The Funding Conundrum: Why Seeking External Funds Might Not Be a Good Idea For Startups

Nzekwe Henry December 2

There is a lot of fuss around the subject of raising funding and its importance to a startup’s chances of success. It is not uncommon to have many individuals attach a lot of significance to external financing for aspiring entrepreneurs and early-stage startups, but the stark reality is that most startups never really get to score that much-vaunted venture capital or angel funding. But does an inability to secure funding dictate that startups should never get off the ground? Well, it doesn’t have to be the case.

Here’s a dose of reality; outside funding is not a startup entitlement! It’s more of a perk. It’s all good if you can get some, but if you can’t, it should not serve as a convenient excuse for the inability of your startup to cut it.

Okay, perhaps the media does share some of the blame in what appears to be the disproportionate overestimation of external funding to the growth of startups but aspiring entrepreneurs must recognize that for every Garrett Camp who succeeded in financing his hugely-successful ride-hailing company, Uber, with early venture funding; good-old bootstrapping successes can be cited in the likes of Bill Gates, Michael Dell, and Richard Branson. In these entrepreneurs, a crop of individuals who didn’t get any boost from outside money but waited for confirmed initial success before scaling their respective businesses or going public is wholly epitomised.

It’s kind of the norm for many startup founders to be catching flights and shuttling between cities in the name of wooing investors and raising capital. A good number of aspiring founders are also known to be hopping to random financiers trying to sell their ideas with kickass pitches that took months to put together.

The lobbies of many investor offices are also known to have become something of a makeshift office for many startups who seem prepared to wait it out for however long it takes to make an impression. And for novice entrepreneurs, this is not exactly a bad idea.

The popular narrative now borders around the idea that without outside capital, there would be no growth or success for any business. Some other school of thought may even attribute product development and business expansion solely to the availability of funding. For many, it is believed that raising capital is an integral component of a startup’s foundation.

Now, while some of the above claims may be somewhat justified as raising capital for an enterprise does seem necessary, and investors play a role in shaping many businesses, it will be utterly wrong to assert that external investment is of the utmost need for all startups. 

So essentially, you need not overly fuss about external funding or let it be the factor that ultimately defines how well a business does. Instead, the focus should be on creating self-sustaining companies through the development of products/services that have far-reaching social and economic impact. And if you’re still in doubt, here’s why startups should rethink their need for external funds:

It Could Cause Time And Energy To Go Down The Drain

Okay, so you just launched a business, and the last thing you need is jet-setting and waltzing in and out of offices in the name of getting a financial boost. A new business needs your undivided and undiluted attention on ideas and product improvement. Many startups get caught up in the melee of funding pursuits and inadvertently lose their grip on the important stuff.

If it’s a new business, then it needs to be nurtured. Don’t fall in the loop of fundraising attempts and get consumed by the process, as the business will inevitably suffer. Every hour spent wooing an investor is sixty minutes that could have gone into improving your product and winning over more customers.

Typically, it would require several months and countless meetings to get a couple of investors on board with the program, and this could lead to a term sheet. There could not be a more appropriate example of time wastage for an early-stage startup if the funding pursuit ultimately proves a fiasco. And then belief in your own business and skill set starts to erode from there.

The idea is to get a firm grip on one before chasing the other. Don’t overly fixate on raising funding and scaling when your product is still a long way off from top-notch. Place initial focus on developing a kickass product that will take out the competition and the investors will come calling. Don’t lose precious time chasing a dozen birds in the woods when you can make the most of the one in hand.

Place Emphasis on Revenue Generation

The problem with having access to a fat stash of cash in your company’s account to keep things going for a year or more is that you become complacent and lose sight of what should be the main focus — revenue generation.

Try running a business with little bursts of cash from your personal savings, and you will find yourself making smarter financial calls. If anything, the trepidation that comes with the thought of going flat-out broke will keep you on your toes and nudge you into putting in more work to generate revenue.

It’s not rocket science; it’s pretty much basic that companies tend to make the wisest money decisions when funds are not aplenty. That’s one way to make every penny count.

