A fresh round of seed funding for your startup from a venture capital is a big reason to celebrate. However, don’t start to celebrate too early. This is because experienced hackers are now trying their hands on bigger targets — seed funds of startups. In a real life scenario, cyber security firm Check Point revealed that a Chinese venture capital firm and an Israeli startup were recently duped of $1 million through a classic “Man-In-The-Middle (MITM) attack”.
While the Chinese venture capital firm actually wired $1 million to the startup, the young Israeli CEO and CFO never received it. Check Point did not reveal the names of both parties as it is investigating the fraud.
A day on the internet, according to the World Bank — Source: World Bank, World Development Report 2016 team, http://www.internetlivestats.com/one-second (as compiled on May 29, 2015)
“A Chinese venture capital firm was alerted by their bank that there was an issue with one of their recent wire transactions. A few days later, a young Israeli startup realised they didn’t receive their $1 million seed funding. Both sides got on the phone and quickly realized that their money was stolen,” said Check Point in a statement.
Both parties were quick to figure out that something strange going on with the emails between their emails. “Some of the emails were modified and some were not even written by them,” it said.
Check Point revealed that a few months before the money transaction was made, the attacker noticed an email thread announcing the upcoming multi-million dollars seeding fund and decided to intervene
“Instead of just monitoring the emails by creating an auto forwarding rule, as is seen in the usual BEC (Business Email Compromise) cases, this attacker decided to register 2 new lookalike domains. The first domain was essentially the same as the Israeli startup domain, but with an additional ‘s’ added to the end of the domain name. The second domain closely resembled that of the Chinese VC company, but once again added an ‘s’ to the end of the domain name,” it reported.
“The attacker then sent two emails with the same headline as the original thread. The first email was sent to the Chinese VC company from the Israeli lookalike domain spoofing the email address of the Israeli startup’s CEO. The second email was sent to the Israeli startup from the lookalike Chinese VC company domain spoofing the VC account manager that handled this investment,” it explained.
Incidence of cyber attacks on UK firms -Source: UK Government.
This is how the attacker was able to carry out the classic “Man-In-The-Middle (MITM) attack.” Every email sent by each side was in reality sent to the attacker, who then tweaked the conversation as per his needs and diverted the money. “Throughout the entire course of this attack, the attacker sent 18 emails to the Chinese side and 14 to the Israeli side,” it added.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
After studying economics at University, and spending two years at Bain & Company in San Francisco, I went on to do marketing at a fast moving consumer goods company, before realising that “fast moving” was not fast enough for me. So, I focused my career more on digital, where you could see changes in lives in a matter of days, not months.
Anita Woods, the VP, Product at Wefarm
After moving to the UK, I did stints at Amazon and Google in product and marketing, and then started moving to smaller companies, where I felt increasingly at home. I found myself working at a fintech startup, then healthtech, and then I became VP of Product at Wefarm — a company that’s enabling smallholder farmers to connect with the people and resources they need to achieve their full economic potential.
As we’ve built out the business to be the largest digital farmer to farmer network, here are the top lessons I’ve found useful along the way:
1. Understand your user; don’t blindly chase KPIs
I love metrics and data-driven decisions, but while focusing on optimising KPIs, it’s crucial to remember who you are building for, and what’s valuable to them.
Often product teams are building products they also use themselves, and so it can be easy to fall into the trap of building what you want and losing sight of the end-user. Even when clear KPIs are in place, a lack of understanding of the end-user can lead to chasing goals in the wrong way. In one previous start-up I worked at, I was surprised to hear that we didn’t tell some users that a signature upon delivery was required. When I asked the reason for this, I was told it was because the conversion rate was higher if we didn’t mention the signature. While this may have been true in the short-run, it wasn’t in the long-run because of a dissatisfying post-purchase experience could have on repeat purchases.
At Wefarm, we have a lot of data on what farmers are asking and doing, that could be valuable to a multitude of businesses, governments, and non-profits. For each potential revenue opportunity we have, we think about whether our farmers would be the ones to benefit from this, and if we are doing things that earn their trust.
This really helps us to prioritise, and ultimately things that could increase revenue but without clear value to the farmer simply don’t make the cut. So, while it seems simple, the best lesson I have is spending time with the people you are building products for. Data without the underlying context of the people who sit behind it, is not that helpful. We have teams across the UK and East Africa, but we invest heavily in making sure everyone in the UK also has the space and time to be in Africa meeting with the farmers they are building value for.
2. Tech start-ups must look beyond digital offering
As mentioned, at Wefarm we’re enabling farmers to connect with both the people and the resources they need. A big piece of the latter means providing farmers access to the best quality inputs, at the best price. We’ve recently launched our marketplace to help farmers, manufacturers and retailers come together and do just that. However, when you think of the word ‘marketplace’ in product, it can be easy to immediately conjure images of a purely digital and automated Amazon-style service where we could predict exactly what farmers need to buy, and then generate automated messages to tell them about these products at the times that matter most. Whilst we want to get there, it’s also important to look at how farmers are using channels today, and, ensure we’re prioritising getting value to them via the path of least resistance.
After realising that most of our farmers like to view physical catalogues at their local agrovets containing all of the products we have available, we focused on automating the process for easily updating and printing new catalogues, and collaborated with our field teams to get them into the hands of our partner agrovets. More automation is still key to scaling our business, but for me, it was a useful sense check to realise that existing farmer behaviors are a combination of both digital and physical.
