In Morocco, the 2M television channel has partnered with telecommunications operator Inwi to launch an innovative reality show to promote local entrepreneurship. The program called “Who wants to invest in my project?” “Special startups” gives entrepreneurs the opportunity to present their projects to investors.
Salim Cheikh, Managing Director of 2M
The show’s goal is to provide an opportunity to market your business, gain access to financing and receive mentorship from successful entrepreneurs. It revolves around interactions between candidates and investors, such as the famous American and Japanese programs “Shark Tank” and “Money Tigers”.
In addition to mentoring and access to professional networks of major entrepreneurs, candidates will benefit from investments from the Central Guarantee Fund (CCG), support from the Digital Development Agency (ADD) and the Federation Moroccan Information Technology, Telecommunications and Offshoring (APEBI).
Salim Cheikh, Managing Director of 2M, explains that “the investors in question will put their money to ensure growth and contribute to the development of the businesses of the selected candidates”.
The episodes will be broadcast from November 24 after the selection of the nominees.
Note that the purpose of this new Tech Show is to use television programs to promote entrepreneurship among young Moroccans.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Everybody has heard some version of the adage ‘don’t let money stand in the way of your dreams.’ You’ll find thousands of blogs and articles, tips and advice, and ‘do’s and don’ts’ urging you never to give up. Add to this the advertising and marketing campaigns that champion the Careem and InstaShop success stories of the world and it can feel like every new startup is destined for triumph.
Fadi Jawdat Hindi is the founder & CEO of Algofy.ai
The humbling truth is that success is anything but guaranteed. A good idea is not enough. Startups need investment, and a person selling a unique concept often doesn’t have the money to fund the venture. Instead, they pitch to family, friends, angel investors, and venture capitalists to get it off the ground. Even with funding, launching a successful start is not as easy as it looks.
What we see is the PR packaged version of startups. Success stories are repeated in magazine articles to sell the entrepreneurial dream. What we don’t see is the blood and sweat that goes into becoming successful.
Here’s how it actually plays out.
IT’S NOT A LEAP – IT’S A PLUNGE.
Looking for funding is a hard job – considerably harder than it is made out to be. I’m originally from the US and deciding to pitch to investors in the UAE versus Silicon Valley was a tough decision. It’s a small pool locally, and every debutant startup is vying for attention.
While the UAE’s economy and regulations create an ideal environment for startup incubation, you still need to do a lot of leg work to get where you need to be. Add to that a global recession, and suddenly your ride will become a lot bumpier. The usual advice still holds: find your niche, hire a strong team, innovate, and get funding, but while these tips are valuable, they only scrape the surface of what it really takes.
The funding world is full of choppy waters, with investor sharks out for blood. You need to be thinking smarter and working harder – with an airtight business plan and even more optimized MVPs. At some point, you have to get selective about which meetings you entertain. There are a lot of investors that are simply looking at what comes their way but may not have the funding required to support your startup. Needlessly leaving you hopeful of a positive outcome for a long period of time, before you yourself lose interest and stop the pursuit.
STAY OPEN TO OPPORTUNITIES.
“The best startups generally come from somebody needing to scratch an itch.” – Michael Arrington, Founder of TechCrunch
Ask any startup founder, and they’ll tell you that it’s not easy to walk away from a steady job and regular income. But if there’s an itch, sometimes you just have to scratch it. Deciding to leave my 30-year corporate career working for the likes of Accenture, National Bank of Abu Dhabi, H.H Ruler’s Court, Smart Dubai, Dubai Electricity& Water, and Takaful Emarat, carried both risks and rewards.
During my time as CEO of Takaful Emarat Insurance, I was tasked with redesigning an organization-wide digital transformation. We needed to not only successfully reinvent the company culture from the ground up but also understand our shortcomings and flaws. Working in the system, I realized that the way we look at insurance was outdated, and we needed some disruptive systems to change the landscape.
That’s how Algofy.ai was born. Using my technical background, including process automation, artificial intelligence, and machine learning, my vision is to enable customers to independently secure their financial futures without the usual hassle and frustrations. Algofy.ai is an insurtech aiming to disrupt the industry and put the power back in the hands of the consumer. It is a digital platform with digital channels for strategic partners that simplify the buying processes and after-sale service.
As a customer-centric solution, it lets consumers independently select, monitor, and track their protection & investments (offered through our strategic partner Noor Takaful Family PJSC). Our consumers are also offered the opportunity to receive exercise rewards with the Apple Watch and Apple iPhone by meeting monthly challenges.
As part of the customer-centric, AI-driven ethos of Algofy.ai, the Bliss platform is designed from the ground up to operate in the digital space, our insurance partner is Noor Takaful Family PJSC, collectively we offer the most comprehensive product in the market with flexible terms, full visibility, easy cancellation, and freedom of choice. There’s no other product like it because we poured our heart and soul, thousands of engineering hours, into creating something the market wants instead of repackaging what’s already available.
But none of this happened overnight. It took months of hard work and sacrifice so that when we had our chance to impress investors, we were better, stronger, and more prepared than everyone else.
STAY COMMITTED
Looking back to the birth of Algofy.ai a year ago, believe me when I say that you can’t change things for the better without causing some level of disruption. Simultaneously, it pays to remember that opportunities often come disguised as disruptions.
