How It Takes a Village To Build a Winning African Startup

How It Takes a Village To Build a Winning African Startup

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Cellulant recently stole the limelight in the African startup scene when it bagged 47.5 million dollars from Rise Fund. A company for Africa by Africans, in Africa, it started as a music ringtone business that completely transformed to become a digital payments platform serving 140 million people across 11 countries.

Recently, I had the honor of listening to a talk given by Cellulant’s co-founder and Group CEO Ken Njoroge at Nairobi Garage. It was one of those talks I wished every young African aspiring entrepreneur could hear. His story was very inspiring not only because of what he said, but also because of what he did not say.

He did not drop any foreign names that have become popular when some entrepreneurs talk about their background. There was no mentioning of Harvard, Stanford, Merrill Lynch, McKinsey or PwC. Instead, he talks about Nakuru’s Menengai High School, Strathmore and University of Nairobi.

His story is as local as it gets.

Another thing that struck me was how he did not say, “I single-handedly built this business.”

Instead, he acknowledged all the people who helped him along the way, including family, friends, staff, even landlords who wouldn’t get their rents on time. In other words, he exemplified the idea, “It takes a village to build a company for Africa by Africans, in Africa.”

Ken started two businesses, the first being a web development firm called 3mice which he later sold, and the second is Cellulant. So what does it take to make it as an entrepreneur in Africa?

Concrete Foundation/Solid Value System

The concrete foundation hinted here goes against the mainstream cultural narrative young entrepreneurs might hear such as, “You have to be connected to the right people. You have to come from the right tribe. You have to be comfortable with being corrupt because it’s the only way to make it in this country. You have to have studied abroad. You have to have enough starting capital.”

Instead, Ken talks about how he was raised by a single mother, how he didn’t have a lot of money growing up, how he dropped out of University of Nairobi, and how he started both businesses with no capital.

The concrete foundation, instead, was the value system that his mother instilled within him that focused on hard work, thoroughness at work and respect of others. He quoted her as saying, “Never let the amount of money you have in your pockets determine what you can and can’t do, or who you are.”

This helped him cope with the challenges of being an entrepreneur as he could mentally separate his sense of self-worth and ambition from the reality of having little money at the beginning of the startup. And because he grew up without money and was thus not used to the comforts it could bring, he was okay with having no money for a while.

What him and his co-founder, Bolaji Akinboro were not okay with was giving up or corruption. As cited here, “Right from the outset, we have adopted a strong stance against bribes. We believe that innovation wins the day, not bribes.”

Other values they built the culture with were honesty and transparency with everyone, whether it was their own staff, family, business partners or companies that owed them money.

This does not come easy when someone is in a position of leadership because everyone looks at them as though they have all the answers. Yet sometimes they don’t. This sort of vulnerability is one of the four pillars of courageous leadership according to author and research professor Brene Brown, with the other three being clarity of values, trust and rising skills. In her book Dare to Lead, she defines vulnerability as the uncertainty and risk that comes with emotional exposure, and while popular opinion might view it as soft, it’s actually brave.

It’s not always Unicorn and Rainbows

Raising an eye-popping amount of 47.5 million USD in capital without a white co-founder inspired a lot of excitement, since the next big investment during the first half of 2018 among African startups was Branch at 20 million USD according to a report by Weetracker. But while that result attracts so much awe, looking under the hood shows the amount of hard work that went into achieving it. They had to compile a list of potential investors — 60 in their case — do their homework on who made decisions, prepare and make pitches, fail, find out what didn’t work so they could go back to the drawing board and repeat.

Two years and 400 pitches later, they received only 1 yes and 59 no’s. This makes you realize that persistence is a much-needed trait if you’re going to be an entrepreneur.

Know Your Why

And what usually feeds this persistence is a strong why, a strong reason to continue despite all the obstacles that exist in your way.

For Cellulant, it was the recognition that this startup’s story was bigger than the co-founders and their own personal egos. Cellulant is all about being a really transformational force in the continent, reducing poverty, changing every element of the traditional cultural narrative when it comes to entrepreneurship in Africa.

Focus on What Matters

Ken’s final advice to entrepreneurs was not to get caught up by the hype of the most recent technologies but to instead focus on the things that matter. The things that won’t change, like understanding the problem you’re solving in the market, and focusing on building and delivering a high-quality solution that’s better and cheaper than the competition.