3. Communities don’t have borders
One of the things I remember from my first field visit in Kenya was hearing a farmer talk about why he responds to questions from other farmers that he has never met. He said he felt that it was his responsibility to help them because other people have helped him. The power of digital means that a sense of community and belonging is no longer based solely on physical proximity. My own personal experience of this has been with a Facebook group for parents of children with the same rare genetic condition that my daughter has. Within this community, there are people who play different roles, the information seekers, the advice givers, those looking for reassurance/validation, and of course, people can play different roles at different times.
I’ve sometimes been asked how we can work towards providing “perfect” answers to questions on our service. But what I believe is even more powerful is giving farmers across the world the context to make their own informed decisions. Like in any community the power lies in being able to bring more trusted voices into the fold. I think a common mistake of startups is to believe that you as a business have all the answers, and it’s your job to tell people what to do. But for me the lesson I have learnt in helping build a tech-startup in Africa, is that many farmers already have the answers, and a desire to share them, and therefore the real opportunity that I see for us is to provide a place where those farmers can be part of a global community, and help empower them even more to make their own decisions
Anita Woods is the VP, Product at Wefarm, a London-based peer-to-peer knowledge sharing platform for smallholder farmers which recently raised $13 million in a Series A round of funding led by True Ventures, with AgFunder, June Fund; previous investors LocalGlobe, ADV and Norrsken Foundation; and others also participating.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Twiga Foods, the Kenyan agri-tech startup trying to disrupt Kenya’s food demand and supply chains, understands that Kenyans need food, and need it badly. About 36.1%, representing nearly over 18 million of Kenya’s 48 million population are hungry. This figure is worsened by the facts that:
Peter Njonjo
Over 3.4 million people face acute food insecurity in the country; and
Agricultural productivity has been stagnating in recent years due to frequent droughts, floods, and climate change, leading to only about 20 percent of Kenyan land being suitable for farming.
Interestingly, Kenya’s agricultural sector contributes about 26% — more than one-quarter — to Kenya’s entire Gross Domestic Product. This is even as about 75% of Kenya’s entire workforce, mostly spread out in rural areas, is engaged in the agricultural sector.
Africa’s Food Security Index: Click To ExpandThese facts are the reasons Twiga Foods would be the startup of the future. The startup is going after Kenya’s food sector to break the jinx of inefficiencies presently in the sector, and to ensure that the limited resources available in Kenya’s agricultural sector are well-utilised.
Its simple business model is to aggregate all food retailers and dealers, from the banana vendors buying in bulk to the avocado retailers selling in stock, and then connecting them to Kenyan farmers producing quality farm produce. This is a classic example of a business-to-business (B2B) model, so that vendors looking to purchase agricultural produce don’t have to travel miles to meet local producers of the produce, thereby saving them the transportation and logistics cost, increasing the productivity and demand for the produce of the farmers, at the same time reducing food waste.
These metrics are what TLCom Capital looked out for when it invested in Twiga Foods.
“TLcom’s general investment thesis for Africa is that given the high penetration of mobile, there are very large markets where demand is already proven and technology can play a true role in offering a superior value proposition over existing solutions,” said Ido Sum, partner at TLCom Capital which syndicated Twiga Foods’ recent $30 million fund raising led by Goldman Sachs.
Quite noteworthy is the fact that TLCom Capital is often strategic with its investments, going mostly for early comers with the huge potentials. It went for Nigeria’s Kobo360, a startup pioneering digital trucking in Nigeria through the Goldman Sachs-led $20 million investment. It also went for Andela, one of Africa’s well-funded startups. Hence, that Venture Capitalist TLCom Capital preferred to invest in tech companies in their early to growth stages, such as Twiga Foods, shows that the startup is, to a large extent, home to disrupt.
The same is also said of Goldman Sachs, America’s leading investment banker which is recently interested in Africa and international institutional firms and VCs looking to invest on the continent at a time when other international investment banks such as Credit Suisse and Barclays have cut down or exited their African operations altogether. Goldman Sachs’ investment in Twiga Foods marks its first major deal in a Kenyan firm.
In view of all these, we therefore discuss a few strategies gleaned from Twiga Foods’ quest to disrupt the Kenyan food market.
Prove A Point First But Know That Scaling Is Important
First CEO Grant Brooke simply had to find a way to scale Twiga Foods, a startup in the often neglected African startup ecosystem — agritech. Of the whole investment made into Africa’s startup ecosystem in 2018, agritech got a meagre $20.2 million, out of which Twiga Foods got $10.2 million. Compared to fintech’s $284.6 million, this is discouraging for new comers to the agritech sector.
From all indications, these figures are a representation of the fact that even though Africa has a yawning food sufficiency gap, startups who take the path of agri-businesses often face low investment appetite from investors. Nigeria’s agritech startup Farmcrowdy, one of Africa’s top-funded agritech startups for instance, has been able to raise slightly above $2 million in funding from VCs since its founding in 2016.
Of course, investors are not to blame: entering early stage startups in Africa’s agritech startup ecosystem appears foolhardy, with all the risk associated with crop yields, partly brought about by changes in climate and diseases.
So Twiga’s strategies were to first avoid the crop production stage, in preference of the post production stage when crops are ready to be harvested; and to eliminate the final consumers from its model. Consumers in the African food markets are highly dispersed, making it grossly difficult to aggregate them. They are also highly unpredictable. Pursuing them would increase cost per acquisition for any startup, at the same breath, creating unnecessary competition from dispersed local markets where they are used to buying and selling from.
Therefore, by targeting the middleman between the farmer and consumers, Twiga found an easily large market to scale. The startup already has more than 17, 000 producers for direct delivery to more than 8,500 vendors.
