Building Startups From the Ground Up

Building Startups From the Ground Up

Co-written with Amina Islam

Image for post

Following in the footsteps of the startup ecosystem worldwide, the African scene has blown up in the past few years. According to the Weetracker H1 report[1], 168 million USD has been pumped into African startups during the first half of 2018 alone compared to a similar amount garnered during the entire year of 2017. This is good news because it shows that the world not only carries hope for the African continent but is willing to back up that hope financially.

However, while it’s so easy for our young entrepreneurs to get high on all this money, if you’re currently running a startup it’s crucial you’re clear on wcheap yeezys corsair ddr3 1600 cheap jordan 4 pallone calcio a 11 callaway reva femme sport jumpsuit nike aiyuk jersey billige matratzen converse blanche et doré basket léopard femme Purchase Florida state seminars jerseys, football, and various accessories for Florida state seminars Purchase college team jerseys at a discounted price and of high quality Purchase Florida state seminars jerseys, football, and various accessories for Florida state seminars dänisches bettenlager lounge set Bonnets rugby corner hether you exist for the investors or for the users; the former being a bad long-term strategy. One sad thing you’ll notice — especially in Kenya — is how executives become more focused on fundraising and all the tasks behind it that they forget the fundamentals of managing a business: building a successful profitable business model, managing people well so employee turnover is low, setting a successful sales model that will test the product from the first customer and take it to profitability.

The inception of a startup presents a catch-22 situation: how can we execute without funding? However, with time if the balance of your focus tilts towards fundraising more than business execution, the fund well would dry up at some point. This is because, unlike grant or seed funders for whom fancy demos and videos might work, Series A and Series B investors come equipped with hard questions about how the business operations are being run and what the numbers exactly are.

A second element that’s missing from a lot of startups revolves around the most basic form of human feeling: carrying empathy for your market and understanding the exact problem you’re trying to solve. What occasionally happens is ideas get imported without validating their relevance to the African market. Unfortunately, this practice has been in the culture for decades because a lot of the business models we currently deploy have been inherited from the colonizers and other developed nations. And this practice is highly palpable in the tech field. Instead of focusing on scaling up local businesses and practices, tech entrepreneurs have a greater tendency to import ideas, repackage them and try imposing them on the African economy. This is not to say we shouldn’t import ideas, but we should import the ideas relevant to our communities. In other words, the attention needs to be inwards-outwards instead of outwards-inwards.

Take for example, using a card to purchase items on an online platform. While it’s common for a customer in the US to insert their credit card details on a website to make an online purchase, the lack of trust prevalent in the African culture acts as a barrier to its adoption. This has forced many e-commerce companies that operate in Africa to introduce the Cash on Delivery option [2].

According to an interview that appeared in 2014 on Dignited.com [3], Parinaz Firozi, MD Jumia Kenya says Cash on delivery has helped the company acquire new customers. Over 60% of our customer acquisition has been through cash on delivery. There is zero risk for the customer since they only pay for the product if they like it, there are no cost implications if they reject the product, the delivery man just takes it back. It’s stress free.”

But all is not lost.

One tech company that’s doing this right though is Twiga Foods. They seem to understand their market and if we break their business model according to Simon Sinek’s Golden Circle, it’s clear to see that it goes as follows:

Image for post

Why:

Trying to solve the problem of the high cost of agricultural produce, Twiga Foods aimed to level the playing field by removing the brokers handling produce en route from its source to its destination.

How:

This meant using technology to bring both agricultural producers and retailers onto a single platform, to make markets secure, reliable, and fair.

What:

Getting farmers who grow a variety of products to join the m-commerce platform, where vendors are able to place their orders which is fulfilled the next day and paid for using mobile money.

Only time will tell how their growth will look like in the long-term, but at least it’s evident they seem to be taking the right first steps.

So, in summary, the main takeaways from this post are:

  • Judge from the actions taken by the executive team on whether your business exists for investors or for users
  • Have empathy for your users and understand what problems are you really solving
  • Focus on building a profitable business that’s sustainable in the long-run instead of just chasing funds

Post as appears on https://www.linkedin.com/pulse/building-startups-from-ground-up-edward-ndegwa?published=t

References

[1] http://weetracker.com/demo/2018/07/02/african-startup-report-h1-2018/

[2] 2016 E-commerce sub-sector assessment report for Kenya http://bit.ly/2Bmy0km

[3]http://www.dignited.com/10887/cash-delivery-credit-cards-recipe-online-businesses-kenya/

 

 

 

 

Read more

The Rise of Funding in Africa

Image for post

For the longest time we have been conditioned to see a single side of the story of Africa; one highlighted by poverty, civil wars, insecurity, and famine. Reinforced by images on international media of people waiting to receive international aid, animal carcasses littering parched grounds, and people packed into tiny boats trying to get to Europe, the narrative we carry about ourselves is that our countries are poor and self-defeated and the best way to make it as an African is to get out of the continent.

