On December 6 and 7, 2016, some of the brightest minds in the African tech ecosystem convened at the Intercontinental Hotel in Victoria Island, Lagos for the 2016 Meltwater Entrepreneurial School of Technology (MEST) Africa Technology Summit (ATS).
Here are 3 things we heard:
1. “Is it better for your idea to die with you, or is it better for it to live in the hands of someone else?” – Mitchell Elegbe, Founder & CEO, Interswitch
It’s public information that in the early days of Interswitch, a behemoth in Nigerian Fintech, Elegbe gave up roughly 85% of ownership to a consortium of Nigerian banks. Today, with Interswitch’s valuation rumoured at upwards of $1 billion earlier in 2016, Elegbe’s stake, while reduced, is arguably more valuable than had he chosen a different course.
In a 2012 interview with the IFC, Elegbe explained, “Though Interswitch was my idea, I gave up ownership to the banks. It was more important to see the vision come to fruition than owning the organisation. So ownership was given to institutions that we believed would be needed…to assist in growing the business.”
Takeaway: In building SMEs and early-stage tech ventures, entrepreneurs often need outside resources to achieve traction & scale. Identifying skilled co-founders, partners, employees, consultants, etc . is only half the battle. Top talent tends to demand competitive compensation and cash-strapped young ventures may primarily be able to offer equity.
As Elegbe’s example highlights, entrepreneurs should realise that it may be advisable to give up (sometimes very significant) portions of ownership, especially if necessary to mobilise resources critical to realising one’s vision. After all, as Mark Cuban once said on the TV show, Shark Tank, “80% of a watermelon is better than 100% of a grape.”
2. “The best kind of money you can raise is from your customers.” – Wale Ayeni, Senior Investment Officer, Venture Capital, International Finance Corporation (IFC)
In a panel session on ‘Investing in Afritech,’ Wale Ayeni, Tomi Davies (Co-founder & President, African Business Angel Network), Jason Njoku (Co-Founder & CEO, Iroko), and others discussed and debated the merits & pitfalls of venture capital investment for early-stage tech ventures in Africa.
An idea that gained broad consensus was that regardless of whether or not a given venture can attract VC interest, VC investment may not align with founders’ visions and goals. That said, the reality is that aspiring & early-stage entrepreneurs need startup capital to push forward. Ayeni espoused the viewpoint that one of the best ways to get that startup capital, while assessing whether a venture is creating something truly valuable, is to have customers pay (sometimes in advance as applicable).
Takeaway: From time to time, it may seem as if the ecosystem celebrates successful VC funding rounds more than customer traction & business milestone announcements. This can have a distorting effect on aspiring entrepreneurs, but the goal of these venture architects should be to build a successful business, not to raise venture capital.
Indeed, experienced investor Fred Wilson of Union Square Ventures has said, “The fact is that the amount of money startups raise in their seed and Series A rounds is inversely correlated with success…Less money raised leads to more success. That is the data I stare at all the time.”
For a practical guide to starting and growing a company with customers’ money, we recommend The Customer-Funded Business by John Mullins.
3. “There’s a long list of things that makes Silicon Valley special, but the most significant is the collaborative culture.” – Michael Sharon, Former Head of Product for Mobile, Places & Pages at Facebook
In a ‘Silicon Valley Fireside Chat’, Michael Sharon, Matt Michelsen (Self-professed ‘arms dealer of technology’ and Founder, GothamAlpha), and Jorn Lyseggen (Founder & CEO, MEST & Meltwater) discussed what makes Silicon Valley special and how to translate that to various hubs in the African tech ecosystem. Themes that stood out include collaboration & ownership.
On collaboration: From introductions to members of personal networks to advice, mentorship, & sharing of insights, Sharon noted that a key trait of many Silicon Valley leaders is altruistic social behaviour without any expectation of direct benefit. And Michelsen championed a mindset change – moving from the idea of ‘them’ (competing ventures, investors, organisations, etc.) to ‘us’.
On ownership: Lyseggen, who has invested $20 million or more in the African tech ecosystem, noted, “without your help, Lagos will never be another Silicon Valley.” Similarly, Michelsen presented the idea that what’s important is not the Africa Technology Summit itself but what happens after it. He challenged the audience, “Which of you is going to step up & keep things going in the coming weeks and months?”
Takeaway: As many have noted from Bill Clinton to Mark Zuckerberg to the Andela team, ‘talent is evenly distributed but opportunity is not.’ Indeed, Lyseggen shared that the most common remark he’s heard from African founding teams returning from Silicon Valley is that their counterparts in the West are not better than them.
With a sizeable and young local population from which to draw from, not to mention like-minded advisors and thought-leaders globally, we across the African tech ecosystem undoubtedly have the talent to match Silicon Valley as a hub for innovation and impact as we move further into the 21st century.
And those of us with the resources (whether financial, social, intellectual, or otherwise) to create & mobilise opportunities in the ecosystem have a responsibility to do so, working collaboratively & with a sense of urgency and ownership to maximise impact.
Editor’s Note: Emeka Ajene writes on behalf of the team at Africreate. Africreate is a social enterprise partner to the African tech & SME ecosystem, with a particular focus on Nigeria. We’re trusted innovation, insight, & capacity-building advisors to startup & SME entrepreneurs, investors, corporates, and other domestic/foreign ecosystem participants.