Africa’s Agritech Startups Who Solve The Inefficiency Problem In The Agric Supply Chain May Win
Twiga’s other strategy is simple: find an efficient way to deliver to final consumers at lower costs. Inefficiencies in the supply chain have been blamed for high food prices in African cities, where close to 90 percent of the supply comes from informal retail outlets. Kenyans spend 45 percent of their disposable incomes on food, compared to 14 percent for South Africans and 10 percent for citizens of most European countries. To solve this problem, Twiga followed a simple pattern:
Get a farmer to sign up to join Twiga.
Twiga visits and assesses the farm, then adds farmer onto system.
Twiga issues a purchase order to book the produce and indicate date of harvest.
Twiga harvests and weighs farmers produce and issues you with a receipt.
Farmers receive payment within 24 hours.
All produce is gathered at over 30 Collection Centres across Kenya from the farms.
Produce goes to the Packhouse for processing, grading and dispatch to over 60 sales routes.
A vendor signs up to join Twiga.
Twiga sales representative visits vendor and registers them onto system.
Vendor places order with sales representative.
Twiga delivers produce directly to vendors shops.
Through this, the farmer benefits from: guaranteed market; transparent pricing as seen on price boards; farming advice;resources and access to credit from Twiga’s partners. On the part of vendors, the benefits include quality produce; free delivery; assured food safety through easy tracking; access to credit from Twiga’s partners; and fair prices for produce.
The end implication of this simple process is that Kenyans would spend less to purchase food produce. This would in turn encourage them to budget more on food.
Can Using Corporate Expertise Like Twiga Foods Assist Startups To Grow Faster?
To beat the glut in investment in Africa’s agritech startup ecosystem, Twiga quickly appointed Peter Njonjo to take over from founder Grant Brooke. Although the startup has previously raised $10.3m from investors and secured $2 million in grant funding from organizations such as USAID and the GSMA in 2017, followed by a 2018 $10m investment from the International Finance Corporation (IFC), TLcom, and the Global Agriculture and Food Security Programme, bringing Njonjo onboard the startup may seem more or less a strategic move to capture more market and scale quickly.
“Starting new ventures is really my skill-set and passion, while proficiently running institutions is Peter’s skill-set and passion. Twiga has an aggressive growth plan and this transition leverages on our respective expertise, ” Brooke said.
Njonjo was the most senior Kenyan at Coca Cola Company where he worked for 21 years, leading the multinational’s West and Central Africa business unit as President.
Peter Njonjo’s appointment, noted Mr Brooke, presents a first; with a senior executive in a Fortune 500 Company joining an African startup, a “clear testament of the increasing capacity of venture capital in funding and solving significant problems and harnessing opportunities on the continent.”
“If my leadership was the period in which Twiga was proving a point that there’s a better way to build food safe and secure markets, Peter’s leadership will be about institutionalizing this way of doing business and scaling it. Peter’s experience in building efficient supply chains and last-mile distribution in over 33 African countries makes him uniquely suited to lead us,” said the outgone Twiga Foods CEO Grant Brooke.
Currently, the startup has reached more $50 million in total funding since 2014 when it was founded, over $35 million achieved under Njonjo’s leadership.
Critically speaking, Twiga’s success could largely be attributed to Grant Brooke, who has built a career researching Kenya’s informal retail market, an experience dating back to his home city, Texas, in the United States. Njonjo’s appointment could be analysed as finally giving Twiga Foods an African outlook. Therefore, it is safe to say that Twiga Foods still has a long way to go in qualifying as a contemporary agritech startup founded and run by an African. Mr. Njonjo’s Africa’s first ever corporate touch at Twiga and its eventual success may however still be a lesson in strategy for African startups.
Twiga Foods: Bottom Line
To put Africa’s food needs into perspective, Kenyans have more certainty of having food than Ugandans, Rwandans, Togolese or Nigerians. This is a dire situation for the population of these countries combined, and a huge opportunity for many more African agritech startups to come onboard.
Twiga Foods has obviously found a large market for its business model. Africa’s farmers are still obscure, and remotely isolated from the large market. Twiga has started a show of allowing them to play a significant part with some force. It does this by collecting them together with technology and helping them to deliver their products to final consumers, in a safe, cost-effective and efficient way.
These are the lessons Twiga Foods has taught us in Africa’s complicated food supply chain, and why Twiga Foods may be Africa’s next unicorn (and indeed the first agritech startup to achieve such feat) in ten years to come, if it gets its processes and team right.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Startup success or failure is mostly dependent on founders’ hustle, resources and decision making. While external and uncontrollable factors can sometimes play a big role in the performance of a startup, rarely will a startup suddenly fail or succeed independently from entrepreneurs’ actions.
Every entrepreneur is prone to making bad decisions no matter their knowledge or experience. The 5 common mistakes listed below are fully controllable and easily avoidable. Here’s a reminder of what can negatively affect your startup success.
1. Short-Term Success
It’s easy to score a quick win even with just an idea. Every hard-working entrepreneur can hustle to get the first paying customers just by knocking on doors and selling a vision. Furthermore, today, anyone can build a product with or without a budget. The hardest part is building a sustainable startup. Follow these general business rules:
Start with a vision but set one short-term goal at a time.
Break down short-term goals into small achievable milestones and celebrate the small wins.
Be open for change.
Understand that one startup failure is one step closer to building a different sustainable startup even if the ideas are completely different.
Surround yourself with customers or future buyers since day 1. Let them help you build the product as if they’re co-founders in the venture.
Virtually any idea or feature can be tested before development. Pay attention to those validation signals and avoid convincing yourself that if you build it, things will change.