But then the waves of negative perception started to turn. And this turn could be tracked by the increased interest in attention that African countries shampoo isdin lambdapil Mexico cheap jerseys nike wiki archivador cajonera carpetas colgantes ipad 2019 hülle mit tastatur und stifthalter comprar fatos de treino adidas baratos nike air max ivo black and white comprar fatos de treino adidas baratos tp link remote control дамски памучен чорапогащник cheap jordan 4 meia com pompom hängemattengestell preisvergleich škare za plastične cijevi koaxialní kabel hornbach have been getting through foreign investments and exposure to international events. As mentioned in the previous article, Building Startups from the Ground Up, funding into African startups significantly went up during the first quarter of 2018 when compared to 2017 with the sectors receiving the most money being Fintech, Agritech, Healthtech, Ecommerce and SaaS.

This upwards trend in interest had been going on for a while. According to EY’s Africa attractiveness program 2016, the year-on-year Foreign Direct Investment (FDI) project numbers for Kenya grew by over 50 % [1]. In 2015, Barack Obama and President jointly hosted the Global Entrepenership Summit in Nairobi [2]. In June 2016, Mark Zuckerberg’s foundation — the Chan Zuckerberg Initiative — made a multi-million dollar investment in Andela, a startup that trains African software developers and gives them full-time roles at international companies. Other international companies such as Google and IBM opened offices here and people like Jack Ma jetted in with 38 Chinese billionaires.

Mark Zuckerberg was quoted to have said, “There’s so much energy and so much potential here. I just want to walk around and meet folks.”

So with increased attention towards the African continent, what do investors really look for in startups?

As mentioned in Building Startups from the Ground Up, execution and business readiness is key. Investors invest to grow their money so they need to see potential for a positive return on their investments. That means, if you’re a startup entrepreneur, you’ll need to show you have an idea with a good customer-market fit as well as an effective business model. Simply said, solve real problems that real people have and show that you’re going to make money out of it.

The best way to show execution and business readiness is through actual numbers[3]. As an entrepreneur you need to understand your numbers inside out. Know your intended market, financial projects, details on sales channels and back up your growth projections using hard data.

Besides the numbers, investors look for certain character traits in the team executing the idea. For example, Parul Singh, principal at Founder Collective, a VC firm based in Cambridge, Massachusetts, mentioned in this article that while self-confidence is required to launch a business, arrogance is a key red flag because it may hinder someone from taking constructive feedback from the market[4].

As part of their due diligence, some investors would also look into the background of the founders. For example, Isaac Ho, the founder of VentureCraft Group spoke about how he found out that integrity was a common problem among founders as they tend to hide the real situation of the company from stakeholders. They also face management problems such as not knowing how to delegate tasks or hire the right people for the right job[5].

So if the investors are going to dig deep into founders’ backgrounds, it makes one wonder what they would think when they see entrepreneurs proudly talk about the amount of time they spend travelling to present at awards instead of running their companies? It also makes one wonder if they would continue to invest if they contribute to a startup but there’s nothing to show for it after many years of execution?

As a final note, as we continue to reap the benefits of international attention, can we stop trying to get away with mediocre quality of work?

Co-written with Amina Islam

References

[1] https://www.ey.com/za/en/newsroom/news-releases/news-ey-staying-the-course-despite-a-relative-economic-slow-down

[2] http://disrupt-africa.com/2015/07/kenyatta-obama-host-global-entrepreneurship-summit/

[3]https://us.accion.org/resource/7-things-investors-look-investing/

[4] https://medium.com/marketing-and-entrepreneurship/what-investors-look-for-in-a-business-before-investing-4cd719db8c1

[5] https://www.cnbc.com/2017/05/05/venture-capitalists-and-investors-on-what-they-look-for-in-startups.html

 

