Forget Silicon Valley dreams. This is the best route for African startups


#1
  1. On funding

Forget about investors, Series A, Series B, Series C crap. This route that has been popularized in the tech media does not work in Africa. First of all, African tech markets are too small to be dreaming about ‘unicorn’ status. In Africa, most well executed startups will end up making between 10-100k USD per month. This is good, but when you have been given millions of dollars of funding, it’s nothing. Also we don’t have a good IPO market in Africa, so forget about IPO. And finally, we don’t have big boys of tech acquiring people left and right like Facebook and Google. So your investors will be left with no return, you will be left owning less than 10% of your company like Jason Njoku and you’ll likely even be fired by your majority shareholders for underperformance, like what happened to the Konga and Jumia founders.

2 . On ‘exiting’

Forget the stories of selling your startup for billions of dollars and banging Instagram models in exotic islands with the proceeds. First of all, there are less than 10 exits in Africa every year. In the US there are over 100 exits every day! There’s just not many acquirers in Africa, and zero IPOs outside of telcos. Furthermore, I have seen a lot of these startup acquisitions in Africa behind the scenes and believe me, it’s not pretty. Most of the exits you read about in Africa were desperate moves by the founders to save their failing business. They got peanuts in the end but put on a brave face for the media. I know of a startup that was a ‘big’ name in tech circles, but after 7 years of work, they got $20,000 in their acquisition.

3 . On recruiting

Please forget the Silicon Valley image of hiring. Forget poaching from rivals. Forget the swanky offices with PlayStation, ping pong tables and hammocks that make you wonder whether it’s an office or a playground. I’ve seen so many founders try blow cash on such stupidity and end up running out of money despite having good capital. The Silicon Valley hiring models are only enabled by their sweet funding environment, which we do not have here. You have to adjust.

So what’s the best option for African startups?

  1. On funding, use the following:
    Savings: get a job, save for a few years then commit to the startup full time. The good thing is in Africa, even $10,000 in savings can take you very far.
    Friends and family: if you have some rich relatives, don’t be ashamed to use them! Money is hard to come by and relatives can give you on friendly terms. Just be ready for a backlash if you lose that money!
    Loan: I advise people to use this for growth. Only use a loan for starting capital if it’s a ‘sure’ bet like if you’ve secured a tech contract and need capital to fulfil it.

  2. On ‘exiting’ please forget about this completely! The best overall outcome for an African founder is to own the whole/majority of the business, while making a good amount of money at the end of each month. Target over $5K USD steady net profit every month and you will be good. The ultimate should be $10K USD profit per month and above. You will have no ‘third world problems’ at this level, and you’ll still be able to bang Instagram models in exotic islands with such an income. You’ll probably have to have two companies making a good amount each month for you to be able to achieve this.

  3. On recruiting, I think the best thing for African startups is to have a knowledgeable founder or at least one team member who can train new recruits. So that means you get cheap labor from out of college, but with time you get the desired results. You might become a ‘training ground’ for bigger companies to come poach your employees, but if you develop a good training guide you’ll be fine. Also forget about the swanky office. Work from home is the best arrangement for African startups. You save costs, save on navigating insane traffic 4 hours per day, you can hire from anywhere in your country/the world, you can balance work and family life, no harrassment from government officials, no having to deal with petty office matters, you are able to focus completely on work and performance.

This is the right formula for African startups. I can tell you Linda Ikeji(blogger), Seun Osewa(Nairaland), Akin Alabi(Nairabet), Guerassim Nikolov(Sportpesa), Caspar Lee(SA YouTuber), Danson Muchemi(JamboPay), Mr. Majani(Ghafla) have all been wildly successful using this formula to a large extent. In fact, most of the big entrepreneurs in Africa followed this route. What do you think?


How to build a multi-million dollar company without raising funding. Is it possible?
#2

Who told you this ? :worried:


#3

10% of $1B is not a bad deal. Is it?


#4

Iroko is worth $1B ?


#5

No it is not. Iroko is a zombie company that’s just floating along by the grace of their investors. Their valuation is so out of whack with their revenues and they are making crazy losses. To top it off, there are no buyers in sight. Of course as a result the employees and managers are stressed all the time. See their Glassdoor reviews for an inside look into how things are going over there:

Do you want 10% of such a company or do you want to make $100k+ annually for yourself in peace?


#6

Leave them o


#7

This got me cracking up :joy: …who send you abi na who you de work for?


#8

Mehn! Those reviews are brutal


#9

Funny enough you are right Iroko was profitable before those investors came, now they are a loss making machine,bastian and jason both own i think 11% each of Iroko and their loss is crazy(African standard) maybe that is why he left also the first investor cashed out.

I hope they make profit oneday.