Work with the best. If you can’t afford working with the best, hire them as mentors and team leads.
2. Premature Growth
It’s easy to fake and justify startup success with resources. If you have funds, you can force an undesirable solution into a market and see a growing number of customers even if the numbers don’t add up. Many startups failed waiting for the time their customer lifetime value exceeds acquisition costs. Research shows that 70% of startups fail because of premature growth.
Instead, focus on building the foundation even if it takes years. The foundation of a startup is a product people use, recommend and pay for. Achieving those three pillars takes a series of product iterations. Once you’re there, even with just a few customers, it won’t be hard to scale to the next hundred and thousand buyers. The other way around is detrimental to a startup.
3. Hiring The Cheapest
Usually, the biggest portion of a startup investment is allocated to product development. It can be enticing to bet on a team who seem like they might be able to get the job done just because the cost of hiring the best is higher.
In reality, over the long run, the cost of hiring underqualified candidates can be significantly higher than the premium price paid for the right talent. Redevelopment, miscommunication, mistakes and slack will cost time and money.
Instead, even if you can’t hire the best, get them involved as advisors and guides to your team. Even if they don’t do the work, their leadership will increase the probability of success of your product and startup.
4. Picking The Wrong Battle
Building a successful startup is a challenging endeavor. To improve the odds of success, entrepreneurs are better off focusing on products where they can control most of the variables. For instance, entrepreneurs that aim to launch a startup in a new space will take more time to understand the market than founders who focus on areas they’re familiar with.
Creating products that help you overcome your own challenges is a good start. It is a great way to solve problems you are passionate about. Since longevity is a key ingredient of startup success, picking a battle you know you can compete in for many years is how you will succeed in business.
5. Long Performance Evaluation Cycles
There is always something that can be done to improve a product. The truth is, there is no such thing as a perfect product and long development cycles will only delay customer interaction and feedback.
It costs time and money to test new hypotheses. Therefore, the more insights you can gather before product development and the more involved customers are, the more likely you will build the right features. Building and releasing quickly is how you can minimize risk and expenses.
Avoiding these 5 mistakes will significantly increase the probability of your startup success. The truth is, applying those rules is easier said than done. To make sure you are moving in the right direction and making the right decisions, surround yourself with mentors and likeminded entrepreneurs.
Abdo Riani is a product development expert and a founder.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Youth, the playwright George Bernard Shaw famously claimed, “is wasted on the young”. But when it comes to the public perception of the qualities of a startup founder, thanks to Mark Zuckerberg and co, the appearance of youth seems to be prized above all other attributes.
And yet the truth is, if you delve into all the data available, the average age of founders of the most successful tech startups is 45. Moreover, according to a study published by Harvard Business Review, even the tech titans who did start out in their early twenties — Bill Gates, Steve Jobs, Jeff Bezos, Sergey Brin, Larry Page — experienced their biggest business success when they were middle aged. Steve Jobs and Apple launched the iPhone when he was 52, while Amazon’s future market capitalisation growth rate was at its peak when Jeff Bezos was 45.
“Every entrepreneur has a unique story,” says Aftab Malhotra, 41, founder of disruptive artificial intelligence tech startup GrowthEnabler. “That involves big exponential ideas, passion and courage.”
The qualities of a startup founder also include “patience, pattern recognition, grit, communication skills and authenticity”, argues serial tech entrepreneur Sachin Dev Duggal, chief executive of Builder.ai.
Age helps, he adds: “What I understand today, that I didn’t decades ago when I started out, is to be a successful entrepreneur you have to be able to see past the noise and darkness and brave your way to the other end.”
Wisdom build over the decades. “My fifth startup, Carbonite, just got sold for $1.4 billion and I’m almost three years into my sixth, Wasabi, data storage in the cloud,” says David Friend, founder and chief executive of Wasabi Technologies, now aged 71 and a successful, seven-time entrepreneur. “I finally feel like I know what I’m doing. My first startup, right out of college, was reasonably successful, but it makes me cringe to think of all the dumb mistakes I made.
“After more than 40 years as a CEO, you see many of the same issues emerge over and over again. Issues like how to put a team together, how to position and differentiate a product, building a corporate culture. After all this time, I have a sense of what will work and what won’t. More importantly, I have a higher degree of confidence in my day-to-day decisions and that sense of confidence ripples through the organisation.”
Qualities of a startup founder improve with age
Despite all the media emphasis on young entrepreneurs, the qualities of a startup founder are enhanced with age and this helps when it comes to seeking investment, scaling their business and ultimately achieving a successful exit after acquisition.
“I IPO’d a business I started in my twenties, I grew a not-for-profit in my thirties and now my latest business is growing at a pace that is exhilarating and terrifying in equal measure,” says Mark K. Smith, chief executive of tech company ContactEngine. “I’ve raised tens of millions of dollars and I’ve seen huge success.”
After more than 40 years as a CEO, you see many of the same issues emerge over and over again
But, like many other successful tech entrepreneurs, Dr Smith has also suffered, and survived, failure. He sums up his tale within the length of a tweet: “(12/04/2000) IPO on LSE, market cap of £100m, price dropped 40% in a day. Worth £8m at 8am, £5m at 4pm. Hero to villain in exactly 8hrs.” This happened when he was only 34.
“You’d imagine, wouldn’t you, that this experience might be the end of a career? Well it wasn’t for me. The thing is that when you IPO you are entering into a human construct that defies logical explanation. Markets ebb and flow not, as you might imagine, on the basis of science, but of the more nebulous metric of sentiment,” says Dr Smith.
