The undoing of startups

Start-up, a term used by so many,admired by even more and understood by very few. The term, by the standards of the Oxford dictionary “is a newly established business“.The truth is,it is simply a glorified name for SMEs (Small and Medium Enterprises).Owing to the media coverage and popular blogs like TechCrunch and VentureBurn,and the growing number of investors (both angel and VCs),the name start-up has established so much significance than it should.Why not though,right? I mean,with billions of venture capital funding floating around Silicon Valley and Palo Alto and the constant number of “overnight” success billionaires around the globe,it only makes sense that all of us want to be associated with the name.But is it for the right reasons? Don’t get me wrong,if you are a start-up,you are a start-up;whether you want to be associated with the name or not.And again,I am in no means criticizing anyone for using that name. Jovi,Katana World Inc. itself is one.The only underlying question is,do you know where you are;what you want and where you want to be?

I recently read an interesting piece dubbed “Beware of the startup prostitution” written by Winerist founders Tatiana Livesay and Diana Isac. The post was such an eye opener.So powerful,enlightening and direct.Some of the key things highlighted there are the inspiration behind this post.Although their examples and citing mostly referred to companies based in London and the UK,the points mentioned couldn’t be further away from the truth back here in Kenya and Africa as a whole.

I have seen and read about so many funded startups in Kenya and outside the confines of the country.There has been a tremendous increase in the number of accelerator programs,funding programs,training,webinars and conferences all geared towards increasing the success rate of startups in continent,with initial seed funding capital,office space,mentorship and so much more. 88mph,nailab,iHub,Savannah VC,Nairobi Garage,Global fund just to mention a few.And this trend is totally justifiable.The number of startups have increased as well,the numbers hitting an increase of about 65% globally.So much that Forbes termed this as the beginning of a new era for entrepreneurs and startups.On a personal note,I have attended so many of these conferences /webinars and applied to even many more of the accelerator programs although I am yet to get into any(some of my co-founders have been so lucky as to enter such programs and emerge victorious).Truth is,such things have given me the opportunity to learn a lot about business,tech,market and all that.The downside of the whole thing however,is losing focus on what really matters-and that is the business.

Having been born in Kenya and spent the better part of my years in Kenya,I have had the immense opportunity to study our country,the people (myself inclusive) and the culture.Aside from all the wonderful things that we are endowed with,Kenya as a nation has one very huge flaw.A flaw that surprisingly exists in most African nations and as I recently learnt in other parts of the developed nations as well.And the flaw is called HYPE.It’s one of the few nations that a regular Joe can gain celebrity status overnight and loose it the next morning.One minute the media is giving you all the publicity and frenzy that comes along with it-and Kenyans,whether they hate you or love you-will give you the attention and celebrity status .Like the fast moving wind it comes,and in the same manner and lifespan it goes.The Socialite HYPE,the team mafisi HYPE,the tusker project fame HYPE ,the tattoo HYPE just to mention a few.And now,we have a new kind of HYPE emerging,the startup HYPE.

Similar to  Tusker Project Fame show (TPF),I have always been left wondering where the stars(TechStars and Music stars alike) went to (seriously though,where exactly do winners of TPF go to?).I have seen so many promising startups,with a great product and Business Model Canvas disappear overnight.Some go as far as changing the whole company and the products.And all this after receiving so much HYPE and blog publicity from giants such as the TechMoran,CNN,VC4A and others.If you don’t believe me,take a  look at the portfolio of some of the VC firms I listed above,and check to see how many startups are still sustainable (or grown) after recieving funding and how many have completely changed their business from the product down to the BMC. The story is no different in the rest of the world.Same script,different actors.

In the post by Diana and Tatiana,they clearly point out where the glitch is.Most of the startups forget that they are running a business and they instead start to focus more on making investors happy (Personally I am 100% guilty on this one,the only luck on my end is I have co-founders with broader perspectives than mine).Instead of growing a sustainable business,one with a steady revenue stream and client retainment ratio,we have focused so much on analytic reports,some of markets we are yet to penetrate that make the investors happy-in the hope that one of the investors will sign a big fat check and we can get “rich“.Most of us do not even know why we are in business,or if we are in business in the first place.The truth of the matter is,most of these investors are the same investors who have been attending all the conferences and startup challenge programs,most of whom none of whom  carry their checks to the said events.They have heard the same pitches and watched the same decks so many times,that frankly speaking even though I am not one of the investors,I personally would have gotten bored.A lot of Venture Capitalist have even started to shift their attention from Kenya and Nigeria,especially in startups that are tech related.The move has been caused by too much HYPE surrounding the said startups,and failure of most of them to live up to their promise.

One of the co-founders at our group,Micha,has always insisted on bootstrapping  a company to sustainability and only looking for VC funding for growth and expansion.And for the longest time,I never really quite fathomed why he was for such a bold move.I mean,the journey to bootstrapping is such a long and tedious one.And plus,in my head,we could always land an investor if we just put our head into it.I still believe we can,but I agree more with Owin on this one.Now more than ever.

Using businesses like Café Deli as an inspiration and a learning tool.From a small coffee shop in Westlands Kenya,it bootstrapped and grew itself slowly from ground up.It was until recently that they got capital injection from GroFin,a South African VC firm.The total amount summing up to around 1 million Dollars is intended for expansion and improved customer experience of the cafe.The coup de grace of such growth is,you can always dictate to the investor your terms as well as the amount of equity you are willing to pat ways with.

Until startups stop thinking of the EXIT option,where we hope that a tech giant or a giant in the related field will magically see your business as the next gold mine and buy you off for a sum that can afford you and your next four generations holidays in Hawaii,and start focusing more on what matters (the clients,the products,client acquisition and retention,market,growth and sustainability),we are going to still be seeing less of our startups make it to point of going public.Until we start focusing more on REVENUE GENERATION and TRACTION,then that woman selling her veggies at the corner is doing business,you are not.

A $1 from a client,is more important than $100 from an investor.

The road to growing a successful business is windy,uncertain,tiresome,emotionally draining and scary.But with patience,working smart and hard and a bit of luck,the rewards are greater.