Read more

Demystifying the College Dropout CEO Myth

Image for post

The graveyard is filled with startups that looked promising at one point but then plummeted to their death. Launching your own startup has turned into a fad nowadays. Whether it’s because there’s a lot of motivational content on Youtube telling you to quit your job and follow your passion or because kids nowadays do not want to be stuck in any type of 8 to 5 jBonnets rugby corner plavky chlapec 128nove veste femme pied de poule marron nike air max 90 carhartt uk meia com pompom nike daybreak uomo balenciaga 2017 shoes ipad 2019 hülle mit tastatur und stifthalter pallone calcio a 11 meia com pompom suport tableta bord balmain carbone fragrantica logitech c270 microphone not working golf d ob, the reasons may vary, but the result is the same; many youth nowadays want to update their Facebook status to reflect, “CEO of so-and-so.”

I am not here to crush the ambitions of young people as the Kenyan economy does need you to be more self-starters thanks to the unemployment problem. My message is for you to understand that startups are not just fancy ideas set up to attract fund money. Startups are serious businesses that solve problems in the market and must become profitable at some point. Sometimes startups become so obsessed with their solutions, they don’t really understand the problem they’re trying to solve so they easily topple when someone shows up with a better solution to the problem.

As mentioned before, this means startup CEO’s need to understand who their customers are, what their business models are like, what their sales funnel looks like, and most importantly, as Kevin O’leary would always ask on Shark Tank, “How do I make money?”

When you judge a startup, understand what your unit economics look like, which would require you to answer the following questions among others[1]:

  • What’s the cost to acquire one user?
  • What’s the lifetime value of that user?
  • How are you defining your unit?

According to this report[2], 50 % of startups in the US fail because of some of these reasons:

  1. Lack of focus, motivation, commitment and passion
  2. Too much pride, resulting in an unwillingness to see or listen
  3. Lacking good mentorship
  4. Lack of general and domain-specific business knowledge: finance, operations, and marketing
  5. Raising too much money too soon

Unfortunately, we don’t have similar studies done in Kenya to corroborate or contradict those studies. Having built 6 business ventures myself, however, I’ve personally learned the following lessons: there are many marketers out there but not enough salespeople. Sales, sales, sales is the engine of any business and our youth don’t know how to sell.

You’ll see people build startups mostly as a good conversation starter; start a company that’s not even registered, call yourself a CEO, make business cards and look for funding, without having a single paying customer.

Unfortunately, you’ll hear stories of CEO’s who dropped out of college to start their ventures, but then they don’t have the skills it takes to run a company. The college dropout ceo who made it is an outlier. Aileen Lee published an extensive overview in TechCrunch of U.S.-based software ‘Unicorns’ (startups with a market value of more than $1 billion) and one of her findings was that Inexperienced twenty-something founders are outliers. Companies with well-educated thirty-something co-founders who have history together tend to be most successful[3].

Another research published in Harvard Business Review recently showed that the average age of people who founded the highest-growth startups is 45. So why is it that our kids drop out of college and think they’re going to be the next Mark Zuckerburg?

We can’t blame them, to be honest. There’s a cognitive bias called the survivorship bias where we are more likely to systematically overestimate our chances of success because the news is filled with success stories more than failure stories.

In 2013, The Atlantic published a post on how despite the sensational stories about college dropouts, 71 % of the 34 million Americans with no diploma are more likely to be unemployed and poor[4].

The graveyard is filled with startups that looked promising at one point but then plummeted to their death. Shield yourself from the survivorship bias by frequently visiting the graves of once-promising startups. Despite its morbid nature, such a walk should help defog your judgment.

Co-written with Amina Islam

References:

[1]https://www.cleverism.com/ultimate-guide-unit-economics/

[2] https://www.entrepreneur.com/article/288769

[3]https://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/

[4]https://www.theatlantic.com/business/archive/2013/03/the-myth-of-the-successful-college-dropout-why-it-could-make-millions-of-young-americans-poorer/273628/

 

Read more

The Ego-Tripping CEO

When I read the founding story of Moovit, I found myself intrigued. Moovit is a free public transit app and urban mobility data analytics company that was founded in 2012 by Roy Bick and Yaron Evron. Yaron was an expert on the public transportation industry while Roy was a technical prodigy. They came together with the aim of improving the experience of commuting within cities. When the two founders self-assessed, they realized that even though they had the industry expertise and technical talent, they were missing the experience of someone who knew how to build a business. So Yaron Evron contacted Nir Erez — a serial entrepreneur — and not only did they bring him in as co-founder, he was appointed CEO of Moovit[1].