Learning to embrace failure is key
Sentiment, on a national scale, explains our negative attitude to failure in the UK; we would not see having failed as one of the essential qualities of a startup founder.
“I’ll always remember the classic water cooler conversation with a friend of mine who told me she’d heard someone commenting on me,’ recalls Eric Mayes, CEO of the Cambridge tech company Endomag, which uses nanoparticle technology to help surgeons mark and remove cancerous tissue.
“They had said, ‘Eric has great ideas, but he’ll never deliver’, because my first venture failed. Of course, it hurts and touches you, even though you know it is narrow thinking. It’s always a shock to hear people think that way, when you have the kind of positivity that creates something out of nothing,” he says.
Older tech entrepreneurs who’ve overcome early disaster have resilience; they’re not afraid to ask questions or ashamed to admit they don’t know everything. “There is a certain power in not trying to be the oracle with all the answers,” Mr Mayes explains. “It frees you up to ask the questions that lead to better answers. It’s a great basis for managing people, projects or teams in general.”
By contrast, in the United States, failure is viewed as a nightmarish part of the American dream.
“‘Failing fast’ is a mantra that startups and entrepreneurs often quote,” says Mr Malhotra. “What that means is having the courage, passion and tenacity to do what others fear. Try things and challenge the way things are done. Being an entrepreneur is the hardest and most mentally exhausting undertaking and those who have the energy to try again and again will learn and grow at warp speed.”
The secret to being a successful startup founder?
Ironically, having been through failure is one of the ultimate qualities of a startup founder that give older business brains an advantage. “Entrepreneurs who ‘fail’ will eventually succeed and change the world. They will become the mavericks, the disruptors and the leaders the world admires,” says Mr Malhotra, giving 48-year-old Elon Musk (Tesla, SpaceX) and 81-year-old Ratan Tata (Tata Group) as examples.
Interestingly, Dr Smith sees the experience that comes with age as so integral to the qualities of a startup founder that he’s only really interested in investors who are at least 45 years old. “That seems rather specific doesn’t it? Well here’s why: the last tech crash’s 20-year anniversary is next April and, if you ignore the 2008 banking collapse when, oddly, the ‘new’ tech bubble avoided being burst, then we are due for a ‘correction’ quite soon,” he says.
“And if your investors are wee boys or girls and have not seen the trough and only the peak, then beware. Because you need to understand that shares go down as well as up. That is when ‘proper’ companies win out. Just another ‘Uber of’ or another social media silliness will crash and burn.”
Emily Hill is a writer at Raconteur Media Limited, London, United Kingdom
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
With the recent sale of South Africa ’s Taste Holdings’ Starbucks and Domino’s Pizza, a strong message has been sent to potential franchise buyers in Africa: it may not be business-savvy to bring many franchises on board than you can handle. In South Africa’s highly congested and competitive environment that has the likes of KFC with over 885 outlets, Steers with over 581 , Debonairs with over 546 or Nando’s with over 340, Taste Holdings would have expected the game to be tough for Starbucks and Domino’s with just ten or a few more stores or outlets.
Now, Here Is The Background To All These
Taste Holdings said in June this year that its losses widened 32 percent during the year to end February, 2019 as high operating costs and once-off impairment costs continued to impact on the company’s earnings in the year to the end of February.
It further stated that impairments and once-off costs rose to R102m during the period from R24m last year with R58m attributed to the food division and R44m to the luxury goods division.
This is even as income earned in the South Africa ‘s food and beverages sector in 2018 was majorly from food sales of restaurants and coffee shops (about 45% of all income earned in the sector)
To take care of this,Taste Holdings’ majority shareholder Sean Riskowitz said Taste was now focusing on its jewellery brands that include NWJ Jewellery and Arthur Kaplan .
Riskowitz said the jewellery business was profitable, cash flow generative and solid with plenty of growth opportunities.
Lesson learned: It just doesn’t seem savvy to over-diversify at the cost of focus; and know when to draw the line on unprofitable business lines.
Even With Bad Earnings, Does Taste Holdings Have To Under-Sell The Starbucks’ Franchise?
Of course! All that Taste Holdings needed to do was to obtain the approval of Starbucks International, which it did. And it made perfect sense to under-sell too, if anything Riskowitz said was the reality. With the consistent losses and a funding requirement for a minimum store rollout at R238 million ($16 million), selling at R7 million ( $480k)seemed the safest way to leap out of a a wide trap. Riskowitz has admitted that the franchise was difficult to manage.
“ So the value that has actually accrued to Taste from this sale is not just R7m, but also the transfer of this store build liability, making the transaction worth R245m to Taste,” Riskowitz said.
Recall that in November, 2019, Taste shocked the food and beverages market by announcing that it was selling its South African Starbucks franchise for R7 million to an entity called K2019548958 following detailed operational reviews.
Finally, Here Is How You Can Handle The Loss of Multi-Billion Dollar Franchises, Such As Starbucks and Domino’s
Selling off two valuable franchises is a big deal, especially with the hopes of relying on the brand and reputation of the franchises to make quick returns but Sean Riskowitz appears determined to to turn things around at the company.
Riskowitz, who is also the chief executive of Protea Asset Management, Combined Motor Holdings (CMH) and Calgro M3, said that Taste Holdings’ strategy lies in its strong long-term business economics.
Relying on this, he said Taste Holdings, whose share price has tanked 95.51 percent in the last three years, would eventually bounce back.
“Shares represent the price of a company, but value is a measure of the underlying intrinsic worth of a company,” he said.