Admittedly, the coronavirus pandemic has come as one of the most significant disruptions to markets in recent years. Still, even with economies in recession, coronavirus-fueled tech trends continue to dominate daily life. That means there won’t be any slowdown for startups. If you’re ready to seize the moment and put in blood, sweat, and tears, you may have a shot at doing some disrupting of your own.
Fadi Jawdat Hindi is the founder & CEO of Algofy.ai, a Dubai-based insurtech.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Togo based Gozem which started out as a ride-hailing business has in the last two years evolved into a behemoth of products and services especially with its transition into an African “super app” as a result of the rollout of a new interface. Established two years ago in Lome, Togo, Gozem was able to raise US$900,000 in funding which helped it expand to neighbouring Benin Republic and added to its transport offering with auto-rickshaws.
Gozem co-founder Emeka Ajene
In July Gozem launched an e-commerce delivery service in Lome and Cotonou, allowing users to order items via the app and have them delivered to their doorsteps, as it began the process of becoming an all-inclusive “super app”. This transition has now occurred, with the new Gozem interface making it easy for users to access the startup’s various service offerings. Instead of opening the app to find a ride-hailing map, users now see various options that they can quickly choose from to access the exact service desired.
This new app consolidates all of Gozem’s different services – ride-hailing, delivery, e-commerce, and an in-app wallet – into an easy-to-use app interface. The new app is now available in each of the seven cities in which Gozem currently operates, but the available services will differ by city.
“As we launched various new services and verticals over the last year, we heard from our users that if we were able to offer a holistic experience in our app, we’d offer real value by reducing friction and enhancing convenience,” Gozem co-founder Emeka Ajene said.
“To that end, this new super app has been a long time coming, and we’re happy to continue tailoring our products and services to local needs so that our users who live busy lives can get right to the services they want when they want them. By bringing all of our various service offerings into one common space, we’re making navigating our app a lot simpler for our users.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Ethiopia’s shutdown of the internet at the end of June in response to deadly protests over the murder of a prominent musician cost the economy at least $100 million, according to NetBlocks, a civil society group which monitors global internet freedom.
Alp Toker, an Executive Director at NetBlocks, told Kenyan publication the Daily Nation that their calculations showed that direct and indirect losses were divided evenly.
Alp Toker, an Executive Director at NetBlocks
According to the group, the numbers take into account lost business, informal trade and a degree of lost confidence.
“Beyond the impact on fundamental rights, each day of an internet shutdown in Ethiopia runs up a bill in excess of $4.5 million, in terms of the economic impact to the GDP according to the Cost of Shutdown Tool,” Netblocks said.
The Cost of Shutdown Tool (COST) is a model developed by NetBlocks and the Internet Society which factors in telecom industry and development indicators to calculate the economic impact of internet disruptions.
Last Thursday, Ethiopia fully restored internet access after the 23-day shutdown, which is considered the nation’s worst in terms of severity and duration.
The government, however, defended the shutdown saying that it helped manage the situation and avoided unwanted destruction by violent protesters.
“Given the extended duration of Ethiopia’s shutdown and heightened reliance on digital communications during the COVID-19 pandemic, we believe the overall impact to be somewhat higher.”
As a result of such actions, Toker noted that industries or businesses which are dependent on internet access to make profits or achieve social impact will essentially be shunned by investors. Digital services have also begun being integrated into Ethiopia’s traditional sectors making them susceptible to negative effects from such actions.
Cutting off internet access in Ethiopia is not an uncommon action by the government. Human Rights Watch (HRW) said in a report released in March that Ethiopia shut down the internet eight times in 2019 alone.
Last year, Ethiopia shut down the internet following the assassinations of top government officials in June in what Prime Minister Abiy Ahmed said was a coup attempt. In the same month, the government also cut off internet access during national school examinations to curb instances of cheating.
Source: Daily Nation
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
In August (2016) I officially completed my first year of being fully dedicated to my food startup Yumamia.
It’s been a year of hard work, long nights, excitement, stress, frustration and celebration.
The knowledge and skills I gained in just a single year surpassed everything I learned in a 12-year career working as a regional marketing manager for multinational companies.
Belal El Borno, Yumamia Founder
I wanted to share some of the knowledge I gained with fellow aspiring entrepreneurs to save them valuable time and money; some of the advice might be common knowledge for more experienced entrepreneurs, but will definitely be helpful for the ones who are just starting up.
1. Being a part-time entrepreneur just doesn’t cut it
Before I was fully dedicated to Yumamia, I had a day job and for about a year I tried to juggle both. We had one employee dealing with our customers and partners, and we outsourced the website development to a third party company.
This was our first big mistake.
As a startup you need to hit the ground running from the moment of inception. You need to move fast, make mistakes fast, learn fast and progress very fast. That can’t happen at the start without being 150 percent dedicated. If you’re not doing this your progress will be much slower, putting you at the risk of competition catching up with you. And as a founder you need to be there every second in the beginning to grasp all the little insights that others might overlook.
2. Be resilient but flexible
We had to face a lot of failures.
It took four major pivots and hundreds of tests until we finally reached the point we are at today. We had to be resilient and relentless, but also flexible to know when we should start from scratch on a new model.
If you are not seeing progress, it just means there is something missing that you need to figure out and tweak. Also, that may mean it’s time to pivot — and you will pivot, probably more than once, before you start seeing that hockey stick growth graph.