You Don’t Always Need Huge Funding

Here’s the thing most people don’t know about startups; startups are organisations that are working on a business model. It could even be said that they are organisations that are searching for one. What this implies is that a startup is an entirely new entity that has its sights trained on identifying what it’s future customers are really on the lookout for.

It might do some good for founders to recognise that it is not very wise to invest in a five-member prototype development team when a single freelancer can do a good job of developing a lean version. A move of this nature will better inform on financial needs and help to understand how much outside funding is required if any is required at all. So you don’t go about seeking funds when you have enough to get started.

Future expenditures on product developers, marketing initiatives, technology licenses, access to distribution channels, and intellectual property investments, are mostly unavoidable. But be wary of too many sales executives without a finished product. Also, the initial stages of your business will hardly be helped by huge office spaces and highly-paid employees.  So be on the lookout for those too.

Offering A Seat At The Table To An Outsider

Every other day, there is a news piece breaking somewhere about a startup that has just roped in some amount of cash from an investor in exchange for some amount of equity. Sounds pretty straightforward, doesn’t it? Well, it hardly ever is.

Exchanging some amount of your company’s equity for some cash is not a transaction you make hastily. It has implications. A deal of this nature forges a relationship that will exist for as long as you have the company unless otherwise stated. And this is one call you don’t want to get wrong.

It’s like a business marriage of a sort; the investor will have to be involved in every major business decision, they will have to be kept updated on the business’ progress, you will be answerable to them for losses and other discrepancies. Numerous meetings will have to be called to bring them up to speed, a plethora of excel sheets will be flying around your desk, and justifying actions and arguing moves will become part of your job description. In essence, you lose that little bit of autonomy and control for every amount of equity you hand out. That is why you can’t afford to make a wrong call here.

The very essence of being your boss may be undermined permanently by one wrong move. Therefore, critical thought ought to be given to the whole arrangement before any commitments are made.

For all its perks and benefits, signing off on an equity investment is tantamount to agreeing to share profits. And that is a mild way of saying a significant chunk of the company’s profits ultimately nestles in coffers of the investor who could have done no more than offer you cash. You may have been happy taking the money from the investor initially, but you may not be too pleased seeing the bulk of the money you have toiled for slip away when it’s time to reciprocate.

Worse still, you may even get involved with international firms, and that would imply that the profits raked in by your company find its way into other countries instead of assisting in the empowerment and development of the infrastructure and workforce in your own.

All these drawbacks further underline the idea that external funding may indeed be overrated and bootstrapping is still a good way to go. Securing outside funding may not be the answer you seek and not being able to get one should not stop your startup from taking off and even hitting the heights. Putting your own money in your business does serve up some degree of leeway, and it also gives one absolute control over the finance and creative aspects of the company. It places the onus on you to channel funds judiciously and make wise moves for your firm.

Smart entrepreneurs recognise that disrupting today’s business world is not a frenzied sprint to the finish line, but a marathon, with many hurdles along the way — almost like a scavenger hunt! If you set out on your journey to enjoy the path as well as the destination, it is very likely that you will reach your destination in one piece and in good time. And outside funding is not the ultimate route.


Feature image courtesy: Shutterstock

Egypt’s Nawah Scientific Gets USD 1 Mn Funding Boost From Endure Capital

Nzekwe Henry December 10

Egyptian research startup, Nawah Scientific, has secured an investment worth USD 1 Mn in a pre-Series A round led by Endure Capital, with 500 Startups, Averroes Ventures, Egypt Ventures, and angel investor, Dr. A. Abdelhamid, also joining the funding round. This is the first time the startup is raising external investment.

Nawah Scientific is a Cairo-based startup that appears to be carving a niche for itself in the area of scientific research. The startup which was founded in 2015 by Dr. Omar Sakr; a PhD holder in the field of Pharmaceutical Sciences, boasts a collection of advanced equipment that is suited to the research and development needs of both natural and medical sciences.

Nawah Scientific helps scientists and universities who do not have access to sophisticated equipment and facilities carry out critical research tests that would be otherwise improbable or too much to ask.