Riskowitz said he was equally confident about his other investments in South Africa, charging that Calgro generated more than R400m in cash from operations in the six months to August.
“Their price-to-earnings ratio is now 2.5x,” he said. “ Does it really make sense that the share price should be where it is in that context? We also know from Calgro’s own calculations that if they liquidated the business the shares would be worth around R23 per share, versus a market price of just R4.”
“Calgro is a perfect example of an exceptional opportunity that people will look back upon in a few years and kick themselves for missing.”
Lesson learned: You many acquire big brands in the course of your business to add to your company’s reputation or brand image but don’t lose focus of the company’s value long-term.
Some Words For Doubtful Investors About The Wayward South African Economy
Riskowitz said he was positive about South Africa despite business confidence sliding to its lowest this year in the third quarter.
“At this time, many people are fearful about the future of South Africa, and so the price at which you can invest is very low compared to the quality of businesses and management talent, in general,’’ Riskowitz said. ‘‘We make ten year or more investments and believe the economic and social environment will normalise in due course, creating a long runway of growth and value creation for many South African businesses. ”
Starbucks Coffee, South Africa is run by the same parent company which runs Domino’s, Taste Holdings. The first franchise was opened in Rosebank, Johannesburg. Currently, there are 13 Starbucks franchises in South Africa. Starbucks International’s first ever location was opened in Seattle, USA in 1971.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
It’s been almost two years now since my full-time job at a company I founded. Since then I’ve gotten to work with some fantastic individuals that have changed some of my core beliefs about startups. Namely Nate Watson at Contemporary Analysis, Cory Scott at LiveBy, and the three founders of Buildertrend: Jeff Dugger, Steve Dugger, and Dan Houghton.
Preston Badeer, data scientist, product manager and startup founder
Learning from these people and many others has drastically changed my views on what’s important in an early-stage business. In hindsight, I think my mistakes as a founder were caused in part by core beliefs that were fundamentally wrong.
False Belief 1: ‘VC is evil’
One of the biggest mistakes I made when starting companies was delaying raising capital for as long as possible. Mind you, I wasn’t pushing it off because I didn’t need it, but because I despised the idea of it.
Asking others to fund your company always seemed backward to me. If it’s a viable business model then it should fund itself, or at least be on its way toward doing so. And if that’s the case, why raise money at all? Why spend time formulating a pitch deck when you could be formulating your actual product?
I also found it easy to question the authority of VCs on any given topic, since most are successful founders and most successful founders would admit to luck being heavily involved.
This then draws into question the “success metrics” by which a VC can claim their authority or point to past success. There seems to be very little agreement on which metrics should be used, and many of the ones in use were clearly chosen because that particular VC had good results on that particular metric.
However, despite all this, I now believe investment (VC or otherwise) is crucial to the success of any startup. It’s purely about timing and the investment style. My problem was that I was focused squarely on VC, didn’t evaluate other styles, and had the timing totally wrong.
False Belief 2: ‘Focus on the product’
I was a developer for a long time, and some habits are tough to break. One of those is an incessant focus on product quality and development “progress.”
Unfortunately, neither of these things make money, and if you mean to build a business, you must at some level follow the money.
Product quality is only as useful as the sales it creates. If the quality is causing your ideal customers to say “No,” then work on the specific area of quality they complained about. Make those potential customers give you feedback during the development of the fix, and continually ask them what their barriers to buying are.
If you mean to build a business, you must at some level follow the money.
Development “progress” is things like features launched, integrations created, lines of code written, pages of your app created, etc. and it’s easy to get attached to building these out. Development can be very abstract, so performance-driven individuals (or developers who report to them) will grasp for some way to measure progress or success.
This is a lose-lose situation for everyone because you’ll focus on the wrong things and also gain false confidence in your product. Using potential sales to inform what you develop and measuring success based on sales impact will force you to focus on what your potential customers are focused on.
False Belief 3: ‘Quit your job’
In the introduction to the book Originals, Adam Grant makes a point about common misconceptions. His prime example is when he didn’t invest in the earliest stages of Airbnb because the co-founders held full-time jobs.
It’s well-known that investors don’t like to put their money into part-time endeavors. If you want VC money, you’ll almost certainly have to quit your job and go full-time. Or — and most VCs prefer this — you already have by the time you’re asking.
As Adam Grant points out, however, having a full-time job outside of your startup actually increases the odds of your company surviving by 33%.
This alone should tell you not to quit your job, but I want to take it a step further. I believe that if you can’t pay yourself at your startup, and you don’t have a seperate full-time job, you should spend time getting one.
Ideally, you should get a job at another startup with founders you look up to. You’ll learn from their mistakes, your own mistakes, and learn a lot from general experience, all of which benefit your company.
In addition, by getting a stable job you’re actually decreasing the burn rate of your startup and increasing its runway. Which is why I believe (again, if you can’t pay yourself at your startup and you don’t have a full-time job) getting a job is actuallywhat’s best for your company, not just you.
Avoiding investment before sales might sound like the slow lane, but if you put sales first then you’re on the fast track to either paying yourself or being appealing to investors (whose money you can use to pay yourself). This, in turn, will allow you to quit that job and focus all efforts on your business.
I believe early-stage founders having or getting full-time jobs is not a bad thing. In fact, it’s actually in the company’s best interest. It’s also the key to getting the right timing for investment.
Preston Badeer is a data scientist, product manager and startup founder
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Chinese investors are not notorious for investing in African startups, although they invest in other startup ecosystems in world. However, China’s venture capital (VC) investment in the Indian startup ecosystem grew five times at $5.6 billion in 2018 compared to a $668 million in 2016.