3. Relevant work experience gives you an incredible edge.
Prior to Yumamia I was working in marketing for a major F&B company in the region. It was my job to bring new international brands and introduce them to the Middle East and then maintain and grow those brands consistently over the years.
I can’t tell you how much that experience came into play once we were ready to launch Yumamia, one of the first online homemade food delivery startups in the region.
I knew exactly what to do, what to expect and what to measure to know if what we were doing was working or not, and if it wasn’t working I knew what was needed to fix it.
If I did not have this experience, we would have been stuck in a rut scratching our heads trying to figure out what went wrong. So before you decide to launch a startup, try to get a job in an industry relevant to the startup you want to initiate.
When you’re building something completely innovative, it’s harder to build and it takes longer to solve problems versus a run-of-the-mill business idea. After all, no one has ever done this before so there is no frame of reference, so you end up doing a lot of your own R&D.
You need to keep this in mind when you’re working on your projections. You will need more time, money and human resources to start seeing results. However, on the positive side, you will get a lot of attention, respect, and a much higher chance of raising capital.
5. Learn, respect and then disrupt
Spend time researching the industry you’re trying to disrupt, meet professionals from that industry, and take their advice. Try understanding their current challenges, their current inefficiencies and how the industry currently operates. You will automatically be able to spot where the gaps are and how you can fill them with new innovation.
6. Have two mentors
Having an experienced tech startup mentor is a no-brainer but unless your startup is a pure tech startup, you also need another mentor with extensive experience in the industry you’re trying to disrupt (for example a mentor experienced in logistics if your startup is a logistics app). This will help a lot in familiarizing you with the industry and will give you some good insights to work with.
7. More learning it and less winging it
Unless this is your second successful startup, no matter how much experience you have, you will never be prepared for this amount of responsibility right at the start. You need to make informed decisions all the time and as your company grows it needs a stronger and more skilled leader so you need to keep learning everyday.
Try to dedicate an hour each day to read a book or take a course in a skill that you lack.
8 Be prepared to deal with copy cats
Six months after launching Yumamia many copy-cats started popping up, copying our every move and using many unethical ways such as snooping around our office and sending us undercover staff members posing as job applicants and home cooks to try and get inside information. It’s a good thing we kept pivoting as they kept copying old models that were not working for us, which still kept us in the lead.
Unfortunately, many industry influencers in the region are very tolerant and supportive of copy-cats. You will hear things like ‘the market is big for both of you’.
I completely disagree with this statement since you run the risk of being an overly crowded market and not being able to raise capital from the already very small pool of VCs in the region. Did you know that at an early stage, with each competitor that enters the market your own startup valuation goes down?
Make sure you are always 10 steps ahead by having an exceptionally strong team, constant innovation and ensuring that your future plans are strictly confidential. They can only copy what they see but they won’t know what else you’re cooking.
Lastly, always remember that you only get a few chances to truly live out your entrepreneurial dream, so make the absolutely best out of it. It is an extremely bumpy road, but you won’t want to trade the world for it.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer.
Market inefficiencies saddle the farm-to-market sector in countries across sub-Saharan Africa. Smallholder farmers face sub-optimal yields, food losses and waste, and unfair market returns. Informal market vendors, who dominate the last-mile of distribution, have little control over the quality, quantity and regularity of the produce they sell. In this interview, FINCA Ventures chatted with Elia Timotheo, founder and CEO of East Africa Fruits, to grasp how this Tanzanian-based food distributor is bringing greater efficiency to the agricultural value chain. East Africa Fruits formalizes the informal farm-to-market sector by providing a stable, fair market for horticulture crops, transporting goods using cold-storage and distributing to food buyers to improve productivity and incomes for smallholder farmers and informal vendors.
Elia Timotheo, founder and CEO of East Africa Fruits
Your mom was a Tanzanian food entrepreneur. How did this upbringing and other experiences inspire you to build and run an agriculture company?
Elia: East Africa Fruit’s origins came from a mix of factors in my life, but my first motivation was to never be employed. I wanted to run a business like my mother. Despite not going to school, my mom began her first business in the 1980s selling fast food in the Kilimanjaro area of Tanzania. I grew up watching and helping her, a hardworking single mother, who now has five restaurants. She inspired me and passed along the fundamentals of business, but I didn’t know what kind of enterprise I wanted to run. While I was an undergraduate, I had the opportunity to work with the Ministry of Agriculture. Through this, I participated in a program that allowed me to meet with farmers to understand their challenges and what the government could be doing to address their agricultural needs. My program team visited over 3,000 farmers across Tanzania, and together we observed patterns around food waste and transactional middlemen, all of which resulted in reduced incomes for smallholders. This was the “ah-ha” moment that put me on a mission to develop a business solution to eliminating post-harvest losses and increasing incomes for small-scale farmers.
Tell us more about the issue of post-harvest loss. Why is it such a big problem and how is East Africa Fruits tackling this issue?
Elia: Roughly half of what farmers produce never reaches the market, and this loss is spread out across the farm-to-market value chain. First, farmers may lack the knowledge and training to properly care for their farms, produce and harvests, resulting in 20 to 25 percent of losses. Second, farmers sell produce to brokers who use inappropriate vehicles to transport perishable produce, leading to another 10 percent of losses. Lastly, in the market, it’s very difficult to sell all the produce in one day or even two, yet there are no storage facilities for a truckload of produce that just spent days travelling hundreds of miles in inadequate conditions. All this results in severe losses for farmers who fail to reap the fruits of their hard work. To change this, East Africa Fruits establishes a relationship with smallholder farmers and provides training, food processing, storage and market access using cold-storage transportation. This process extends the shelf-life of produce and reduces post-harvest losses.
