Nicholas Haralambous was the CEO and co-founder of Motribe before the company was successfully acquired by Africa’s largest social network, Mxit in August, 2012. In 2009 he featured on GQ’s list of Top 30 Men in Media and was also a finalist in the Men’s Health Best Men Awards in 2010. Prior to its sale, Motribe, was named by Forbes magazine as one of the Top 20 Startups in Africa in 2012. In this essay Nicholas offers advice for African entrepreneurs looking to find funding.
by Nic Haralambous
Finding funding is never easy, don’t let anyone tell you differently. You don’t simply trip and fall into a pile of cash. This is especially true in the emerging markets at present.
Many investors are risk-averse (they don’t want to invest in unproven businesses) and those who are local and not averse to risk don’t have enough money too truly back a long-term startup play. This is the first paradox in the tech-investment space in Africa right now.
There are many investment firms making a move in the right direction in Africa but they are still few and far between.
There are the varying types of investment you can go after; Private equity, angel investment, seed funding, accelerators and Venture Capital. You could also look to family funding as an answer – getting your family to back you in small increments.
I have previously raised fairly substantial seed funding from 4Di Capital in South Africa for my company, Motribe and I lived to tell my story.
In 2011 I was certain that the solution to everything was more funding. I also believed that the money needed to come from abroad.
Here are some problems I ran into:
Move to the US/EU
Many investors were interested in giving me money but wanted me to move the Motribe Headquarters to New York. This was a bad idea but the money was good. We decided against it.
The lesson: The investor needs to be the right fit for you and your business. Not all money is good money or the right money, don’t settle.
Not Enough Revenue
This problem generally comes into play with a fairly young startup in a very dynamic space. It’s often tough to raise funding without revenue in the emerging markets.
The lesson: Make money. You don’t have to make profit, just prove that your business can make money and scale the making of money.
The Wrong Kind of Revenue
Be sure that you have chosen the right revenue model for your product or company. Revenue anywhere is often the advice given but often leads to troubles down the line. Be vicious with your goals and ensure that you go after scalable revenue.
The lesson: Be patient and don’t be greedy. Sometimes turning down revenue is better than getting the wrong revenue.
General Misunderstanding of African Markets
Traveling abroad and pitching to Venture Capital abroad taught me some interesting lessons. One of the main observations I made is that interest in Africa is peaking but knowledge of the market is not. Investors are often loathe to get on a plane and come into deepest darkest Africa and find out for themselves what is happening.
The lesson: You know your market, stick to what you know and don’t let anyone tell you otherwise.