In India alone, Chinese investors have clearly been betting big on startups with their funding surpassing their American and Japanese counterparts in 2018. In fact, Chinese funds flowing into India have seen exponential growth over the last couple of years. China’s venture capital (VC) investment in the Indian startup ecosystem grew five times at $5.6 billion in 2018, compared to a mere $668 million in 2016, according to research and analytics platform Tracxn. In 2017, the number stood at $3 billion.
Given their interest in investing in startups, most founders here would give an arm and a leg to have a cheat-sheet to the dos and don’ts while meeting Chinese investors.
During a panel discussion at the fourth edition of the TiE Global Summit in New Delhi on Friday, Damien Zhang from CDH Investments and Jeffrey Yam from Integrated Capital gave a sneak-peek into the mind of a Chinese VC. CDH Investments is a Beijing-based alternative asset management firm while Integrated Capital is a Hong Kong-based multi-strategy private investment office. Both entities have investments in Indian startups.
The Dos
“We are casual about meeting founders, so feel free to meet for drinks. And reach out for karaoke if you’re in China,” Damien says.
According to Jeffrey, as an Indian startup founder, even if you don’t fit a Chinese investor’s mandate, be “proactive”.
“Their advice could help a lot. Once you’ve developed a personal relationship, it’s easier to get an investor on board once they know your journey rather than just seeing a deck. You want investors that you actually enjoy hanging out with and vice versa,” he adds.
Never exaggerate your numbers and do not under-report your competitors, says Damien.
“Every Chinese investor does a very thorough cross-checking and if you understate your competition or there is something amiss about your numbers, they will just go past you,” he says.
Jeffrey concurs, and adds that trust is the key.
“On the numbers, you would want to be absolutely transparent. And you want potential investors to have trust in you,” he says.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
My startup Meddy, a GCC-based consumer-facing online platform that helps patients find the best doctors and book appointments with them, recently raised a total of US$2.5 million in a Series A funding round led by NYC-based Modus Capital, along with participation from 212 Capital, Kasamar Holdings, Dharmendra Ghai (Health Tech Angel), Innoway, and others. While we get set to use the funds we raised to scale up our operations in the UAE, I also wanted to share some of my insights from the fundraising experience with all you entrepreneurs out there- hope these help you in your own startup trajectories!
1. Start early (as it will take a while)
Fundraising is a very long process, as you have to build a relationship with investors before they are ready to talk terms and commit. A lot needs to happen between your first call or meeting, and ultimately wiring the funds. According to a report published by MAGNiTT, 71% of startups claimed fundraising took up to nine months. So, don’t start fundraising when you have only less than three months of runway. You will probably not close in time, and even if you do, you’re unlikely to get favorable terms, because you won’t be in any position of leverage.
2. It’s a sales process
Closing a venture deal is very similar to a long enterprise sales cycle. It’s highly unlikely that your first meeting will lead to a term sheet. You will probably start with an email, which will lead to a call, which will lead to a meeting, which will lead to reviewing the numbers and research, and so on and so forth.
There are multiple decision makers along the way, and it’s key that you be spending most of your time with the key decision maker. You will know you’re making strides when they start introducing to other people in the firm to get their buy-in. Remember that it’s not uncommon for your lead to go cold on you after staying in touch for weeks or months- you may have to find another entry point to get back on their radar.
3. Manage your funnel properly
You should treat fundraising similar to how you treat a sales pipeline- you have to manage and nurture them properly. I maintained a Google Spreadsheet with detailed information about investors, their sector focus, prior investments, last meetings, etc.
Towards the end of it, this evolved into becoming a nice customer relationship management (CRM) record of all the investors I met, as well as those who I needed to meet. At the end of the day, it’s a sales funnel, and you have to keep feeding the top of the funnel with a lot of investor meetings to increase the probability of some of them eventually converting and writing a cheque.
4. Don’t underestimate a very well-written cold outreach
The prevailing wisdom is always to get warm intros to investors, and I fully agree with that. But most people underestimate a very well-written cold outreach. My lead investor came through a cold outreach on Twitter.
5. Target the right investors
Do your research to figure who would be the right investor for you, and for the stage of your company. Most investors make it explicitly clear on their website at what stage they invest in. So, don’t spend too much time chasing investors who do late-stage growth rounds, when you’re raising your seed or Series A round. You should certainly get in touch with them to get their feedback and nurture them with quarterly updates to eventually get them to participate in your next round.
However, it’s best you prioritize your time finding a strong lead investor for your round. As the name suggests, lead investors are extremely important as they set the terms for the round for them, and for everyone else to participate. They also become your partner, and they will help you close other investors.
6. Remember that venture capital (VC) funds are not the only source of venture capital
As counter-intuitive as it may sound, there are more sources of capital than just going after the venture funds. Angels, angel groups, and accelerators are, of course, a big part of the ecosystem, but not many startups are targeting family offices, high net worth individuals, C-level executives at big companies, large corporates as strategic investors, etc. Most of them are looking to diversify their investments from asset-heavy businesses to asset-light investments- not to mention their extensive network connections in the market that you can leverage.
7. Build a document for frequently asked questions (FAQ)
Since you will be meeting a lot of investors, you will start getting the same questions over and over again. Instead of winging an answer every time on the fly (and probably putting yourself at risk of saying a different answer), you should build an FAQ document for yourself where you can put concise answers that you say to anyone who asks you the same query another time. This will make you sound more confident and prepared, and investors like it when you have already thought about the questions and concerns that they have. It just makes you seem that know what you are talking about.