What intrigued me was the humility of the initial co-founders to not only admit they needed help, but also relinquish the reign of their own startup to someone else when they recognized they did not have the experience of actually building a business.

In Demystifying the College Dropout CEO Myth, I posed the question, why is it that our kids drop out of college, build a startup and think they’recheckerboard vans ochre ciorapi compresivi pana la coapsa zara long jumpsuit in green nike calças de treino jayden daniels jersey škare za plastične cijevi corsair ddr3 1600 brandon aiyuk jersey youth gepunktete strumpfhose converse blanche et doré brandon aiyuk jersey isolateur cloture electrique ruban ćwiczenia na rowerze cheap yeezys air nike sneakers going to be the next Mark Zuckerburg without recognizing how much work it really takes to build a real business? And given the same situation as the Moovit co-founders, would our young CEO’s admit they don’t know what they’re doing and give up running their own business to someone else?

The sad thing you see within the startup ecosystem is how many decisions are taken by one’s own ego. Ego can be thought of as the inflated sense of self. Affirmations such as, “I am the best,” and “I don’t need anybody’s help,” hint at having a huge ego.

When you look at the natural progression of life, something interesting happens as a person matures. Let’s call this person Eddie. At some point of Eddie’s life, he starts to realize that a lot of the beliefs and perceptions he has collected across the years are not exactly his so he starts to shed them one by one as they go through an existential crisis. What ensues then is a sense of internal emptiness, which he tries to fill with materialistic things, big titles and positions.

If Eddie were a CEO in charge of a startup, he’s more likely to build and run his startup around his ego, which becomes a recipe for disaster. He exhibits arrogance where he doesn’t separate his identity from his opinions. Anybody who disagrees with his opinions automatically disagrees with him, and because he finds his self-esteem challenged, disagreements turn contentious.

Also, since he is unwilling to listen to anyone else’s opinion, he puts a natural ceiling on his growth as well as his team’s and by extension, his startup’s. New ideas that do not originate from him get shot down immediately regardless of how good they are.

His ego also makes him competitive in an unhealthy way so he would spend more time trying to destroy someone else rather than building himself and his startup. And because a big ego tends to co-exist with low levels of self-esteem, he tries hard to appear bigger than he really is by making others feel smaller, so he’s both patronizing and derisive.

Last but not least, he lives from the outside in, sometimes acting without integrity and compromising his own highest values to keep his polished image intact. This drives him to always take credit when things go well, attending all the award ceremonies and talking about his story and his leadership skills. It also makes him shirk responsibility when the startup is not generating as much revenues as the board wants to see, trying hard to blame others — the market, his employees — for messing up.

Unfortunately, that is no way to run a startup or even live life. What ends up happening is it becomes hard to hire great talent for the startup because who would want to work with such a tyrant? It also becomes hard to get the best out of the people who are already working there, which usually leads to mediocre performance.

And the startup ecosystem is so brutal already without the added challenge of operating within a continent with limited capital resources. So CEO’s must focus on living life from the inside out, quashing their ego in the process. This means internally defining your value and living in alignment with them day in day out. This also means you realize that you carry an inner richness within you that demands to express itself by creating something that goes beyond the ego. Sometimes this requires sacrificing short-term success in pursuit of excellence.

Co-written with Amina Islam

Reference:

[1] https://www.ngpcap.com/news/moovits-contribution-to-our-world

 

Read more

How It Takes a Village To Build a Winning African Startup

Image for post

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 callaway reva femme años 20 hombre disfraz custom baseball uniforms nfl jersey sales golf męski zara pallone calcio a 11 golf męski zara bose quietcomfort 35 usa price ćwiczenia na rowerze cheap jordan 4 golf d tp link remote control дамски памучен чорапогащник air nike sneakers balmain carbone fragrantica 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

 

Read more

5 Common Sales-Related Mistakes Startups Make

5 Common Sales-Related Mistakes Startups Make

Image for post

Even though we broke down the sales prockoaxialní kabel hornbach meia com pompom air nike sneakers nfl jersey sales brandon aiyuk jersey detske lyžiarske nohavice 134 140 kilpi predam dänisches bettenlager lounge set miroir terzo callaway reva femme estiti eleganti max mara nike technical cross body bag ciorapi compresivi pana la coapsa játék hajszárító árukeresö balmain carbone fragrantica Purchase college team jerseys at a discounted price and of high quality ss to the three main steps of prospecting, pitching and closing, as a person who has been selling within the African market for 20 years, I wish I can say the practicalities of day-to-day operations were as easy as they sound.