A key part of your business model is removing layers of middlemen in the farm-to-market value chain. Why does this need to be disrupted and how is East Africa Fruits offering a better alternative?
Elia: When I first got into the business, I began as a middleman, or broker, to understand the ecosystem. For a farmer to sell produce, he or she must sell to a broker in the local village. For that produce to reach a commercial center, like Dar es Salaam — which may be hundreds of miles away — the village broker must then sell to a transporter who will take the produce to market. There may be only one truck to choose from, so the transporter has the upper hand in price negotiations. Once in-market, the produce passes through another broker who negotiates selling to consumers. When I worked as a middleman, I saw this in action. I never met the farmer; I met a broker who spoke with the farmer and another broker who helped me hire a truck to transport my produce to the market. I was neither in control of selling my produce in the market nor was I able to set consumer pricing — I had to accept whatever prices were established for me. If I wanted to move my produce from one market to another, I was forced to pay layers of fees. All of this creates inefficiency and waste, and this is happening to most farming businesses in Tanzania. At East Africa Fruits, we reduce this complexity in several ways. First, we provide agronomic training to smallholder farmers to help them perfect their product for better-quality harvests. Second, we transport farmers’ produce post-harvest on our own trucks, from the farm, to our facilities [for collection, processing and storage], to the market. This way, our customers avoid wasting time and resources waking up hours before dawn to figure out how to get produce to market. Lastly, we offer our customers convenience: already sorted, trusted produce, on-time. All of this brings about perfection in the distribution system, characterized by greater efficiency and fairer wages.
The obvious customer in your business is the farmer, but equally important is the last-mile vendor. Can you paint us a picture of the struggles faced by informal market vendors and how you are addressing their needs?
Elia: The struggles faced by informal vendors mirror the challenges faced by smallholders. An informal vendor may wake-up at 3 or 4 am to visit one of the public markets to buy produce. Then, he or she will leave the produce with a transporter to deliver it to the informal market kiosk, a process that may take hours. We see an opportunity to reduce the amount of time and money that informal vendors spend navigating this daily routine. There is also potential to improve the security and transparency of the final product. A good example of this would be potatoes. Potatoes are usually sold in a bag where you cannot see what is inside — you can only see the few potatoes on top. Brokers exploit this by putting only the good potatoes on top and rotten produce beneath, causing the informal vendor to incur a loss. At East Africa Fruits, we sell our product in a transparent way so that vendors can see exactly what they are buying, and they can be sure that they will sell a higher percentage of everything they are buying. This leads to cost reduction and increased profitability for the vendors. It also builds up a business track record for informal vendors to help them qualify for microfinance loans to expand their businesses.
How has your business pivoted since its inception and why do you continue to tackle all elements of the farm-to-market value chain?
Elia: When we started thinking about farming, we thought about creating super-quality produce to supply exclusively to premium markets, like high-end supermarket chains, hotels and possibly for export. However, we realized this didn’t match our original vision of producing strong social impact. This forced us to pivot to where we are today: perfecting the farm distribution system, getting produce as quickly as possible from farm to retail, with emphasis on serving informal vendors in the marketplace. To do this well, we know that farmers need access to training to produce harvests of value, access to inputs like seeds and fertilizer, and access to markets for reliable and fair selling.
East Africa Fruits works with 1,300 smallholders in Tanzania and plans to reach 7,000 by 2023. What are your growth strategies and what role will technology play?
Elia: One strategy to grow the number of farmers that we work with is to multiply the number of collection centers that we manage across Tanzania. Our main facility in Dar es Salaam is responsible for storage and distribution. Collection centers are used to gather, sort and process all the produce harvested by our rural smallholder network. A combination of labor and machinery is leveraged to clean, dry, pack and store all the produce that we collect. More collection centers will bring us closer to farmers and enable us to increase our combined productivity, with a goal of moving from 95 or 98 percent sellable produce to 100 percent. In terms of technology, we hope to purchase an off-the-shelf, farmer-side, data storage software solution for building reliable customer profiles and tracking ordering patterns. This will help us anticipate volumes of produce to optimize resources in terms of purchasing from farmers and managing distribution. We are also looking to design a front-end, software solution for selling.
How will you strengthen the connection between East Africa Fruits and smallholders as you grow?
Elia: Three things come to mind. First, farmers believe in organizations that have a physical presence. Collection centers represent our #1 physical entry point into communities. Today, our collection centers are used to process produce post-harvest, to conduct monthly farmer trainings to increase their productivity, and to maintain recordkeeping. In the future, we’re considering using collection centers as agro-dealer shops or storage facilities for farmers’ produce that they do not intend to sell right away. Longer term, we are looking into leasing tractors from our centers. Second, we hold regular meetings with farmers to learn and solicit suggestions for how we may better serve them. Hearing their challenges makes us closer to them and forces us to deliver solutions. This practice comes directly from my early experiences working with the Ministry of Agriculture. A third key way for us to strengthen our relationship with farmers is to support their access to basic needs: farming inputs, microfinance loans, crop insurance.