Focus on going into the market and getting paying customers to validate your idea. That’s what business is really about. It’s not about the money or the recent lifestyle that has become a fad nowadays.

His story paves the way and offers hope to millions of Kenyans who subscribe to the belief that what it takes to make it in Africa is corruption, or fancy foreign names in their educational and work history.

Thanks to @ALX , Nairobi Garage for facilitating this

Co-written with Amina Islam


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As CEO, Are You Investor-driven or Sales-driven?

As CEO, Are You Investor-driven or Sales-driven?

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If you’re running a startup, then you must know if you’re a sales-driven CEO or an investor-driven CEO, and if you’re in-between, how in-between are you…

For real?

Unfortunately, starting a startup has become a fad nowadays. Driven by all the #BYOB hashtags on social media, everyone with a half-baked idea wants to run a startup, so they register a company, edit their Instagram account to CEO and get started.

Maybe they talk to potential clients about their idea, or develop a product and send it out to the market, receiving a paycheck or two in the process.

All of that is well and good.

Until they take a detour and start spending a majority of their time chasing any event where there’s the tiniest glimmer of hope that they could get funding. They start working on activities to serve their dream of bagging huge funding that will help bring in the beanbags and billiards table through the door.

If the startup is built around a tech product, that means doing anything to increase the number of downloads and registered users to sell the story of exponential growth. It also means putting together a cool catchy website and high definition videos and posts on Facebook and Twitter to tell the story of how they’re changing the narrative in Africa and making the world a better place.

It’s supposed to work on a positive-feedback mechanism: The more the startup gets enough people to talk about how big they are, the bigger they become by attracting more business.

The problem is, the process of building a business does not work this way.

But that’s like putting the carriage in front of the horse.

Then unharnessing the horse and letting them run away.

At the end of the day what matters more than the number of subscribed or registered users on your product are the number of engaged users and churned users (the former tells you what you’re doing right, while the latter gives you an opportunity to discover what you’re doing wrong). Also, what matters more than cool websites is the actual work that is being done behind the website and how all of those metrics [user engagement/field work] translate to an increase in revenue.

We’ve mentioned in several posts (Link 1, Link 2Link 3) that it has become the norm for founders to focus on investor-chasing activities. But that’s a bad strategy not only because it diffuses the founder’s focus but because it wastes a lot of the company’s money since a lot of investor in-person meetings happen on different countries/continents thus requiring flight tickets and accommodation.

Money the startup already doesn’t have enough of.

The alternate for you as a founder is to spend 80 % of your time with paying clients. Not just talking to them about how awesome your idea is, but actually proving that awesomeness by closing sales, signing contracts, delivering work and getting paid.

Given, it’s a slower process than trying to sell the idea of the company directly to investors, which is why many young founders drag their feet there. They erroneously think, “Let’s focus on getting the funding first, and then we’ll start to close deals later.”

First of all, it is true that actually being in the market trying to sell to clients one by one is no fun. It requires training your mind to face rejection with a positive attitude. It also means you wouldn’t be backing your Instagram’s CEO title with the right image — the fancy suit and offices. Instead, you would need to keep your burn low, and maybe live with your entire extended family for a while, listening to their barrage about how you need to get a real job like your cousin, Tim.

But being in the market selling is very important because it validates your idea by bringing in revenues. And the lack of revenues would signal that maybe you would need to rethink your product or service, which most founders are reluctant to do because it tends to tie up to their ego.

Also, the phrase, “Necessity is the mother of innovation,” exists for a reason. Having less resources sometimes pushes you to innovate in order to keep your burn rate low.

Setting up your entire survival strategy on fundraising can be likened to playing slots at a casino. It’s a short-term strategy that could work or not. The slower more certain strategy is to acquire clients, and deliver to them directly, then having them pay you for the product or service.

There is no denying that having enough financial capital is important for a business to survive — and it has been the nail on the coffins of far-too-many startups, especially in Africa, so I’m not saying to never seek funding. What I’m advising against is seeking it as a first option rather than a last option after self (or family)-funding or bootstrapping.

As much as there are millions of books on how to be an entrepreneur and run your own business, you can’t really learn the how until you do something, because there are millions of tiny nuances to selling and entrepreneurship that require continuous human interaction.