The startup goes about this by receiving experiment requests via its online platform. Through a courier, the test samples are moved under prime conditions from the address of the client that made the request to premises of the startup.

A team of competent in-house scientists then take the reins from that point onwards as the required tests are carried out and the test results are relayed to the client via the startup’s online platform. Through this simple but effective mode of operation, Nawah Scientific is able to cater for the needs of researchers as it affords scientists access to top-notch research facilities, whilst fostering scientific research in both Egypt and beyond.

Having been established barely three years prior, Nawah Scientific claims to have offered its services to clients within and outside Egypt. So far, the startup claims to have analyzed as many as 15,000 samples from 32 universities. But the services of the startup do not stop at scientists and academia as it also carries out complicated research projects and simple analysis for chemical and pharmaceutical companies.

Commenting on the development, Dr. Omar Sakr, Founder and CEO of Nawah Scientific, tethered his motivation for establishing the startup to the need to make access to cutting-edge research and high-tech equipment more available.

He also noted that a lot of time that should otherwise be put into meaningful work is spent by scientists shuttling between cities and universities to have their samples tested. And in the process, yielding unreliable research projects that are shallow at best. According to the CEO, this has put a strain on the trust between industry and academia resulting in a poor ‘research-to-product’ conversion rate. He, however, believes that the startup is now better poised to fix these problems.

With the latest development, Nawah Scientific has now become one of the first life sciences startups in the MENA region that has achieved success in raising significant investment. Since its inception, the startup has posted an impressive year-on-year growth and this can be thought to have gone some way towards attracting and closing the investment deal. And this bodes well for other science-based startups in the region as the company appears to have broken the proverbial glass ceiling.

Speaking with regards to the investment, Tarek Fahim, Managing Partner of Endure Capital, opined that biotech startups share a lot in common with software startups before AWS and rapid development tools. He also stressed the importance of infrastructure players who can push boundaries to the growth and sustainability of biotech enterprises, stating that they can help “lower cost for starting and increase the speed of prototyping.”

Egypt Ventures; a VC that was launched recently by Egypt’s Ministry of Investment, is believed to be the biggest investor in this round. Hema Ali, Managing Director of the newly launched VC, expressed the company’s excitement at being part of the startup’s journey as it looks to scale its offerings and expand into new markets.

It was this time last year when Nawah Scientific clinched the grand prize in the pitch competition at the 2017 RiseUp Summit. Having emerged winners of the competition, the startup roped in a USD 50 K cash prize.

Now, barely a year on from that night of blitz, the startup appears to be holding its own quite well, and the latest investment worth USD 1 Mn (which is quite substantial given that the startup is raising external capital for the first time) is a testament that Nawah Scientific is on the right track, as this connotes investor confidence.

Plans related to expanding the startup’s services and growing its marketing activities outside of Egypt are expected to get most of the attention with the latest capital injection.



Feature image CourtesyNawah Scientific

Egyptian Healthtech Startup Vezeeta Raises Investment From IFC

Nzekwe Henry December 10

Egyptian healthtech startup, Vezeeta, has secured an undisclosed amount of investment from World Bank Group’s International Finance Corporation (IFC). This development sees Vezeeta become the first Egyptian technology company to bag a direct investment from the IFC.

Vezeeta is one of the leading healthtech startups in the MENA region and the latest investment from IFC into the Cairo-based company follows a previous announcement which saw the startup close a Series-C round worth USD 12 Mn. That round was led by STV; a Saudi-based investment firm.

Vezeeta was launched in 2012 by Amir Barsoum. The startup makes it possible for patients to search, compare, book, and consult with doctors in Egypt, Saudi Arabia, Jordan, and Lebanon. Vezeeta also assists medical personnel with practice management solutions that help in better management of medical appointments and patient data.

Up to 2 million appointments are believed to be facilitated by the platform on a yearly basis, and that’s according to the startup. More so, Vezeeta claims to have over 10,000 healthcare providers signed on to the platform, providing services to at least 2.5 million patients in the region.