Financial service providers struggle to serve smallholder farmers and informal SMEs, who are often deemed too risky. What opportunities do you see in financial inclusion as a result of the impact created by East Africa Fruits?
Elia: While we do work across the farm-to-market value chain, that doesn’t mean we can do everything ourselves. We see many opportunities to channel financing to small-scale farmers and informal SMEs and actively seek to connect our customers with microfinance and insurance organizations. We think about this aspect in two dimensions. Our first focus is on enhancing farmer productivity given existing farm sizes — better inputs to create better outputs to help farmers grow incomes. The second dimension is through farm expansion. Moving a farmer from half an acre to two acres will have an impact on the cost of production, which can be covered through financing solutions. The farmers working with East Africa Fruits have developed a strong business track record, which can be shared with microfinance institutions like FINCA Microfinance Bank [“FINCA Tanzania”] to help smallholders qualify for loans to support the purchase of inputs, assets or expansion of farms. Similar benefits would apply to informal vendors looking to leverage microfinance loans to grow beyond one market kiosk. Because our customers are cut off from traditional financing [e.g., because of socioeconomic status or rural location] they solicit loans from local village brokers who charge crazy high interest rates, which only perpetuate the cycle of poverty that they face. This practice is most common when it’s time to pay school feels prior to harvest.
Imagine it’s five years from now and East Africa Fruits is making international headlines. What would that headline be and why is this important to you?
Elia: “Creating a Sustainable Environment for 20,000 Smallholders to Thrive” — This would demonstrate tremendous gains in smallholder productivity and a sizeable market for small-scale farmers and informal vendors to sell their produce.
Why were you excited to have FINCA Ventures come on-board as an investor?
Elia: It’s always helpful to bring in a fresh set of eyes and thinking as we look to scale our business. FINCA brings expertise in financial services and we hope to collaborate with its Tanzanian microfinance institution to deliver financing solutions to our farmers and vendors. To have an investor who is equally committed to the success of our company and our customers is most exciting for us.
So, what’s your favorite fruit or vegetable?
Elia: Pineapple! If I must pick a vegetable, I’d go for spinach.
FINCA Ventures is an impact investing initiative of FINCA International that provides patient capital and support to early-stage social enterprises. To know more about them, click here.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer.
Starting a business is rough. Most startups fail. Your best chance to thrive is to find the right community, the right partners, and the right network of support from the very beginning. We love nothing more than meeting promising founders during their first days starting a company.
The tech giants of today started as one or two person ideas not long ago. We’ve met many young companies and noticed that startups with the following characteristics have the best shot of becoming enduring companies.
Clarity of purpose Summarize the company’s business on the back of a business card.
Large markets Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.
Rich customers Target customers who will move fast and pay a premium for a unique offering.
Focus Customers will only buy a simple product with a singular value proposition.
Pain killers Pick the one thing that is of burning importance to the customer, then delight them with a compelling solution.
Think differently Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.
Team DNA A company’s DNA is set in the first 90 days. Choose your first few hires wisely.
Agility Stealth and speed can beat slow incumbents.
Resilience Hone your ability to bounce back and keep trying.
Frugality Focus spending on what’s critical. Spend only on the priorities and maximize profitability.
Inferno Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.
This article is part of Sequoia Capital’s publication series. Sequoia Capital is an American venture capital firm, headquartered in Menlo Park, California and mainly focuses on the technology industry.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer.
Tunisian startup, “InstaDeep”, which is in the top 100 of the best companies in Artificial Intelligence, co-organizes with the organization “INDABA”, a big challenge called “#IndabaGrandChallenge”, for the identification of a treatment for Leishmaniasis.
Karim Beguir, co-founder InstaDeep
“Leishmaniasis is a neglected disease. As a disease of poverty, it has historically received limited funding for discovery, development and delivery of new tools. Current treatment is costly, lengthy, painful and sometimes toxic. At the same time, new drug candidates are being developed and old ones are being tested every day. Today, millions of drug activity assays are available at the press of a button. In this Indaba Grand Challenge, we dare to ask you to help identify amongst the already known, tested and (often) approved drugs, potential cures for different forms of leishmaniasis,” the startup said in a press release.
Here Is What You Need To Know
The organizers of this initiative are seeking, in collaboration with Deep Learning “INDABA”, to propose a new treatment, comprising a Leishmania protein (either of a defined species, or a protein present in the proteome of one or more Leishmania species) and a small molecule (or set of small molecules).
The initiative targets experts passionate about data science or Machine Learning, people active in “bioinformatics and pathformatics”, researchers, practitioners and clinicians of kinetoplastids as well as Universities, institutes and research organizations.
Leishmaniasis is a chronic disease with cutaneous and / or visceral manifestation, kills each year more than 50 thousand people in Africa, Middle East and Latin America. It affects 12 million people in nearly 90 countries on our planet. Each year more than 2 million new cases appear.
The #IndabaGrandChallenge thus brings together civil society, the community of doctors, chemical epidemiologists but also datascientists, for a single mission: to find a medicine to cure this disease.
To know more about #IndabaGrandChallenge, including how to apply, click here.
About InstaDeep
Founded in 2014 in Tunis, Tunisia, by Karim Beguir and Zohra Slim, InstaDeep is now based in London and has offices in Paris, Tunis, Nairobi and Lagos.
