Over the last couple of months, we have brought in top entrepreneurs across various industries through the Breakfast Chat series. From our first session with Yomi Awobokun of Enyo Retail to Deji Akinyanju of Chicken Republic, our goal with Breakfast Chat is to bring tech founders together and have our guests share insights on what it takes, from their experiences, to build a sustainable global company. What does it take to build a great team? What are the downsides to raising money? How/when does one expand? These questions and more get answered in the most honest way over traditional breakfast.
Last month, our guest speaker was Iyin Aboyeji. He is a co-founder of Andela, and the former managing director and co-founder of Flutterwave. He has been part of building two top technology companies in Nigeria and dubbed as one of the successful tech entrepreneurs in Nigeria currently under 30.
Iyin shared insights and tips on various topics. If you missed the session, we’ve put together this post for you:
On lessons learned from previous ventures (Bookneto and Fora) that failed:
I believe you learn far more from successful businesses than failed businesses. Regardless, the two biggest lessons I learnt were:
1.) Your team is very important and when building a business you really need to ensure that the business is built with the best possible people you can find. There is no nobility in not taking advantage of finding the best team. So whatever it is that you have to do to get a team as your unfair advantage, you should, even if it means giving up equity.
2.) The success of your business is dependent on access to market and the size of the market you are trying to penetrate. For example with Bookneto we had a very young team, mainly engineers, trying to sell to the universities and that didn’t work. The market was very small in Canada and we had so many competitors playing in that space.
On how to know it’s time to walk away from something that is not working, using the switch from Fora to Andela as an example:
What happened with Fora was very interesting because we collapsed it and created Andela. I made sure I returned the money to our investors, which is my number one rule. The investors in Fora were given stock in Andela and we started building from scratch.
I thought Fora was a good idea. However, the route to market was not properly executed and it required way too much from regulators. In terms of knowing when to move on or close shop, I believe it is about having the mindset that you are on a journey to find product-market fit and multiple approaches are necessary. If in a few weeks you don’t see any changes with one approach, you should try another one. However, after you have tried multiple approaches and things are not changing, you need to consider the opportunity cost to your time of trying one more approach, especially if you have a general sense about the results.
The mental shift that it takes to be able to know when to quit is being honest with yourself and understanding that if you are in a bad spot and nothing is changing about your business, you either need to change the way you are doing the business or change what you are doing. At the end of the day, you do have a limited time.
On how Andela was able to get the Chan Zuckerberg Initiative (CZI) investment and his ability to position the company to raise other amounts of investment from investors.
In regards to this, I had a co-founder, Jeremy Johnson, who is a master fundraiser and had taken a company public, so in terms of raising money, he played a major role. The key thing really is your ability to show a clear path to growth.
Ultimately, Business boils down to unit economics. For example, the Akara and Ogi trader in Yaba market is an example of a brilliant business person. He/she goes to the market and buys the ingredients for making “Ogi” and the beans to make Akara. The trader processes the raw materials and then sells the end result for a profit and accounts for his/her time. This is the way every business works. The whole idea that you can grow this big user base without accounting for the units that make up your business and who pays for what you are producing, is building castles in the air. I talk to a lot of tech entrepreneurs and they always feel like the laws of profit and loss does not apply to them, and I let them know that it is false.
When Andela was going to raise, it had established that it has a brand and a market and it had the capacity to push talents all across the globe. It also established that it was able to find a market that needed that talent regardless of location, provided the talent was able to deliver. Also, we were able to show that these businesses were willing to pay on a monthly basis for the talent over a long period.
Let’s say, for example, one Andela fellow is worth maybe $6000. CZI was willing to bet that if we have a thousand Andela fellows per month then that will be around 6 million dollars per month, and 72 million dollars per year and our investors mark Zuckerberg Chan invested about 24 million dollars in Andela. Even if the cost to run the business is around 30 million dollars, it is still okay. If you do the math, they were going to spend below 24 million dollars to get 72 million dollars. People think it is Jazz, but it is just math.
On the realities of receiving external funding/ investment.
Typically when you raise money, you now have a boss you answer to. You would usually get the money in tranches and the money does not go directly into your bank account. The bosses are board members who are now a part of your team, they might be invincible but you will be accountable to them. They can cut your salary, they can decide to fire you and even decide not to pay you.
Most of the time, the board would require that you bring in more senior professionals on the team, these senior members would serve as coaches to guide the rest of your team to make it feel like a company. The beautiful thing is you still set the direction of the company.
One thing I tell founders is that after you raise money, you go from being a founder to CEO. There are certain expectations you will have to deliver to the board and investors, like monthly audited financial statements, monthly investor updates and so on. You literally go from being a free-spirited entrepreneur to an employee who has to be accountable for what they do. The truth is, don’t raise money if you don’t need to.
On how startups can position themselves for partnerships with established organizations.
You need to understand what motivates your prospective partner and what they care about, not just what you care about or what is in it for you. Most of the time, startups focus more on their products and what is important to them. You need to understand the motivation of the larger organization as well as the person you are selling to (the decision maker) and then try to optimize your offering for what they care about.
The other thing you need to do is build your marketing and sales capacity. The key thing to keep in mind is that Inbound is better than Outbound. You need to spend more time refining your process for getting and closing inbound sales – ensure you have clear pricing, enable self-service on your product so your customers can get self-started and pay for your product without speaking to anyone. The customer that comes to you is far better than the one you have to go and sell to. However, if you must do outbound, then find out who your solution really works for in your current database and reach out to similar businesses, and sell your product to them.
At Flutterwave, we had a bank partner that whenever we put out a product, they copy it, build it themselves and push out to their customers. At first, it was annoying but after a while, we just thought it was a brilliant strategy. We would go to their competitors and show them our product and tell them- “Hey, your competitor is going to the market with our stuff. We have it, do you want it?”.
Marketing and sales are not rocket science, it just requires a lot of work and understanding of your customers.
On the challenges of hitting brick walls at the go-to-market level with informal unions, in terms of people saying “who is this guy and where is he coming from”
As we speak this is still a big problem and the truth is, innovation cannot wait. What I have done that has worked is to always try to bring in someone that people respect from the target group, someone who sees the bigger picture and make this person a member of my team. You could bring this person in as a founding member and have them reach out to their colleagues and the individuals we are looking to partner with, to make them see why the partnership has to work.
This again is why I cannot overemphasize the need for a good team; Having a good team is an unfair advantage and you cannot be self-righteous about it.
The second thing I do has to do with “Advisory”. Anytime I set up a company, I try to always set aside about 10% in equity for advisory. If the person can not join the team fulltime, I would ask that they at least advise me and ultimately help me navigate the issues. In summary, you would want to bring certain people on your board or as a member of your team to help you reach certain groups.
Finally, do not forget…
“Having a good Team is very important. When you are building a business, you really need to make sure that your business is built with the best possible hands” – IyinOluwa Aboyeji.
Thanks Iyin for a truly insightful session!
For the October edition of Breakfast Chat, our guest is Mrs Toyin F Sanni – CEO, Emerging Africa Capital Group and former Group CEO of United Capital. If you are a tech entrepreneur, request for an invite here *Only 25 seats available*