With regards to the development, Amir Barsoum, Founder and CEO of Vezeeta, offered that the investment from a “global power” like the IFC will help accelerate the growth of the startup, as well as buoy its plans of building a formidable global network.

Chief Executive Officer of the IFC, Philippe Le Houerou, also commented on the development expressing his confidence in the ability of Vezeeta to drive innovation in the MENA region. The CEO also expressed delight at the prospect of African entrepreneurs harnessing their creativity and drive with the power of novel technologies to address some of the continent’s most pressing problems.

Vezeeta’s Chief Technology Officer, Adel Khalil, also rendered his voice in support of the development reiterating its importance in helping the startup keep up with its mandate of empowering millions of patients in the region, and making sure patients and healthcare providers are seamlessly connected by leveraging data and new products in healthcare.

Mohammad Elmougi echoed, Vezeeta’s VP North Africa, echoed the thoughts of the CTO when he hinted at the commitment of the startup to pulling down all accessibility barriers and improving the quality of healthcare experienced by patients in the region through the elimination of all the bottlenecks that currently bedevil quality healthcare service accessibility.

While this is undoubtedly the IFC’s very first direct investment in an Egyptian technology venture, it would, however, not be the first this investment arm of the World Bank Group is throwing about its financial weight in the MENA region. Over the course of the past few years,  the IFC is known to have made funding commitments worth over USD 100 Mn in startups, venture funds, and accelerators across the Middle East and North Africa, including such Egyptian ventures as Flat6Labs and Algebra Ventures.


Feature image courtesyMENAbytes

Ugandan Startup Swipe2pay Swipes Away USD 40K At BRIDGE East Africa Startup Pitch

Kevin Gachiri December 10

Swipe2pay, a Ugandan startup was picked as the winner of BRIDGE East Africa Startup pitch and secured USD 40K at Weetracker’s first flagship conference event held at Crowne Plaza on 7th December in Nairobi. The announcement was made by Takuma Terakubo the CEO of Leapfrog Ventures whose joint partnership with Weetracker made the event possible. Leapfrog Ventures will add Swipe2pay to its roster of startups, it is funding in East Africa. Other startups that took part in the pitch included Yusudi, Talklift, Zumi and Asilimia.

The Selection of Swipe2pay came as a surprise considering that each of the 5 startups had delivered convincing pitches in front of the panel that comprised Japanese investors on tour in Africa, some for the first time. Solomon Kitumba, CEO Swipe2pay, had come from pitching at #slush18 in Helsinki arriving in time to make his pitch as the last participant for the day. Swipe2pay makes it possible for informal businesses that accept cash from customers to be able to accept digital payments as well as credit card transactions. The startup which was founded in 2017, is already integrated with Visa and Mastercard.

In an interview with Weetracker, Solomon intimated that “We are already active in Uganda with a majority of our customers coming from Mbarara and Jinja. We have built a regular customer base of 550 regular users on our  platform with transactions sometimes growing upto 3,500 per day when we get very busy.”

According to their website, the solution they provide to customers also includes their provision of daily, weekly and monthly reports. The fintech startup has integration with Kenya’s MPESA making it possible for them to venture into the local Kenyan market as well.

Solomon is assisted by a team of six who play different roles in driving the business forward and the funding they have received will go into product development as well as strengthening its talent pool which would be necessary for looking at how the product can be polished, refined or extend its features. Having grown in rural Uganda, Solomon had observed how informal market traders mostly women fail to access finance since they don’t keep records or any form of payments they receive from clients.  This makes it difficult to get credit reference. The need to accept funds from clients who wish to pay by cards also means that they usually turn away clients from this customer segment. Swipe2pay, therefore, helps in attracting more customers.  It is this discovery that made Solomon devise a method of bringing a better solution to these informal traders.

Weetracker’s BRIDGE East Africa, held in Kenya drew a substantial crowd of investors from Japan as well as attendance of local investors, venture capitalists and seasoned entrepreneurs. The event hosted startup pitches that were held in between the panel discussions and fireside chats with selected guests. Leapfrog Ventures announced at the event that it is looking at making 200 investments in Africa in the coming 3 years.