In the next post we will delve deeper into the topic of seeking investments if you’ve grown your business to the point where you absolutely need external funding following conversations with Tania Ngima, CEO of Demo Ventures, and Jason Musyoka from ViKtoria Ventures.



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Mistakes to Avoid as a Startup While Fundraising

Mistakes to Avoid as a Startup While Fundraising

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One of the main growing pains of business is reaching a point where you’re hurtling along so fast that self-funding or bootstrapping is no longer sufficient to keep you going. When you grow at that fast a pace, the wheels may start to come off, which could put your business at risk of failure. This necessitates fundraising as a strategy to keep the lights on and the doors open. In the previous post, we looked at the main challenges African startups face when it comes to raising funds from investors. In this post, we look at different types of funding and the factors that may attract — or repel — investors.

Generally, there are two main categories of funding a startup founder can seek: equity capital or debt capital.

Equity capital is in the form of funds paid into a business by investors in exchange for stock. Such funds come with a risk for the investors, as they will not be repaid in case of corporate liquidation until the settlement of all other creditors[1]. However, investors might be willing to take the risk as the value of their stocks might appreciate over time, allowing them to sell at a profit. Also, owning sufficient number of shares may give them some degree of control over the business.

The alternative is debt capital, which is given to a business with the understanding that it must be paid back at a predetermined date and with an agreement to pay interest in exchange for using the money [2]. Debt capital can be difficult to acquire for startups that are at the beginning of their journey because it would require proven track record of success. However, the upside of getting debt capital rather than equity capital is that it doesn’t force the business to forfeit ownership.

Regardless of what type of funding a startup seeks, as founder, you need to get the fundamentals of your pitch right before attending investor meetings. In conversations with both Tania Ngima — CEO of Demo Ventures — and Jason Musyoka — Angel Investors Manager from Viktoria Ventures, presented below are common mistakes that make investors shudder:

1.Presenting a back-of-a-napkin idea

Ideas drawn at the back of a napkin look cool. But without market implementation, they make better napkins than business pitches. An idea must be validated on the ground before any attempt is made to grab an investor’s attention. While startups don’t need to have broken even yet, they need to show proof-of-concept by being revenue positive and having a base of paying customers. However, if market validation is what you’re looking for, the avenues for these are ‘award-type’ competitions and grant funding. Crowdfunding could also possibly help you to go from idea to product/service validation.

2. Helter-skelter Financial Records

It is common for startup founders to get so caught up in the trenches of their day-to-day operations, that they don’t keep their accounts in order. Showing up for investor meetings without supporting documents such as a business plan and financial records is such a rookie mistake, it makes you look like you were lost and had stumbled into the wrong room.

Investors need to see a clear path on how they’re going to make their money back. A business plan answers questions on how the business is planning to stay on track while scaling while financial records show a summary of the startup’s financial health, covering details on assets, liabilities, cash flow, and more.

Investors also know that, in many cases, projections and business plans are likely to change over time. These documents are useful in gauging your thought process as an entrepreneur (including how you think through assumptions, contingency plans, changes in the external regulatory or market environment) as well as how ambitious you are.

3. Competition? What Competition?

Sadly enough, startup founders are divided into two camps — those who obsess over their competitors that they don’t get much work done, and those who go through life pretending they don’t exist.

While stalker tendencies like putting google alerts on your competitors is not recommended, knowing they exist is important. More important is identifying what your positioning is compared to them, and what makes you unique and sets you apart.

4. Crazy valuation — a unicorn, anyone?

The valuation that you show up with need to be backed up by the numbers in your financial records. Unfortunately, what has become common is for African founders to base their valuation on the target market or the latest valuation of a similar startup they saw on Shark Tank.

Others value their startups by multiplying their annual revenue by numbers that are not very reasonable — like 15x. While valuations based on revenue multiples are more of a subjective science rather than an exact one, factors to be considered are risk, growth and profitability [3,4]. Risk has a negative correlation with revenue multiple whereas growth and profitability have positive correlations. From his experience, Mr. Musyoka puts a 5x revenue multiple as being average in this market.

Co-written with Amina Islam








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Deconstructing the Local Angel Investment Cycle in Kenya (Part 1)

Deconstructing the Local Angel Investment Cycle in Kenya (Part 1)

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Imagine you’re meeting your relatives for the annual holiday dinner and you notice your nephew is missing. His mother explains that he’s busy building his own startup so he no longer has time for anything.

