Many young startups, especially in Zimbabwe fail or delay turning their ideas into their own businesses because they don’t have access to funding. Some of these would be entrepreneurs often end their startup journey prematurely because they are too busy worrying about how to raise enough money to start. Not having money has emerged as the reason many people don’t turn their ideas into startups. They all say, “I don’t have the money to start. I went to the Bank and the Bank said do not fund startups because you are still in development stage. It’s too risky, come back when you start selling and are earning revenue.”
For most entrepreneurs the thought of developing their idea ends here and most go back to trying to figure out how to get money to start. By keeping their idea to themselves some some think they are protecting it and that one day they will find money and execute. This prompted us to look at the various stages that startups go through and how those who are starting out can raise funding for their startups, without relying on the Bank or other traditional financing routes. For the right startups, there is a lot of money that is looking for a home in Africa, Zimbabwe included.
Startup funding grows
According to qz.com, an online magazine that covers African startup news, 2018 is turning out to be a great year for many African startups. Startups in Africa have so far raised more money in 2018 than they did last year. According to qz.com 118 deals have been completed in the first half of 2018, raising nearly USD170m.
Most of the funded startups in Africa between January and June 2018 were in the following sectors;
Excited startups
These statistics excite many Zimbabwean startups, who wonder why they are not getting a piece of the action. Most startups then focus on trying to get a piece of the pie, without focusing on the path they must follow to develop their idea properly. When looking at startups it is important to look at how an idea is developed into a fundable business. Not every idea is fundable from the get go due to the fact that ideas take time to be developed into fundable businesses. More importantly ideas are risky and need to be worked on in order to refine and derisk them. Banks understandably come at the very end of the funding cycle when risks have been mitigated because they are dealing with depositors funds which are regulated by Central Banks.
This chart exposes some worrying missing links in our local startup ecosystem. The lack of Angel investors for starters. But the biggest missing link is that there are not enough people turning ideas into startups! If they are there, we are struggling to document them. Over the last few months we have been working with a handful of startups, some of them were featured in this column last week. We have also discovered another big problem, most startups in Zimbabwe are shy to come out because they fear that their ideas and plans will be stolen and executed by some corporates or well heeled investors.
Sharing helps
Fortunately this is not always true, because ideas without good execution are just that. They often die before they are even validated and developed, no matter how much money you throw at them. Those with ideas are encouraged to share them in order to de-risk and develop them. Sharing helps refine them and over time build them into formidable companies. Copycats will always be there but thankfully many will fail because they don’t have your vision and execution plan. How you respond to problems and challenges is part of the idea execution. It’s true that we don’t always execute in the same way or are as effective when doing so.
Ideas are developed over time and they attract funding from serious investors only at a stage when they start earning some revenue. Getting to a stage where a startup is generating revenue is very difficult but doable with the right approach. In future articles we will focus on how to get there. Pat yourself on the back if you have made a sale because as a startup your journey has just begun. This is when some investors who like your idea and have belief in what you are doing stick their necks out and provide you with some funding. If you prove to them that you can scale your offering, more money follows and who knows you will one day be listing on the local or world stock exchange.
Raising money is a process
The point is, raising money is a process. Before you start focusing on raising the big bucks, build your product / service first, because whether you like it or not your startup will go through a cycle which involves the unavoidable ‘valley of death’. The valley of death is when all things that could go wrong seem to do so and at the same time driving you mad, to the point of nearly giving up. Most startups that survive this stage go on to do very well. Thankfully you don’t have to go through the valley of death or any stage of building your startup alone. In Zimbabwe there are many people and places that are offering support and helping startups grow.
Last week we had a privilege to host a very promising startup and their consultant for two days in our meeting room. The consultant was helping the startup do what every startup must do. Spell out the problem you are solving and how you plan to solve it. All startups need this because this will allow you to focus on how to develop your idea stage by stage. Less time or money is wasted pursuing the wrong idea or execution plan. We meet a lot startups that have brilliant ideas which have a chance to go on and become good companies, but some of the founders lose focus and are distracted from creating value by a lot of things.
One of the biggest distractions in Zimbabwe at the moment has to do with money. A number of startups focus too early on the valuation of their idea, even before making a single sale. For some startups not having money is like the end of the road. Such founders think it is impossible to start and develop their business without money. We once met a founder who was working with a city council on a product that involved some third party customers. After we sat down with them and told them they didn’t need a bank loan to start their business but that the third party client could pre-pay for their service in order to secure it because it was one of a kind, they were shocked but thrilled. Because this was true. They went on to do just that and it worked.
With enough sharing of your plans, as a startup you get ideas and solutions to problems you thought required another impossible solution. If you have an idea that you are developing and need advice contact us. We are helping startups with work space, internet and mentorship. Until next week. Have a great week and keep your startup alive. Remember you can come out of the valley of death!
