Jason Njoku, iROKOtv founder, has a great confession: be careful as you take VC (venture capital) fund for your startup. He is not saying that you should not take VC money; he is saying you need to have a real strategy as you do so. Why? The high-voltage intensity that comes with that money is not something every person can handle. Yes, there are emotions, and most times, bad things happen.
Because venture capitalists are exit-oriented and not necessarily profit-oriented, implying that scaling, at all costs, to jack up valuation, is what matters to them, taking that money means you have signed-off your work-life balance. But in a region like Africa where no one has good understanding of customers or the markets, scaling becomes bumpy with all models thrown out during executions. I have written extensively on our long gestation period to profitability.
The gestation period to profitability in a typical Nigerian startup is long. That long gestation is also the reason why many startups or small businesses collapse few years of founding. Typically, one way to deal with this is to raise capital, ramp up market entry to grow fast enough to attain profitability. But in our extreme volatile economy, if the timing is off by months, the company can collapse. You just run out of cash.
Here you see me, I believe one thing: the Best Investors Are Customers. Irrespective of where your fund is coming – VCs, personal, friends, associates, etc – until customers can invest in your business, you have no mission.
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Read the entire Jason’s tweets on the subject
LinkedIn Comment on Feed
Ehmm, but it’s not possible to accept millions of other people’s money, only to go to bed and start snoring; obviously you have more or less murdered sleep, once you take up the challenge.
After all said and done, the most beautiful business success stories remain the ones started with almost nothing, then a product or services was ordered, and then paid for. It feels so good when you earn your first customer, in such a ‘natural’ way, no drama or unknown forces.
But to succeed in the latter, patience remains a key virtue, and then the ability to do more with less, call it prudence or anything you wish. Plenty money most times reduces quality of thoughts, do not get entrapped in that web, only few do well under such conditions.
If you know how to build from scratch and gain customers through your work, you can always sleep well at night, with a genuine smile during the day.
You only live once, take your time and ensure that you live it elegantly well.
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I agree totally, that the African terrain is different, but many investors don’t know that.
I personally also came to the conclusion that the hype about large sums of money being invested, was just what it is “a hype”.
How do you eventually account for that money in results? It’s different if you’re selling off your business.
Like the paragraph above ” you have just murdered sleep.
Thanks for the article
I commend Jason for the tweets. He just mentored many young people from those tweets. Most times, the alternative needs to be evaluated.
Some of my friends should see this
Share the link with them