The start-up applies deep reinforcement learning and other advanced machine learning techniques to create AI (Artificial Intelligence) systems that can help companies make better business decisions in the industrial environment, according to the same source.
The start-up InstaDeep has managed to establish an excellent reputation by providing “solid and unique” AI solutions.
It is one of the first African startups to publish original AI research at the conference on machine learning and computer neuroscience Neural Information Processing Systems (NeurIPS 2018).
The startup was also one of eight companies selected from the 84th international selection jury of Endeavor.
The Tunisian company has been ranked by the famous analysis firm CB Insights, which lists startups from 13 countries, in its top 100 of the best companies.
About INDABA
The Deep Learning organization “INDABA”, has the mission to strengthen machine learning and artificial intelligence in Africa.
The word INDABA indicates in the Zolo language, a gathering or a meeting to share and listen to the news of the community in Southern Africa and to consult on questions of common interest.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
For all the glorification of the tech founders you see on the media, a business is a business.
Yannick Lefang, Chief Financial Officer at Gebeya
Like many folks of my generation (X), I’ve watched every Rocky movie and fondly recalled the scene where Rocky climbs the 72 stone steps leading up to the entrance of the Philadelphia Museum of Art and puts his hands up as a sign of victory. This scene has always been a perfect metaphor for an underdog or a regular joe rising to a challenge. On this rainy afternoon of February 2020 as I land in Philadelphia, Gebeya has just raised $2M seed investment from global investors and as the CFO, I am reporting on duty to acknowledge receipt of the funds and some other paperwork with the co-founder and CEO Amadou Daffe. It’s been a long and grueling process leading up to Philly and I am sharing a few lessons learned along the way:
Gebeya co-founder and CEO Amadou Daffe
Fundraising is not fun so raise when you really need to
I am no fan of the fundraising and I am probably the most unlikely CFO to raise a seed round in Africa. And here is why: If you are an African entrepreneur trying to raise, the odds are stacked against you. In 2019, several reports show that around 427 startups raised funding while a platform like VC4A lists a total of 13,500 startups in Africa. As a startup, you have a 3% chance of raising money. If you raise a seed round, it’s even worse because less money goes to early-stage startups. It is important to have a good rationale for fundraising because it is going to take time, energy, and resources. I always go by the rule of thumb that you will most likely raise when you don’t need capital to operate. It means it’s better to show revenue or some sort of market fit at minimum before you engage with investors.
The fundraising process is grueling but it doesn’t have to be
I had never raised money from investors before the Gebeya seed round but as a founder myself and a finance professional with over 15 years of experience with global financial institutions, I had the foundation and skills necessary to tackle the challenge. It was still a long and challenging process. A couple of things I learned along the way:
Put together the right team before you raise. The entrepreneurs who have raised money will tell you that it’s more than the pitch competition or the shark tank presentations. You need a team with legal, technical, and financial expertise. Make sure you have someone with project management skills, fundraising is a project and has to be managed as a project.
Have a clear understanding of the process. First, you need to get to know the investors and what they stand for (officially and unofficially), you need to really understand the terminology (term sheet, cap table, business model, spa, etc.), you need to take charge of the process and stay on top of things. While this is a do or die for your startup, investors have many deals they manage at once.
Be organized. This goes a long way in boosting investor confidence and also speeds up the fundraising process. Get your documents in order (contracts, agreements, licenses, etc.). You can create a virtual data room ahead of time so you are ready when you fundraise. It may sound easy but it’s not.
Your financials are important even if you are not making money
If you are like many African founders or founders in general, you are probably a developer or a techie who decided to follow the footsteps of Mark Zuckerberg (I hate this example but it’s what founders related to) and that may well be the reason you won’t be able to raise funds. For all the glorification of the tech founders you see on the media, a business is a business. The easiest part of the fundraise at Gebeya was the technical due diligence. The hardest part by far was the financial due diligence. So what should you do to make it easier?
Adopt best practices for financial reporting very early. Whether you are making money or not, you need to have decent financial reports. It gives you clarity as an entrepreneur and that clarity will boost investor confidence.
I was surprised by how simple the investor’s mind is when it comes to assessing business opportunities, especially in the tech space. It boils down to how scalable is your value proposition. If you are enabling transactions and taking a percentage along the way, how scalable is that process? It’s better to think about your business model in layman terms. Forget your product, focus on the business.
The most important thing good financials do for your startup is telling your story better than you can. I am a data geek and one of the reasons I love data is it allows you to shape and convey messages effectively, provided it’s well organized and structured. Your startup may not show fast growth but amazing margin – get your data to tell that story for you.
Fundraising takes time so expect the unexpected
It took a year or more to complete the seed round for Gebeya, it felt like 3 years! You will need hard work, perseverance, and a pinch of luck to make it through alive. Be prepared to spend more money because of the fundraising costs (legal, travel, project management, etc.) so you may actually run out of money during your fundraising. It is important to plan and anticipate these events and be transparent about it with your investors, especially if you already have a term sheet. You may request a SAFE or a bridge loan to stay afloat while the process is ongoing. Note that running out of cash doesn’t mean you have a bad business and investors will quit because of it. You may simply have receivables that are delayed or unexpected expenses. Ultimately, you have to plan for the worst and hope for the ok. Best is not an option.
