Maybe it’s time we rethink the excitement of fund raising capital
An entrepreneur (E1) was trying to introduce another entrepreneur (E2) to me. E1 believed that E2 and his current business will fit perfectly with my investment criteria. In his recommendation E1 said, “This guy (E2) is a solid guy, he was the founder of this super startup; he went on to raise over $50m from investors in 3 years!”
At this point I was confused. E1 was suggesting that I fund E2 because E2 has a reputation for raising money. I know E1 is not alone in this belief. There are many entrepreneurs who just want to announce their latest funding rounds. But have you noticed that these entrepreneurs who are excited to announce their funding rounds are never willing to disclose the valuation with which they were done?
Trust me, though fund raising is important, it does not guaranty the success of your startup; what you do or achieve with the additional capital is more crucial. I don’t think raising capital is an achievement in itself. There are a lot of companies that have raised huge capital and still folded up.
|No||Startup||Shut Down Month||Amount Raised (USD)||Amount Raised (NGN)|
|5.||Yik Yak||May, 2017||$73.5mm||N26.8bn|
These are just 10 companies with massive funding that folded up in 2017 alone. So, fund raising alone, for me is not an achievement.
Technology vs Business
I cannot overemphasize this point. Technology entrepreneurs in Africa need to find a delicate balance between technology and business. A lot of times, founders focus on the technology rather than running the business. This is a recurring theme. Most founders just believe that once they have a solid technological innovation, the market will be at their mercy. We have seen that this is wrong!
In Sub Saharan Africa, with Nigeria as a case study, a lot of transactions are still offline. Technology businesses should look to digitize all these offline behaviours; a more realistic approach is to use your technology to facilitate the offline activities rather than try to change their behaviours.
Let us get this straight, even in the USA, with impressive stats including broadband penetration, smart phone penetration, literacy levels, good infrastructure etc., offline retail sales still dwarf online transaction values. Why would Amazon acquire an offline supermarket chain exclusively focusing on organic foods (whole foods)? You would imagine that the online retail giant will focus exclusively on its online business, but…
The moral of the Story
The fact that you have raised money does not guaranty success of your business. So, I will rather the founder focused on proper execution rather than feeding his ego by announcing more funding rounds.