As the African tech ecosystem continues to grow, legal needs are also increasing. Aside from building products, startups need professionals to oversee basic regulatory laws, taxation, compliance with securities law, and other legal aspects of running a business.
Recently, we have reported on several regulatory policies and how they are affecting African startups. In 2019, Moe Odele and Lynda Dunkwu founded Vazi Legal, a tech law firm that represents investors, startups, and technology-enabled enterprises at all stages of development.
How Vazi Legal started.
Prior to starting Vazi Legal, Moe was a lawyer at a boutique-impact Investing consulting firm that operates in the UAE, Europe, Southeast Asia, and North America. She also worked at a New York City-based non-profit that provides pro-bono legal services to social entrepreneurs, impact investors, and communities impacted by large-scale development projects and governments. Both she and her partner are licensed to practice in Nigeria and the United States.
In 2013, Moe was offering random legal consultations to startup founders—mostly personal acquaintances. This was in the early days of the ecosystem. Later in 2017, while she was still at the impact investing firm, she saw the need to create a more robust structure around tech lawyering that will serve African founders. Although she started it on a part-time basis, Moe transitioned full-time with Vazi Legal in 2019.
Three years later, Vazi Legal has grown to a team of 12—lawyers, researchers, and auxiliary staff—that have worked with several African startups that have jointly raised $700 million. "80% of our clients come from referrals," Moe told Benjamindada.com during a call. Most of Vazi Legal’s clients are from Nigeria, Ghana, South Africa and Kenya.
In regions where Vazi Legal attorneys are not licensed to practise, they leverage a network of lawyers in these countries to attend to their clients. However, as part of its 2022 plan, the tech law firm intends to expand into Kenya by hiring lawyers that are licensed to practice in the East African country. In addition, Vazi Legal is setting up legal operations in the United Arab Emirates and other parts of the Middle East region.
When Vazi Legal launched in Africa, the lack of human capacity to make up its team was the major challenge. "Most lawyers on the continent hear about tech law when they are out of school. The curriculum does not teach them how to provide legal services for tech startups," Moe said. "Nigerians also do not like paying for services because they cannot see the tangible results."
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To solve these issues, Vazi Legal invested its first year in orienting tech entrepreneurs across Africa about the need to engage legal professionals in the course of building their startups. In the second year of its existence, the firm launched a paid-internship programme to identify, train and engage legal talents in the rudiments of tech law, the six weeks of training covers: fintech, decentralised finance and digital currencies, investment advisory and compliance, technology and human rights, intellectual property, licensing and digital infrastructure and artificial intelligence and legal tech.
UnHacked+: Creating opportunities for female founders.
While Vazi Legal was providing investment advisory for African tech founders, they noticed a gap. Moe said "We realized that a majority of our clients were men. It's symptomatic of the fact women founders are not raising funds like their male counterparts." An analysis by Briter Bridges revealed that 75% of the 1,112 companies operating in Africa that have received venture capital funding between 2013 and May 2021 had all-male teams, 9% all-female teams, and 14% had a mix of male and female founders. Just 3% of the $1.7 billion went to all-female founding teams, with 76% channelled to all-male teams.
As part of efforts to bridge this gap, Vazi Legal launched UnHacked+ in 2021, an initiative to provide fundraising support and a 40% discount on legal advisory for African women-led startups or startups with at least one female co-founder with at least 10% ownership of the company. "Through this initiative, we have been able to increase our women-led clients by 35%," she said.
What has Vazi Legal learnt about investors, founders, and the regulatory landscape?
Moe who primarily works with startups on investment advisory said that "an investor that is problematic from the beginning will always be problematic. As the ecosystem continues to become more viable, more founders will be willing to speak about the challenges. However, founders should avoid complex deals and should also be clear with investors on the terms of the deal from the onset."
Aside from scrutinizing investors to avoid problematic ones, Moe revealed that one of the recurring challenges they have faced is co-founder crises. In his book "The Founder's Dilemma", Harvard Business School professor, Noam Wasserman revealed that 65% of high-potential firms fail due to disputes amongst co-founders. "Over 50% of issues that we resolve for founders immediately after fundraising has to do with co-founders’ relationship—and this is a critical issue," Moe said. 'Prior to fundraising, co-founders should have an agreement to define roles and equity."
To navigate the tough regulatory landscape, especially for highly regulated sectors like fintech, she advised that startups should take compliance seriously. "Compliance is a risk mitigation strategy, startups should not wait for their compliance to break down. They need a forward-looking compliance department." Moe said.