Ultimately, it’s a human experience
When Amadou called me early January 2019 to ask me if I could help with his fundraising effort, I said no because I disliked fundraising and VC – the whole narrative in Africa was wrong for me. I still believe that raising VC money may not be the best way to start and grow a business in Africa. The exit options are just very limited. Where are you going to IPO? I understand why entrepreneurs want to raise VC, it is definitely an accelerator if you have the right business and strategy. The other reason I said no, was the fact that I had never raised VC money in the past except a few bad experiences with pitch competitions. But I knew one thing: I love challenges and I know a thing or two about finances. Most importantly, I know Amadou and fully embrace the vision to make Africa competitive by sourcing and nurturing Africa’s best talent.
When I agreed to take the challenge in March, I went through a grueling interview process with investors and had to immerse myself in the business. Then I came up with a plan to get the startup to a place where investors will have the confidence needed to invest. It was a total team effort, a unique and humbling human experience. I got to know an amazing group of investors along the way.
When I started to work on the fundraising, I agreed to get paid only after the round was completed successfully. I was confident that with my skills and experience I could make it happen but more importantly, I had a shared vision with Amadou and his team. Lastly, I don’t believe money is a good motivator/driver. At least not for me.
Back in Philly, as Amadou and I were getting ready to walk into the bank and close the round, we couldn’t help but think of the journey that got us there, a perfect metaphor for an underdog or an everyman rising to a challenge. We quickly ate our McDonald’s in the car and rushed to the bank.
Two weeks later, COVID-19 took the world by storm.
Yannick Lefang is the Chief Financial Officer at Gebeya, an Ethiopian edtech startup that raised $2 million earlier this year.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer.
VCs haven’t stopped funding new companies, but they are rethinking how — and what — they invest in.
Ainsley Harris, writer at Fast Company
Here’s what partners at leading firms say:
Roelof Botha, a partner at Sequoia Capital, joined the storied venture capital firm 17 years ago and now oversees its U.S. team. He has backed startups including YouTube and 23andMe.
We’ve made nearly 15 new investments in seed and Series A companies since the beginning of March, so we’ve been very active despite the lockdown. We look for things that are enduring. When I think about a company like Instacart, [which is part of the Sequoia portfolio], it’s likely that once people have experienced the joy of having groceries delivered, they’ll probably persist. But then I wonder about some of the entertainment applications that are blossoming: it’s not clear that those will persist when you go back to school and go back to work. So if we believe [a company reflects] the future, accelerated, we will make the investment.
For some of the later stage companies in our portfolio, we’re actually pushing them to grow even faster. They have a market opportunity now because of these accelerations. It’s likely that the competitive field will be clear because of what’s going to happen over the next 12 months or so. If they are the survivors, they stand to benefit disproportionately. The key is whether their unit economics are good. Do they have good gross margins, do they charge enough for their product? The companies that got into trouble [recently] had upside-down unit economics. WeWork and Uber haven’t yet proven good unit economics.
[A financial crisis] doesn’t necessarily guarantee that a new crop [of companies] emerges. The previous crisis, in 2008, was shortly on the heels of the launch of the smartphone and the launch of cloud infrastructure. Those platform shifts, I think, would have propelled many interesting companies independent of a financial crisis. If you look at what happened after 2000, it’s probably not until 2002, 2003 that innovation really reemerged in Silicon Valley.
Deven Parekh,managing director of Insight Partners, invests in growth-stage companies pursuing scale. His portfolio currently includes 1stdibs, Calm, and Nextdoor.
We’ve tried to work with our companies to say, look, you’re in an environment now where if you make the right decisions, you have the chance to be even more efficient. The actions you have to take [in a downturn] are actually very similar. The depth of the actions might be deeper in some cases, but the actual actions are the same: Figure out what your demand curve looks like, and then try to right-size the business relative to the demand curve. If you’re able to live to fight another day, put the right strategy in place, and continue to strategically invest in areas where there might still be growth, you can actually come out of this stronger. That doesn’t mean that it’s going to be easy.
Last month we led the $72 million Series C raised by grocery delivery startup Imperfect Foods. The entire diligence process, including the warehouse tour, happened online. Literally, somebody walked the entire warehouse with a phone and showed it to us. Would you rather have done it in person? Of course. But I can have the same conversation with somebody on Zoom. I can still do reference calls on Zoom. I think deals will continue to happen.
I don’t expect that 2020 will be a great liquidity year. If you look at the past two to three years in private equity and venture, what people committed wasn’t that different from what they got distributed. Now, as an LP, you’re going to start seeing your net exposure change, and you’re going to be committing but not necessarily getting that money back. If you look historically, those are the good periods to be investing. These periods of low liquidity, where markets are dislocated, are where there’s more investment opportunity. [Though] typically that investment opportunity doesn’t happen the day the problem hits. It’s very hard to forecast.
Kirsten Green, founding partner of Forerunner Ventures, has backed companies including Glossier and Dollar Shave Club since launching Forerunner in 2010. She is also a founding member of All Raise, which provides mentoring for women in technology.
This is a time of a lot of uncertainty, and uncertainty can often cause fear. That can have to do with your job, your financial situation, your kids, and importantly, your health. Maybe you have aging parents; that’s been top of mind for me. If you think about past crises, they were really anchored around either finance or health or war. This one seems so holistic; it’s hard to imagine that it doesn’t have a profound impact on people. This particular crisis has also required everyone to slow down — literally slow down, and stay at home. As your world gets a little bit smaller, you have an opportunity for more focus. I think that can be a really powerful thing in helping people understand what their priorities are.
