You have seen it on TV, you might even have experienced it- standing in front of big league investors and try to sell them a concept or why they should invest in your business. There is definitely pressure there and you as the viewer cringe on behalf of the nervous entrepreneur.
At the Seed Symposium held on 28-30th September at Safari Park Hotel, Nairobi, 2016, Viktoria Ventures was part of quite an interesting session. Viktoria and four other investors had the pleasure of pitching to entrepreneurs in the room. The pressure was definitely not there for our own Keziah Njeri but what we found out is we need to add a FAQs segment to our website; so many good questions were asked! We’ll update you once it’s up.
The topic of the forum was Replication where the panelists shared their different perspective of not only whether it is always viable but also what the word itself means. In business, replication means extending and/or adapting your business model to another location. One school of thought early stage companies should stick to what works before opting to replicate a business. The example given was that of the restaurant industry in Germany; most people in the restaurant business were making losses because business owners were replicating unique brands and niches instead of opting for popular cuisine; for example, fast food. This school of thought was not opposed to having specialized restaurants; they however noted that pizzas sell a lot more.
Still on replication, an example of ‘room for similar products’ was given. Almost everyone needs a black trousers or skirt and therefore there is room for designers to produce similar items. What however will set them apart is the design- a different cut, trim or material- as peoples tastes vary. This was advice to budding designers- make simple designs uniquely instead of making a Kanye West inspired clothing line.
Replication in essence entails tweaking aspects of a product or service to fit the demographic, demands, and preferencesof the new market one is venturing to. A project that works in India may not take off in Sub Saharan Africa if a proper needs assessment and due diligence is not done before implementation. There have been plenty of cases where social impact programs, though started with good intentions, do not take off because of assumptions made during the replication process.
The session also explored an often overlooked aspect of funding by the entrepreneurs: their attitudes once they receive funding. One often finds that the debt funding received is viewed as income by the entrepreneur- these funds should be going to capital expenditure or working capital requirement. It was noted that there needs to be guidance and benchmarks given once capital is received. Another overlooked area of a business is the importance of increasing human capital and finding the right talent. No single person is good at every part of a business, for example human resource and administration, and therefore there is need for an early stage company to fill these gaps if the company is to live past its first or second funding cycle.
It did not escape the panelists that funding was going toward more well-known early stage companies who want to replicate while smaller companies that could have more impact if invested in are being ignored. Food security is still an issue in the country, leaving Kenya to import materials that can be locally grown. Investors were challenged to not only focus on returns, but aim to work with companies that bring about social good on a national scale.
As a parting short, we’ll share with you the words of Prof Ndubuisi Ekekwe, MBA, PhD, Founder of African Institution of Technology, ‘Make customers your investors’. He made this statement during a round table discussion with Keziah, challenging other entrepreneurs to take up this policy of they are to stop seeking out funding for growth. After catching up with him after the event, he stated that it all started with creating a good product, getting customers to believe in the product and there after convincing them to prepay for the product. When his business took off, investors were now knocking at his door and he is not interested. Perhaps an approach early stage companies should consider? That, as well as reliability and integrity. Prof. Ndubusi’s advice notwithstanding, every entrepreneur must strive to get as many paying customers as possible before seeking financing to scale the business; this enables them to negotiate favorable terms with investors.