What You Should Know About Google Hangouts’ Rumored Shutdown

Andrew Christian December 9

Sources familiar with the tech giant’s product’s internal roadmap have reported that 2019 will be the last year for Google Hangouts, as the company plans to shut it down by the year 2020. The development, to nearly no one’s surprise, is a reiteration which accompanies the company’s apparent decision to hold off on further developments on the app more than a year ago.

Google had previously announced its pivot for the Hangouts brand for enterprise use scenarios with Hangout Chat and Hangout Meet, so it has been telling for a while that the consumer app would soon cease to exist. With the abandonment of Google Hangouts concerning development and its presumed final extinction, many entrepreneurs have begun charting a course away from the app, even though it will remain a prominent official chat option in Gmail on the web – continuing on the Google Play Store even now. In line with recent reviews, the app has shown signs of ageing which are evident in its display of bugs and performance glitches.

Hangout as a brand will remain with G Suite’s Hangout Chat and Hangouts Meet, with the former tailored for Slack app-comparable team communication and the latter as a video meetings platform. In the same line, Google Voice calling, which was initially independent and then integrated into Hangouts, was restored to its own redesigned app earlier this year.

Worthy of interest is that in spite of its inevitable axing, Hangouts was one of the few apps to receive early support for Android Auto’s new MMS and RCS functionality, alongside Whatsapp and Android Messages.

Nonetheless, Google’s Scott Johnson has chimed in on this development and denied any decision being made about the timeline of legacy Hangouts’ shutdown. He did confirm that users of consumer Hangouts will somehow be upgraded to Hangouts Chat and Hangouts Meet, both of which have been presented as enterprise-focused products that fill different needs. Scott also confirmed rather explicitly that Hangouts Classic, which is the subject of this development, will eventually be “shutting down’. Meanwhile, there are sources which corroborate the initial report, informing that decisions have been made for the depreciation of legacy Hangouts.

Most of us consider the Chat and Meet to be more business-focused products, and these plans make the situation seem as though they could have more of a consumer-facing component in the future. For entrepreneurs who have continued to use Hangouts, and who are now coming to rely on Slack or Discord style at-mentions, having such features in Hangouts may be somewhat snazzy. If the rumour of Hangouts’ death or transition are true or have been exaggerated, it wouldn’t matter so much if the new upgrades come with those new features.

Meanwhile, another source reports that Google provided an update on its current efforts, and now focuses moving towards a simpler communication experience. Starting on the consumer front, Google has “decided to stop supporting Allo to focus on Messages.” In April this year, Google only noted that it was “holding off investment” on Allo, but the tech giant confirmed that the service is about to get the sunset. Allo will be available until March 2019, with the service continuing to work until then; disregarding today’s downtime. Google has furnished us with details on how users can export existing conversation history from the app.

Google Hangouts, for as long as it has been in use, hasn’t disappointed entrepreneurs, as it can be a great asset to a company of any size – even more ideal for smaller businesses and startups. The app allows you to connect with employees easily, business colleagues and clients via calls and video chat making it seamless for those who travel or work from home. Hangouts also afford companies the flexibility of connection form virtually any smart device. Users can also, during chats, share files via Google Drive, stream live broadcast, participate in webinars and hold staff meetings amongst many more.

As customers will be able to review your business as an accessible one that cares about customer satisfaction, using Google Hangouts is a marketing strategy with all the makings of greatness. With weekly/monthly question and answer sessions, customer chats and feedback reception, you can not only appeal to customers but receive immediate interactions that can help you develop a more robust marketing strategy. Taylor Swift hosted a Google+ Hangout to announce her new album, and with the medium, she was able to reach fans from all over the world – making her song hit number one right after its release.

This goes to say that Hangouts is a great way to make business announcements such as funding rounds, product launches, expansion or any other news that customers may be interested in. The app is also useful in holding online staff meetings, and conference calls with important clients even while you are in transit.