Because selling is a difficult skill to master, there are a lot of nuances that can trip startups if missed, and in this post, I’ll cover some of the sales-related mistakes being made within the ecosystem.

Image for post

Image for post

  1. There is No Product to Sell

Sometimes what startups try to sell — mainly to investors — is the idea. Instead of taking time to build a prototype or a minimum viable product (MVP) using the resources they have, they jump from one investor meeting to another to sell them the idea.

They’ll present facts like what the potential size of the market is, and how their research shows the problem they’re trying to solve is a huge one, and how they’re well-placed to build the solution. However, investors would rather see an MVP that has already been tested in the market with relevant preliminary metrics (number of sales made, etc…).

This is not to say that selling an idea to investors with no product doesn’t work at all. We live at a time when it does — sometimes — but it shouldn’t, because it’s really hard to prove product-market fit with no product.

2. There is No Sales Team

It’s strange to walk into the offices of startups and discover there’s a tech team and a product team, but no sales team. If the startup is at its inception and it really, really, really cannot afford a sales team, then the founding team should dedicate a percentage of their time selling.

Unfortunately, co-founders/CEO’s tend to value meeting investors rather than potential clients even though a strong sales record would help present evidence so the company could receive funding.

3. Selling to the non-decision makers

Just because a company is a prospective client doesn’t mean your point of contact within that company is a decision maker. Ideally, as a sales representative, you would want to bring in the decision-maker to the first meeting, and determine if your solution is within their budget. However, that’s not always possible because of hierarchical charts within organizations so you might need to meet and pitch to several other people before you reach the decision-maker.

4. Targeting non-consumers to pay for consumers

This is interesting and while it’s commonly seen within a diverse group of startups, we’ll use Edtech to illustrate. Products are built for potential students, but then instead of investing in a sales team to sell the product to schools and students, the sales team goes to the CSR department of corporates to sponsor hundreds of students at one go.

Similar to the “sell company to investor” path, this is seen as a path of least resistance. However, even if it appears lucrative in the short-term, it’s ineffective in the long-term because it’s not sustainable.

This action may lead to deals being made and cheques being signed, but the startup isn’t capturing the market directly. Instead of selling to the students and relieving their pain, they sell to the CSR department to create more gain for them in terms of a good press release, etc. This leads to a disconnect from the actual market, because you’re selling to someone who doesn’t really need to use your product.

Also, not many corporations have CSR programs to begin with, and just because a company paid for your program once doesn’t mean they’ll pay again. When it comes to CSR projects, companies like to vary them from year to year, or else they become monotonous.

5. Not following up with clients

Startups think the selling process ends with closing. However, following up with clients to understand their satisfaction with your product or service.

Selling to the market directly is hard.

It’s slow and time consuming but it is the best long-term strategy for any startup. It provides useful market research and as a startup you’ll be informed early on if there’s product-market fit for your product.

Co-written with Amina Islam

 

Read more

Stand Out By Selling Creatively

Stand Out By Selling Creatively

Stand Out By Selling Creatively

Creativity is a very important skill to hone during your sales career. Not only will you need to capture the attention of your prospective clients, but also their hearts as that would help them act on your proposal.

Simply said, creative thinking is the ability to think in new and original ways. For prospecting clients, you’ll have to be creative at getting their attention. Due to the hyper-connectivity of our modern life, most people are suffering from information overload. As a salesperson, you need to take this into consideration every time you prepare a sales pitch: attention is a rare commodity so be creative. This could mean applying your creativity in your marketing channels or in the way that you find leads. For example, for the latter, being creative might mean finding a way to bypass the gatekeepers to reach the decision-maker, which could mean researching where they play golf or which social clubs they’re part of and joining those just to get access to them.

Following that, while presenting your sales pitch, you should aim to connect with them at a visceral level rather than an intellectual one. Filling your presentation with metrics and data may sound compelling, but social science research has shown over and over again that people are not rational beings. Emotions drive a lot of decisions. Neuroscientist Antonio Damasio studied people who had received brain injuries that specifically damaged the part of the brain where emotions are generated and found their decision-making ability was seriously impaired.