Problem with the Eco system is that many of our founders schooled abroad especially in the United states ,they bring back solutions and business models that are just incompatible with the Nigerian market.they create lot of hype and then they dont deliver,shebi,they can always run back to their base when things go wrong,they raise the bar making it difficult for the local-born founder to have access,some because they did one month internship in Silicon valley in some unknown dead startups wont let us hear word,anywhere they go they start their speech with how they help create a startup in Silicon valley,some of them even bring ideas and models which is just out of touch from reality.some of them are just motivational speech drunk forgetting that the Nigerian market is full with many internet illiterate.

Some founders think they can create billion dollars company from Nigeria forgetting that the Nigerian market is very small and underdeveloped and very behind in many aspect,some metrics of the some of our founders they post on medium are just fake and fabricated to give themselves more fame.imagine a startup that just started last year maybe after y combinator and other incubators calming they have done so so transaction but then you start wondering how this is possible in a country where many people are not internet friendly.

Our reputation as a yahoo yahoo nation is an hindrance for Nigeria tech company to go global,no foreign user will like to keep their info on your site when they know its from Nigeria because of our reputation.Change that yahoo yahoo image and some great company will come out from Nigeria.

Some have brought the mentality they you can only be successful with investors money,now,nobody is into the lean strategy,everybody wanna employ like they do in silicon valley even if their resources is low,international staff and so on forgetting that once the business fails,many of the staff will be unemployed,everybody just want to follow the easier part,nobody wanna do the hard work,they wanna be overnight millionaires.that is why they all focus on pitching investors and attending and travelling the world for investors instead of building their businesses and be strategic for investors.

Many founders just need to sometimes check in into the school of reality for them to actually create sustainable business in Nigeria.

Our grand fathers and mothers that have built great businesses that are still standing today,we should learn from them.One of the great guy in internet i respect so much is Seun (nairaland) even with all the criticism,it is still standing and making cash after 11 years.how many tech company in Nigeria can say they will still be there in the next 4 years,some just want to boost their ego or fulfill their fantasy by listing on stock exchange,the day you list that is the end of your business,The market and speculators now determine your business success.

Another stuff that is killing the eco system is nowadays everybody is claiming investor even if they gave you transport fair when the days were rough.these so called investors also attend investors meeting and are specially invited to host conference and summit in some eco system in Africa,there story is always how they they believed in you and invested in you,but they didn’t tell the audience that they have no stake in your company and it was transport money they gave you.tired of people like these investors and we have many of them in Nigeria

Investors my A**

the moral of the story: create strategic business that can stand the test of time.


#11

omoh. The Nigerian internet environment is very brutal. People don’t trust online things here. I know. The moment I included offline payment in one of my startups, then revenue started coming in. Kudos to those who are really and truly turning out a profit in this our jungle. Good Job!


#12

Offline is bigger than online in Nigeria, at the moment.
Things will change but…


#13

will take time


#14

Sigh. here we go again. So much ambition here on Radar. So many experts. Yes Iroko died 2 years ago when folks posted negative things on Glassdoor, what a great reference point. Of course all venture backed projects in Nigeria are vanity plays and of course we are all drowning in our multi-million dollar losses. Of course Bastian and investors left with millions of dollars because everything is dogshit and there were no buyers (the logic literally makes no sense considering there was a secondary and another investor saw the value to acquire their shares at $69m valuation). Of course Iroko is making no revenues because of course you know the revenues. Why not share them here?! Why sell us all short.

Well done. You are a genius. Clap clap clap. Can you be happy now? Can just leave us idiots back to our zombie-walking-dead-startups (whose watched season8. Gruesome).

I actually agree with your original ascertain that VC backed isn’t for everyone. Fuck me I actually wrote about it a year ago But there are some things which require capital. Somethings just simply can’t be built on hopes and dreams. And 99% of major consumer internet companies were built on venture capital. You know the ones you use today. But well done. You have actually prompted me to post something again on Radar. Sigh. Mr Seyi Taylor will be happy. Mrs Njoku disappointed. Clap clap clap. Well done.

God Bless.


#15

is this meant to be sarcasm but the fact are all there that iroko made loss last year and maybe this year also:)


#16

Yes. And the point is?


#17

point is that silicon valley model and investors unrealistic dream or bet in Nigeria is doing more harm than good and it is not working.the model of loss making is alien to an African point of view.

Also another point is when will iroko loss making strategy end?,it seems you guys enjoy sitting in your chairs earning fat salaries while you guys hope on selling the business to the highest bidder. then bounce out and shout MISSION ACCOMPLISHED

i know you guys are not thinking of cashing out but creating a long time sustainable business.

it will be a big disappointment to me as a customer if iroko is sold in the future


#18

I swear to God, the way you’re talking… It seems like you co-founded the company with @Jason_Igwe_Njoku


#19

sorry for being blunt but the real truth is most founders here are more interested in selling than creating a real business.


#20

You can rant all you want, but there’s nothing incorrect I have said about your company. The advice still stands for the readers: forget Silicon Valley dreams.


Jumia is selling off everything one by one
#21

i dont think those things are correct about the irokotv that we look up to that also invests in other small companies. if thats a failure, i think i am interested in that type.