Trends that were already in play are beginning to accelerate. Our portfolio has seen a tremendous amount of resilience. Not unilaterally; there are some businesses that can’t operate right now. But for the most part, businesses that were in the path of progress are seeing some increased adoption right now.
I anticipate and I hope that as we move forward, we understand the importance of sustainability and sound practices that reorganize what we’re making and how we’re making it and where we’re making it. I think that the consumer is increasingly interested in that. On the sentiment side, we did some surveys around what [consumers’] framework for priority had been when making purchases pre-COVID and post-COVID. The one area that shifted was sustainability. That is just something that has come more clearly into focus over time [for consumers]. Perhaps people are recognizing it even more while the world has been operating a bit slower and there are reports of cleaner environments or more wildlife.
Christine Tsaileft Google in 2010 to become a founding partner at500 Startups. As CEO, she has grown the firm into a global player in early-stage investing with over $500 million in committed capital and a competitive accelerator program.
It’s definitely a challenging time to feel optimistic. There’s very little control or certainty. We’ve been trying to move quickly in terms of how we adapt. The demo day that we had in March is a good example. We were really apprehensive about it because we were hosting it online and there was a question of whether it would just fall flat, whether this batch of startups would lose momentum. But I actually liked it better than the in-person demo days because a lot more people could attend and it was very focused on the company pitches. We created this private Slack community for the investors, and there was a lot of interaction. We’re still seeing what the ultimate results are in terms of how many companies raise money, but our team has mentioned to me that founders saw up to five times more follow-up in terms of meetings. It also enabled investors from other markets to attend because we posted it online afterwards. Even post-COVID, I’d love to continue with that format.
We’ve invested in about 2,400 companies [globally] over the past 10 years. Often, Silicon Valley is criticized for catering to the one percent. We had already been seeing that innovation comes from all around the world, and I think that’s even more true now.
Because of the size and the diversification of the portfolio, we’re seeing a spectrum in how [our companies] are faring. Unfortunately, there are some companies that no matter how great they were doing pre-COVID, [they’re struggling now in ways that are] out of their control. For many, it wasn’t a decline over the course of several months; it was a week and everything was just obliterated. Others are more wait and see. And then there are some companies that don’t know how to handle the demand.
Lo Toneyleft his role as a partner at GV, Alphabet’s venture capital spin-out, to found Plexo Capital in 2018. Plexo invests in both startups and other venture firms, with a focus on organizations led by women and people of color.
When you have a downturn and some institutional LPs feel the denominator effect of their public market equities shrinking in value, they may slow down commitments, they may sell off a portion of existing commitments. There’s a flight to quality. Plus it’s difficult for a lot of the more established institutional LPs to get comfortable doing an end-to-end [diligence] process virtually. These things are really impacting first-time venture fund managers. But that said, we know based on the data and history that first-time fund managers perform really well.
This is anecdotal, but it feels like people are more open to doing meetings right now. A lot of people, they have just a little bit more time on their calendars — you don’t have to worry about getting to an office, you don’t have to worry about travel. And so I think that entrepreneurs that are looking for new investors, GPs looking for institutional LPs: everyone needs to up their game on cold emails and figuring out how to get to people. We’ve done at least three deals [recently] that I can think of off the top of my head where we’ve committed to an entrepreneur without meeting them.
We’ve made a lot of gains [in recent years] for women and people of color both on the entrepreneurial side and the GP side. With all of these factors coming together — flight to quality, individuals and smaller family offices being more risk averse, inability to meet face-to-face — I do believe that is going to have an impact on the progress that we’ve made. It’s kind of like, last in the door, first out the door. So I’m worried about that.
Andrew Davisis director of private investments at T. Rowe Price, which he joined in 2010. The firm, which has over $1.1 trillion in assets under management, has ramped up its private market investing in recent years.
Given that we’re a so-called crossover investor, we can truly own a company for a very long time. And so from that perspective, we haven’t changed the parameters of what we’re looking for. I would say what has changed slightly, and this was actually happening pre-COVID, there were some missteps with some unicorns as they became public — or attempted to come public, in WeWork’s case. Those [issues] had already started a shift in terms of the rigor that we were requiring from companies as it relates to the path to profitability, and that’s been doubled-down on. In our current COVID state, additional capital destruction is not tenable. . . . Capital providers [for companies like Uber and Airbnb] are not willing to subsidize highly competitive models to the extent that they were in the past.
I continue to see really innovative things that have the potential to be the next great big companies. But I would also say we have gone through a little bit of follow-on copycatting in the last half of this decade, heading into 2020. The companies that are really going to excel going forward are the ones that are investing in a niche that others haven’t looked at. Those are more interesting opportunities at this time.
[Virtual due diligence] is something that we’ve struggled with over the past two months. It leads you to be more likely to work with a current portfolio company that you already know than a new investment. In one instance, [COVID] did shut down our ability to do due diligence. We were looking at a company that had a significant element of manufacturing associated with it. We needed to be able to go see these two facilities, because a large part of the incremental growth was going to be based on the physical capacity expansion, and we couldn’t. That was just something that was too hard for us to overcome.
Ainsley Harris writes for Fast Company
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer.