Not even family dinners.

Noting his apparent tenacity and how he’s trying to do something with his life rather than idle away on the sidewalks complaining about the lack of economic opportunities, you offer to back him up financially if he splits ownership with you.

Six months later, you ask him how business is going, and he tells you he’s nearly nailed his product but he needs more money.

Three months later, you re-inquire about his progress, and he tells you he has perfected his product but client acquisition has been a bit difficult in this market and he needs more money to keep the lights on.

In the next annual family dinner, he attends.

Only he drives up to the house in a Mercedes Benz.

You wonder how that is possible considering all the money troubles he’s been complaining about.

Unfortunately, that’s how angel investing appears in emerging economies like Kenya.


In investment terms, an angel investor is an affluent individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity. In African markets, arrangements with angel investors tend to exist informally, are usually undocumented, and are catalyzed by pre-existing connections (familial or otherwise).

The only problem is sour outcomes of such investments tend to translate to family feuds and cautionary tales that reinforce the old-school thinking that the only secure investments are those going into real estate or government securities.

That’s why a need exists for institutions like Viktoria Ventures (VV) that formalize angel investing. Viktoria Ventures is a Kenyan company that helps early-stage companies obtain seed funding from local angel investors. It does that by managing a network of local angel investors and guiding them through the investment life cycle so they could screen deals, do due diligence and overall, structure a deal formally where both parties win.

That’s definitely much better than waking up one day to discover that your nephew has been siphoning your hard-earned money to upgrade his car.

Investment Life Cycle

The investment life cycle as explained by Jason Musyoka from Viktoria Ventures are detailed in the following sections.


The initial stage of the investment life cycle is screening. As an investor, you need to be really picky about the deals you select. As mentioned in the previous post, as an investor you need to see more than a back-of-a-napkin idea. You need the startup to have a validated idea with paying customers. This is not to say that a back-of-a-napkin idea will not work if funded, the realities of the market are such that there are way too many ideas compared to available investment money.

It also means that you’ll need to be more analytical while attending pitches, rather than being blown away by catch phrases such as,

“This will help us make the world a better place!”

“This is absolutely going to 100x very fast and we want you to be part of it!”

“We are the Facebook plus Uber multiplied by Reddit of our industry!”

“We have no competition!”

“We’re closing next week and want you to be part of this revolution!”

As an investor, you have to be equipped with the realistic expectation that the failure rate among the startup ecosystem is very high. While data from the African market is not readily available, the closest one given by a Nigerian bank Stanbic IBTC claimed that over 80 % of Nigerian startups fail within their first five years.

Due Diligence

After filtering out opportunities in multiple stages that look closely at the founding team, business idea, traction, and business model, due diligence needs to be made. Due diligence is an audit made to confirm all facts given by the startup are correct.

The main categories you need to look at as an investor during this stage are:

  • Market diligence, which covers your independent review of the claims that the entrepreneur made regarding the industry they’re operating in. It’s necessary to verify the market size, competitive players in the market, and industry trends.
  • Business diligence, which looks into specific claims that the startup makes about its own operations. These include looking at their books to review revenues and expenses, seeing what their customers think of their product/services, and doing background checks on the founders.
  • Legal diligence, which focuses on the company’s structure, documentation, and history, to ensure everything is as claimed. This involves wading through a humongous pile of paperwork with a fine-toothed comb, including but not limited to, corporate records, employee benefit plans, properties and assets owned, financing documents, etc.

Deal Structuring

Deal structuring necessitates a negotiation process where both parties win and the investment arrangement is formalized. Ultimately, the goal is to be in what is known in game economics as a positive sum game, where both sides gain more by cooperating than by acting on their own.

While the entrepreneur gets an influx of money, as an angel investor you can also bring in a set of much-needed expertise into the startup. You can also make demands for better governance within the organization rather than watch it being run like a kindergarten playground.

Major red flags when it comes to investor-entrepreneur conversations are as follows:

  • Feeling like integrity is lacking and there isn’t 100 % honesty.
  • Receiving push back on the subject of reporting, board meetings, or access to company information.

In the next post, we’ll shed light on post-investment activities such as value addition and exiting.

Last but not least, even if you do every step of the investment life cycle correctly, that does not mean your investment will pan out as it’s important to note that angel investing is still risky business.

Co-written with Amina Islam


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