CNN’s African Start-Up yesterday held a Twitter chat with African entrepreneurial leaders Erik Hersman, Juliana Rotich and Rebecca Enonchong, discussing various issues relating to the continent’s startup ecosystem.
The African Start-Up-organised chat with Ushahidi co-founders Hersman and Rotich and Cameroon Angels Network (CAN) founder Enonchong covered various topics, including the importance of mentors and incubators and how to go about obtaining funding.
Asked about the best way to get investors interested in a startup, Hersman said investors are interested in ideas that can go big really scale with a team that can execute.
“So you’ve got to sell them on a big future,” he said. “Use other people to get connected to an investor, build and use your network for introductions. Investors want to see a prototype, build something before you ask for money. Most importantly, show that you have real customers, and a clear line to scalable revenue.”
Rotich advised startups to tell their story as clearly as possible, showing how they solve a problem and can make an impact in the market they are in, while Enonchong said investors were looking for fresh solutions to known problems and, more important, passionate entrepreneurs.
Hersman said the most common error entrepreneurs make while growing their business is not testing or asking customer what they want and need.
“Get out and talk to your customers,” he said. “We tend to overvalue our business, because we see the potential, but that’s now how investors see it. One of the most common errors, is that the founding CEO doesn’t get his/her feet dirty and sell.”
All participants were agreed on the importance of mentors, Enonchong saying a mentor helps an entrepreneur see the “big picture” and also sometimes provides psychological support, while Hersman said a mentor brings “perspective and objectivity” to a startup, serving as a trusted advisor to fill in knowledge and experience on the things entrepreneurs do not yet know.
However, they partially disagreed on the importance of obtaining incubation for a startup, with Enonchong fully in favour and Hersman saying it depended on the company and the incubator in question.
“If you have the opportunity to be incubated please do it! The support you will receive is invaluable!” Enonchong said. “Investors are more comfortable with startups that are receiving the support and follow up of an incubator.”
Hersman, however, said tech incubators can be “amazing” for some startups, but “entirely unnecessary” and even harmful for others.
“Many tech incubators are not run by someone who has been an entrepreneur, or who knows anything about business,” he said. “Be pragmatic. What will the tech incubator provide that you can’t get elsewhere? Is it access to a network, knowledge, etc?”
The right time to exit a business was also discussed, with participants agreeing it again depended on the individual case.
“It really depends. Talk to your team, advisers, investors. I held out and lived to regret it. If the deal is good, go for it. Entrepreneurs sometimes get too attached to their startups. Look at the M&A opportunity dispassionately,” Enonchong said.
Hersman said acquisition discussions are too nuanced to have a broad “hold or sell” discussion.
“It’s a case-by-case answer. Maybe a better question is how to make your startup a target for acquisition. Look at the niche you’re filling, who the big companies are in that space, and what tech they use,” he said.
The entrepreneurs all gave advice on what to do when launching a startup, with Rotich stressing the importance of a prototype and Hersman advising entrepreneurs that building a business is a long-term game that does not take place overnight.
Enonchong said: “Being young and crazy really helps when building your startup. When you’re older you think too much and don’t take risks. So the advice I would give my younger self is “just do it, don’t overthink it”. The most common error is thinking that an idea is a business. You might have a great idea but you must execute.”
In terms of choosing a team, Hersman, who said he looked for smart people who could get things done, said he had adopted the “Star Wars Theory” of hiring gifted but unknown people who can make their name working with him. He said this theory was based on the movies of the same name, which shot several unknown cast-members to stardom. Rotich, meanwhile, said she looked for conscientiousness, suitability and a great attitude.
All three participants agreed on the exciting aspects of running tech businesses in Africa.
“Africa is the last “blue ocean” for tech, the opportunities here are huge. Why would you choose anywhere else?” Hersman said, while Rotich added: “You have a chance to build platforms, ecosystems and products for a unique market. You learn a lot!”
Enonchong said she loved the fact she is a participant in this “amazing story”.
“As hard as it is, it’s also incredibly exciting and rewarding. Entrepreneurs are always told to think outside the box. In Africa, we have no box. Leads to ingenuity and creativity.”