Data Tells, But Stories Sell

Stories work because they’re an effective means of communication that can capture the imagination and be internalized. Most importantly, stories have the power to evoke emotion. So whenever you’re interacting with a potential client, as yourself, “What am I trying to make them feel?”

Definitely, the goal is never, “Repelled by me.”

You want them to connect with you and trust you. You also want them to be engaged and entertained by you so they’ll like you. Persuasion research has shown that people are more likely to say yes to people they like. Nobody likes to get bored, and definitely, not during a process that might end up with them parting with their money.

Storytelling in selling doesn’t mean dabbling in fiction, though. Any stories told need to be true. Otherwise, engage the potential client’s imagination by saying, “Imagine a scenario where you…”

Also, everytime you go through a pitch with a client, pay attention to their reactions, validating the exact parts that work and the ones that don’t.

Storytelling is a skill that heavily relies on creativity as it requires a person to take different perspectives.

So how do you become more creative?

Creativity is a skill that can be developed through practice. It requires lateral thinking, which helps people generate new ideas and solve problems by looking at the world from different perspective.

Just like any skill, creativity can be learned through practice:

– Because creative people are good at noticing things around them, practice your observation skills. For e.g. Everytime you find yourself in a new environment, imagine it’s a setting in a novel and describe what you see. How do the windows look like? What is the kind of floor? What color were the tables? Another thing you can do is find faces in clouds.

– Borrow ideas from different fields. Creative people read across genres as it allows them to implant ideas from one field to another. Think of how James Dyson used cyclone systems to suck up sawdust in sawmills and applied them to the home vacuum.

– Hold regular brainstorming sessions with your colleagues or your potential clients. The main ground rule for brainstorming sessions is to not criticize any idea and to have ideas build on each other.

– Apply the SCAMPER method. SCAMPER is a mnemonic that instigates answers to the following generic questions:

● Substitute: What can you substitute in your solution to make it better?

● Combine: What two elements within your solution can you combine?

● Adapt: How could you readjust your solution so it would serve another purpose? Modify: How could you modify your solution to make it better?

● Put to another use.Who else could use your solution?

● Eliminate.How could you simplify your solution?

● Reverse.What if you try to do the exact opposite of what you’re trying to do now?

  • Hang around children. Creativity is usually associated with play, and hanging around children gives one more opportunities to play and experience the world from a different point of view.

Co-written with Amina Islam

 

Read more

The Challenges Around Investing in African Startups — a perspective from Tania Ngima

The Challenges Around Investing in African Startups — a perspective from Tania Ngima

Image for post

There is no denying that financial capital is an important element for business growth. Sufficient working capital allows a business to take advantage of new opportunities that come up, invest in new assets, or hire more staff to expand operations. As mentioned in the previous article, it is unfortunate that a lack of sufficient capital has been the nail on the coffins of far-too-many startups, especially in Africa.

We had a conversation with Demo Venture’s CEO, Tania Ngima, who shed light on why it is hard to sell African ideas to investors, especially international investors.

Demo Ventures is the investment arm of Demo Africa, an initiative which runs pitching competitions and serves as a launchpad for innovative African technologies.

There is a market gap that Demo Ventures satisfies. On one hand, investors want to invest in Africa but may lack sufficient knowledge about the market. Also, they might not have the bandwidth to manage multiple investments, preferring instead to makemikrobølgeovn med grill og varmluft comprar fatos de treino adidas baratos astro a50 ps4 and pc mikrobølgeovn med grill og varmluft jayden daniels jersey meia com pompom polaroid κάμερα meia com pompom gepunktete strumpfhose comprar fatos de treino adidas baratos polaroid κάμερα brandon aiyuk jersey youth golf d mallas para hombre nike astro a50 ps4 and pc single large investment — if at all. That is why you will see that an approximate 40 %* of the funding that went into the African startup ecosystem during the first half of 2018, went into two companies only; Cellulant and Branch (Link Here). At the same time, there are many startups that are looking for different sizes of funding. So Demo Ventures was started to bridge that gap. Currently; it is in the process of raising 100 million $ in equity to invest in early-stage tech startups focused on consumer web and mobile, renewable energy, and financial services, among other industries (Link Here).

So why is it hard to sell the African dream to investors?

Infrastructural and political challenges

Conducting business in the African market is not easy, with challenges existing at both the macro-level and micro-level scale.