We are yet to find out the actual features that will come with the storied Hangouts Chat and Hangouts Meet as replacements to the authority-building, customer-gathering, engaging, and collaborative Google Hangouts. 2020 is more than a year from now, so while Sundar Pichai and his team of techies decide the fate of this G Suite member, we still have no less than 12 months to enjoy the existing chat room app.

Nigeria’s Logistics Startup Kobo360 Raises USD 6 Mn From World Bank’s IFC

Andrew Christian December 7

Nigeria’s Uber-like trucking logistics startup Kobo360 has raised USD 6 Mn in its second investment round this year. The equity financing which was gained from World Bank ’s sister organization IFC, will help the company upgrade its e-logistics platform and spread its tentacles to Ghana, Togo and Ivory Coast.

This recent investment for Kobo360, which also involved efforts from other platforms such as TLom Capital and Y Combinator, will be used by the startup to become more than just a transit app. The founder, Obi Ozor, told Techcrunch that the company broke into the logistics market as an app that connects truckers and companies with freight needs, but now looks to build a global logistics operating system and become a full-fledged platform.

While bridging the gap between truckers, producers and distributors, Kobo360 is now chomping at bit to build the platform that will offer supply chain management tools for enterprise customers. In a statement, Ozor revealed that large firms are now demanding for movement, tracking and sales-related specific features, which is why the startup is looking to leverage two options – integrate other services such as SAP into Kobo or building the solutions directly into the e-logistics platform.

With this new investment round, the startup will sally forth with the said upgrade by developing its API and opening it up to for the use to large enterprise customers. With the intent for clients to use Kobo360’s dashboard for everything from moving goods, tracking, sales and accounting, the platform wishes to tackle the challenges faced by its customers.

It is also reported that the company will forge a more physical Nigerian presence in order to serve its customers better. Concerned about truck movements and monitoring, helping operation’s collect proof of delivery and accessing trucker owners more closely for inspection and training purposes, Kobo360 is poised to launch 100 hubs before the end of 2019, according to its founder.

The startup, remaining “aggressively” focused on reducing logistics friction for large enterprises and SMEs alike, alongside connecting new markets and unlock better community wellbeing, will add more warehousing capabilities to support its reverse logistics business. By matching trucks with return freight after they drop their loads, Kobo360 will bring down prices and eliminate the return-empty challenge facing its customers.

In a statement, the IFC enthused that the company currently has over 5000 trucks empanelled on its platform, from more than 600 small fleet owners, serving some of the largest enterprises in Nigeria. Kobo360 told Techcrunch in January that it is looking to add 20,000 trucks to its platform and latch on to the expansion which is now made possible by its USD 6 Mn raise. According to the founder, the expansion, which is scheduled to take off in 2019, will be with existing customers – one in the port operations business, another in FMCG and the last in agriculture.

As a matter of strategic priority, the funding, which was announced by both parties on the eve of the opening of the IFC’s Next 100 African Startups Initiative, will be used by the startup to also expand programs and services for its driver members. Along this line, Ozor remarked that neglecting drivers would crumble the company to a pile of issues while iterating that the same loophole hinders ride-hailing companies from becoming trillion-dollar enterprises.

Because owning trucks may be too cumbersome to handle, Ozor opines that the best scalable model is to aggregate trucks, while handling more volume at cheaper prices to leverage the startup’s asset-free digital platform and business model to outpace traditional long-haul 3PL providers in Nigeria.

According to a Weetracker report, Kobo360 raised USD 1.2 Mn in June this year from U.S venture capital firm Western Technology Investment and became a Y-Combinator cohort, while receiving USD 120 K equity investment from the seed fund. The logistics startup, which has served 900 businesses, aggregated a fleet of 8000 drivers and moved 155 million kilograms, is welcoming IFC’s regional head for Africa, Wale Ayeni and TLcom’s senior partner Omobola Johnson to take seats at its board.

Kobo360 also offers training and programs on insurance, discount petrol and vehicle financing to its drivers. The startup has also created an HMO for drivers, alongside an incentive-based program to afford education, which is monikered as KoboCare. The company’s top clients include Honeywell, Dangote, Unilever, Olam and DHL.


Featured Image Courtesy: Macktrucks

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