1Mby1M Virtual Accelerator Investor Forum: With Vinny Lingham of NewTown Partners (Part 2)

Sramana Mitra: Have you invested in any of these ICO-based or token-based ventures?

Vinny Lingham: Yes, I’m going to do another one called Augmentors. It’s a gaming product. They have a really good token called Databits, which they’ve spun out. It’s basically an augmented reality game. It’s pretty fascinating.

Sramana Mitra: What is your estimate of the capital requirements of token-based ventures like that? I’ve been talking to a few people who are looking at that. One of the issues for that, as early stage investors, is this 

can be very capital-intensive. How do you parse that?

Vinny Lingham: It’s definitely a couple of million dollars. I think $3 million is enough money to get a prototype to market in Africa. It’s easier to raise $3 million in a token-based offering to a lot of people worldwide.

Sramana Mitra: You’re saying that these token-based businesses are almost more interesting in Africa than in the developed markets?

Vinny Lingham: Because of the lack of capital in Africa, token-based fundraising is going to be a bigger trend. If you look at the US, there’s more money raised to ICOs than venture capital. My company, Civic, did a $32 million token sale in June.

Sramana Mitra: What is the ecosystem in Africa? You have NewTown Partners. Are there other early stage funds that you get to syndicate with? How is the ecosystem coming along there?

Vinny Lingham: It’s actually very good. As an example, I invested in a company called SweepSouth about three years ago. It was a female CEO entrepreneur. They had literally zero revenues. They’re now employing about 4,000 women in Africa. We put the seed money in there. The capital came from other VCs. There is an ecosystem.

The real lack of funding is at the seed level and maybe in the higher risk opportunities where VCs don’t want to bet. Aisha and her company is a good example where there is a gap in the market. The women entrepreneurs in Africa aren’t getting the support that they need. We take a pretty aggressive approach at finding these people who are generous.

One of the problems in South Africa is you have a lot of white male business franchise entrepreneurs. When the government implemented black economic empowerment, it sidelined a lot of people from getting jobs in the formal sector. These would be young, white guys who graduated.

As a consequence, they started becoming entrepreneurs because they couldn’t get jobs. They wound up creating wealth. People are realizing right now that real wealth is not created by having jobs in corporates. It’s created by starting companies.

Sramana Mitra: What is your most successful portfolio company in the African market?

Vinny Lingham: Definitely SweepSouth.

Sramana Mitra: Can you give a bit of color on the company?

Vinny Lingham: SweepSouth is the Uber for maids. Augmentors is into augmented reality gaming. The technology is unbelievable. Gaming is such a big sector.

Sramana Mitra: How do you read the exit opportunities in the South African companies? Your companies are still quite young. There’s probably another three to five years before they exit. What is your analysis of how the exit market is going to shape up?

Vinny Lingham: That’s the beauty of token. If you look at the token for Augmentors, it’s already trading at about 50 cents.

Sramana Mitra: That’s for the token-based businesses though. What about the Uber for maids?

Vinny Lingham: As you do subsequent rounds of funding from other people, you’re able to exit some shares. Normally a bigger VC will come in and buy shares off you. In the case of SweepSouth, the demand for their shares is so high. It’s important to understand how you’re moving through various stages of the company’s lifecycle. If you’re a seed stage investor, can you exit to Series A? If you’re a Series A investor, can you exit in Series B? If the company is doing well, the answer is generally yes.

Sramana Mitra: The assumption is that the early stage investors are exiting in the subsequent stages. There are bigger venture funds playing in the market who can do Series B and Series C and take out the earlier stages.

Vinny Lingham: Yes, but it has to be higher quality companies where they obviously have a lot of conviction for the company.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Vinny Lingham of NewTown Partners
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