Macro-level challenges could be infrastructural, like nonexistent roads or minimal access to electricity in rural areas. In some cases, there are restrictive policies and high import tariffs that make it expensive to do business in emerging markets, compare to other more developed markets.

Unstable political climates tend to hinder business growth as well. For example, on the 15 Jan 2019, Zimbabwe’s government shut down the internet after protests turned deadly (Link Here). Imagine the impact of such a shut down on businesses operating within the country.

Headline-grabbing news like these tend to make investors nervous.

Problems with Execution

Micro-level challenges deal with business execution — or the daily operations of running a business. Tania Ngima notes, “The difference in execution is the difference between being able to give your investors a return on investment, or not.”

She mentions that execution problems tend to center around the founding team. Sometimes, they get so passionate and invested in the shape or form of their original idea that they might not be willing to be agile and open to diverse opinions The questions that they need to ask themselves are, “Are we willing to rethink our product if the market is not adopting it as anticipated? Are we willing to rethink our business models to deal with changing legislation ?”

Another challenge with the ecosystem is that local investors are hard to come by. Only recently are angel investors from Africa coming around to invest in startups, as there is the old-school thinking of investments only being poured in real estate or government securities. Because of that, it’s very easy for international investors to raise the question, “If you can’t get your own people to invest in you, then why should we?”

Personal Challenges

Finally, entrepreneurship as a legitimate career path is still not fully understood or accepted culturally. While it is easier for children who grew up within entrepreneurial families to become entrepreneurs, the road for the rest of the population is paved with thorns.

Entrepreneurship is generally viewed as the option until one gets a real job. Also in the case that someone tries to pursue a business venture alongside a real job, the side hustle is not given the energy and focus it requires. That could at times translate into higher failure rates.

Besides the emotional barriers associated with having family members not accept them for following a unconventional path, entrepreneurs usually don’t have the financial bandwidth to fail fast or fail often. While in the US, there’s more liquidity for startup founders to fail a couple of times, it’s more “do-or-die” in this market.

Or to be more literal, “do-or-get-a-real-job”.

Also, ideas from Silicon Valley are being imported into Silicon Savannah without taking care of the fact that the two markets are nothing alike. In Silicon Valley, there’s more experience in angel investing, and proven track records of successful exits. As Tania is quoted saying, “In Africa, it’s virtually impossible for a startup to exit via IPO as our stock exchanges are not that mature yet.”

Instead, exits are usually made by buyouts or acquisitions.

But there is hope.

More international funders are looking here. The most recent Weetracker report, “Decoding Venture Investments in Africa 2018,” highlighted that over 725.6 Million dollars were invested in Africa in 2018. It also underscores that the money went into 458 startups with 80 % of the deals concentrating around South Africa, Nigeria and Kenya.

This newly-spurred interest in the African startup landscape by venture capitalists is a good thing. It shows venture capitalists have enough confidence to expect a return on investment from Africa, rather than signing it off solely as a place to pour charity money into.

  • 67.5 million $ out of the total 168.6 million $

Story co-written with Amina Islam

 

 

 

Read more

Mistakes to Avoid as a Startup While Fundraising

Image for post

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 categoriesgolf męski zara billige matratzen babyphone mit alexa verbinden dlm382 aiyuk jersey sport jumpsuit nike köröm díszítő szalagok carhartt uk gepunktete strumpfhose vans chima ferguson pro 2 port royale black forty two skateboard shop meilleur lampe uv suport tableta bord nike air max ivo black and white amazon massaggiatore anticellulite amazon nfl jersey sales 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

References:

[1]https://www.accountingtools.com/articles/what-is-equity-capital.html

[2]https://www.thebalance.com/the-three-primary-types-of-financial-capital-357332

[3]https://moronesanalytics.com/develop-your-intuition-about-valuation-multiples/

[4]https://exitadviser.com/business-value.aspx?id=business-valuation-methods

 

 

Read more

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

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

Image for post

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 plavky chlapec 128nove mikrobølgeovn med grill og varmluft nike wiki dlm382 nike technical cross body bag jayden daniels lsu jersey air nike sneakers meilleur lampe uv mikrobølgeovn med grill og varmluft brandon aiyuk jersey logitech c270 microphone not working köröm díszítő szalagok welche kaffeemaschine für 1 person nike air max aliexpress logitech c270 microphone not working 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.

Informally.

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.

Screening

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

 

Read more