure (payments, identity, data), low consumer trust, and different local consumer behaviour (from high price sensitivity to low digital literacy), means that these business models are not positioned to work. Many aspects may just be related to timing, but video-streaming and e-commerce are two good examples where I see high barriers to scalable growth in the current local environment. Likewise, given the unique dynamics in many regional African markets (light regulatory controls or a highly competitive telecoms industry, for example), I believe that the region could be best placed to incubate its own new technologies, which could prove to be applicable to a global context.

Is there anything you wish you knew about entrepreneurship before you started?

The most important aspect I’ve come to learn about investing in early-stage companies is that it’s not about how much you can squeeze out on the investment terms or how you control the board – it’s about the entrepreneur. It really boils down to putting the best resources behind the team to support their vision. This might mean sacrificing terms to make sure the entrepreneur isn’t diluted and remains motivated to grow his/her company to its potential, giving your board seat to an industry expert, or taking a backseat role so that an investor that can bring operational expertise plays a lead role in the growth of the company. It’s important to understand your unique value as an investor and to commit to playing a role as a partner. But, in the end, it is the entrepreneur who will turn a start-up in to a success story.

Name one business opportunity you would still like to pursue.

This question might as well be, which business opportunities have I passed on that I wish I had been involved! I still believe there is tremendous opportunity to invest in regtech, digital currency, banking-focused software-as-a-service, education, micro-fintech solutions (payments/insurance/lending), and digital identity.

As an investor, I also see a missing opportunity in equity-linked venture debt. Venture debt is for start-ups that don’t have positive cash flows or significant assets to use as collateral. Venture debt providers combine their loan with rights to purchase equity at a future date to compensate for the higher risk. We have had several companies that had working capital requirements or balance sheet needs (in the case of microfinance) which couldn’t find banks willing to extend credit and who had to instead rely on equity investments to support their growth. Other local players have turned instead to Western venture debt companies – inherently these companies have less understanding about the local market and price in large risk premiums to compensate for this risk.

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  • ” it’s about the entrepreneur. It really boils down to putting the best resources behind the team to support their vision. This might mean sacrificing terms to make sure the entrepreneur isn’t diluted and remains motivated to grow his/her company to its potential”
    That is very correct Lex.
    Kudos

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