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Home Spotlight

Much Ado About Nothing – The Andela Uproar!

Fisayo Durojaiye by Fisayo Durojaiye
November 3, 2017
in Spotlight, Tech News
As critics mutter brain drain, Andela raises $40million in Series C funding

Andela Web caption Source: Andela Website

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Let me start with an apology. I was meant to publish the second episode of the ongoing series on capital raising, however, I got interrupted by this Andela story. I hope to continue the series next week, if I don’t have to make a rejoinder to this story.

From what I have observed, there have been thoughts around how Andela has successfully raised over $80mm in just over 3 years of operations and the effect of that on other tech businesses operating in Nigeria and across Africa at large.

Further concerns have also been raised regarding what I will term the Ecosystem Impact Assessment (“EIA”) of the Andela operations especially regarding the perceived crowding out effect of Andela’s strategy of hiring senior developers, while other tech businesses are left with less experienced developers for a significantly higher cost.

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Further, EIA of Andela is regarding its business model of using its own developers and the Senior Technical Consultants (“STC”) to work on projects for foreign companies and the perceived re-colonization theme around it and the much debated “Slavery” in the model.

I will share my views around these topics;

On Andela’s Business and Business Model

  • Andela is for Profit – Let’s get this clear, Andela is not here solely for social good. Andela is a for profit business. As an investor, I will be terribly disappointed if all Andela would show me is how they have supported the ecosystem and not how the business is growing. Jeremy Johnson (the CEO Andela) described the business as a “mission-driven, for-profit company”. So, they are not here primarily for the ecosystem, they are here for profit. So, I suggest that rather that cry foul, local tech businesses should find a way of keeping their developers. Raising their salary is not the best way. Maybe giving them a skin in the game. Employee Stock Option Pool (“ESOP”) might be a good way. (I will write on this later).
  • The Andela Narrative Vs. The Actual – Up until now, Andela has sold us the story that it trains developers and use those developers for its clients’ businesses. This is true in theory. However, in practice, Andela cannot commit a client’s (Say MasterCard) project to a developer trained for just 6 months. This is not possible. Hence the need for Andela to recruit senior developers which they call Senior Technical Consultants (“STC”). Andela pays these STCs a lot more than the best local tech business could afford, hence causing some form of imbalance in the ecosystem. As we all know, water will always find its own level, hence strong developers will gravitate towards where they is paid more.

On Funding

  • Funding Vs Results – I don’t have a view of Andela’s accounts, financial performance and or traction, but from the information publicly available, Andela began operations in May 2014, raised money from a seed round of $3 million in September 2014, and nother in Series A of $14 million in June 2015 (9 months after the initial raise), Series B of $24 million in June 2016 (exactly 1 year after Series A of $14 million) and Series C of $40 million in October 2017 (16 months after). I sincerely hope, and do believe that the company must be on steroids to require such “massive” capital injection in such close timelines especially from their work outsourcing business, as building offices in 3 locations cannot be said to justify the initial $40 millioninvestment.
  • Argument for an Elite Founding Team – My opinion on the capital raising progression of Andela can be linked to the quality of the founders and the country of incorporation of the business. Let’s be clear, Andela is not a Nigerian business (though Iyin Aboyeji will disagree with me). The company is incorporated in the US by founders with diverse nationalities (Canadian, American, Nigerian and a Cameroonian). Andela is an American company with African operations simple! Jeremy Johnson is a super elite founder having founded a business and taken it to IPO. I won’t be surprised that Andela is on the IPO track. Iyin, Ian, Christina, Brice and Nadayar have a long history of entrepreneurship, strong technical background, developed and emerging markets experience, development economics and business experience. I will back a team like this any day any time.
  • What changed for Omobola Johnson – I have been hoping that our former minister will write a blog post on why TLCom decided to fund Andela in their Series C round, knowing that as at 28 March 2017 (Few months before the closing of the Series C Round), she was asking who will build an Africa focused Andela. Maybe, she is convinced that Andela is actually Africa focused or Andela is the company best suited for that purpose.

On Perception

  • The Andela Narrative – Andela is a global engineering organization that extends engineering teams with world-class software developers. The company recruits the most talented developers on the African continent, shapes them into technical leaders, and places them as full-time distributed team members with companies that range from Microsoft and IBM to dozens of high-growth startups.
  • The Andela Perception – I would have loved to write about this, but the image below summarizes it for me;

Let’s not get too analytical or emotional here. I know that 42 votes on Twitter cannot be said to be representative of the whole African continent. However, before you make a comment on this, please check the trends of opinions written by third parties about the Andela business. Check Radar by Big Cabal Media. Check medium posts regarding this topic and you will see the trend.

Remember I wrote “perception”. This might not be true, but  it is left to Andela and its management to either let the perception linger or actively correct it

My conclusion

  • Andela is not here to serve the ecosystem, it is here to make profit
  • Stop crying wolf about your developers, they will move to where they are being paid the most. Don’t forget, Konga used to be the tech company to work for, but immediately the fortunes turned, developers will look for the fastest exit. If you doubt me, check the LinkedIn profile of the STCs at Andela, a lot of them are from Konga.
  • I did not invest in Andela, but I sincerely hope they are executing. Raising $80mm in 3 years is no joke.
  • Don’t compare your startup to Andela if you don’t have the quality of founders Andela has. They just fit the Silicon Valley VC profile for what an elite team looks like
  • I am waiting for Dr. Omobola Johnson’s blog post on her investment in Andela and what changed in 5 months
  • I think Andela should put in greater efforts to correcting the perception about its business. But anyway, what do I know? I have not raised $80mm before.

Happy entrepreneuring!

Fisayo Durojaye,

 

 

Tags: AndelaDeepdiveFisayo Durojaiyeoduntan odubanjo
Fisayo Durojaiye

Fisayo Durojaiye

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