8. Legal takes a long time
When we first got a term sheet, I thought I can just delegate all this legal stuff to a lawyer, and have him/her take care of this. I couldn’t have been more wrong. Legal ended up taking an insane amount of my time. Legal due diligence gets very messy if not handled properly, but that’s for a different post altogether.
9. Be prepared to not get any answers
You will be meeting a lot of investors, and as such, you’ll constantly be getting feedback. It’s imperative you learn from the feedback, and improve your business and pitch deck. Some investors would be kind enough to give you an affirmative “no,” and even give a rationale behind it. This will help you move on, and spend your time and effort going after others.
However, most investors will not reply, and they’d just ghost you. VCs are notorious for not saying no to keep you on the hook, in case you become interesting down the line. From my experience raising multiple rounds of funding so far, a “yes” usually comes a lot quicker than a “no.” However, it’s not uncommon for them to change from a “yes” to a “no” later on as well.
10. Get better at storytelling
In order to raise funding, you need to have great numbers and compelling overall traction. But numbers are not everything. You’re there to tell a story, you’re painting a picture that roughly follows this format: the current status quo is not good enough, millions of people are struggling with a problem. You have a product that is 10 times better at solving the problem, and is, in the process, making the world slightly better.
You need their money to accelerate that progress. You’re there to convince them that you and your team are the right people to pull it off. Numbers and traction definitely help with making a decision, but they are not everything. It’s also a lot about your chemistry between you and the partner at the fund. After all, people make decisions emotionally; they just rationalize the decisions to others (and themselves) with numbers. So, being good at telling a story and convincing others to join on that vision is super important.
11. Always keep in mind that fundraising is a means to an end -and not an end in itself
Fundraising itself is not a goal of your company- that should be to build a sustainable business that solves a problem. So, treat fundraising as such, and get back to working on your business. Don’t spend any more time on fundraising then you have to.
Haris Aghadi is the founder of Meddy, a GCC-based healthtech startup that helps patients find the best doctors and book appointments with them, shares his insights from the fundraising experience.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
With her award-winning online blood bank, Cameroonian nurse-turned-entrepreneur Melissa Bime won international fame and funding but faced one major problem: working in her own country.
Two years after Bime set up Infiuss — a blood delivery service to stem needless deaths through accidents, childbirth and malarial anaemia — red tape forced her to shut down most of its operations and move some 1,700 km west to Ivory Coast.
“Starting out of Cameroon is a nightmare,” she told the Thomson Reuters Foundation, sitting in a cafe in an upscale part of Cameroon’s capital, Yaounde.
“You have a lot of companies starting and then dying.”
Bime, 23, is one of dozens of entrepreneurs who have set up social enterprises — businesses that aim to do good as well as make profit — in Cameroon. Acclaimed abroad, they face significant problems developing their ventures back home.
Why Most Social Impact Startups Keep Failing In Cameroon
Ethical business is growing in the developing world, as ambitious young people seek alternative ways to provide social and environmental services that have been neglected by cash-strapped or inefficient governments.
Cameroon, one of central Africa’s largest economies, does not have a national blood bank and medics usually insist families provide two donors before treating a patient.
With Infiuss, hospital staff or patients can call or text to have the right type of blood delivered from 23 private hospitals across Cameroon. More than 2,000 bags have been dispatched, usually by motorcycle, since 2017.
Bime won $100,000 in 2018 as the African laureate of the Cartier Women’s Initiative, which supports women entrepreneurs, and used the money to build her own Yaounde clinic.
But she could not get a permit from the ministry of health for Infiuss to operate in government hospitals, despite having dozens of meetings, including with the prime minister.
“We needed this permit in order to grow and develop our business,” Bime said, as the majority of Cameroon’s hospitals are government-run.
Cameroon’s ministry of health did not respond to numerous requests for comment.
In Ivory Coast — one of Africa’s fastest growing economies, with a reputation for a favourable business environment — it has been a different story, Bime said.
The minister of public health introduced Bime to major businesses and encouraged them to sponsor her nascent venture.
“His first question was, ‘How do you intend to make it sustainable and profitable?’” Bime recalled. “They’re very receptive to new ideas, and open to trying out new things. It’s a friendlier environment for younger enterprises.”
Other budding social entrepreneurs have had similar struggles in Cameroon, where octogenarian President Paul Biya, has ruled with an iron grip since 1982.
‘’It is easier for projects to become well known outside of Cameroon first’’
Doctor Conrad Tankou, 32, invented GIC Med, a portable digital microscope that connects to a smartphone to scan for cervical cancers. The device has been used to screen more than 8,000 women in Cameroon.
“Young, health care professionals, they’ve had the early exposure to rural areas and the challenges there,” said Tankou, who won $25,000 at the Next Einstein Forum in 2018.
“These experiences inspired them. They are dreaming about doing something positive.”
Yet he has also faced difficulties obtaining government permission to launch his products.
“It is easier for projects to become well known outside of Cameroon first, in order to then make it in Cameroon,” he said.
Unreliable internet access has been a major hurdle for tech start-ups like Tankou’s, especially in English-speaking parts of Cameroon where the government cut the internet for three months in 2017 in a bid to quell a separatist uprising.
Before the crackdown, the region had been emerging as an unlikely hub for start-up tech firms, dubbed “Silicon Mountain”.
Yet Tankou said the Anglophone crisis has pushed him to broaden the scope of the microscope to diagnose other diseases.
“The conflict gave us more ideas,” he said.
– Reporting by Thomson Reuters Foundation, Editing by Katy Migiro
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
