Owolabi Olatunji has been running Nigerian online real estate marketplace Hutbay for the last three years, and says running a startup in Nigeria is very different to running one in San Francisco, Austin, or even Cape Town.
In this guest post, the Hutbay chief executive officer (CEO) takes us through all he has learnt, and gives 10 top tips for any budding entrepreneur in Africa.
In these last three years, so many sacrifices have been made running Hutbay, tonnes of hard-work expended, and lots of disappointments, hard-knocks and a thousand and four reasons to choose a more convenient path. But the further I go the more I feel the weight of responsibility, the joy and the excitement that comes with seeing your vision scaling through and the increasing number of people that use your app and find it very useful.
I’ve always been fascinated with technology from my earliest childhood. However, starting a startup wasn’t in my plans until my final year in school, when I began to weigh the thought more closely. There are some key lessons I have learnt and found very useful.
Choose passion before the money
Of course, this is only advisable as long as money itself is not the passion.
Startups are tough, a lot tougher than you’d imagined. I used to encourage new grads to follow the startup path; now, I warn them against following it. Like the path that leads to Mount Everest’s peak, the startup path is littered with dead bodies and frozen bones. Becoming successful (defined as having realised your vision) in startup-land is more about the enduring force of passion than the purchasing power of capital.
Going into startups or entrepreneurship should be a terrifying prospect for anyone except those who want to effect a change in the society, and entrepreneurship is seen as a strategic path to fulfilling that vision. There is a lot more between what you see and what you are told. Scary mountains you must scale, the valley of a thousand demons you must pass, and a red sea you will have to cross before you get to realising your dream, if at all! It is therefore advisable to have an enduring inner drive, a passion far higher than the obstacles you will face, if you are to stand any chance of reaching the promised land. It is the drive that has kept me going all these three years.
It’s going to take longer and cost a lot more
I used to comfort my co-founder and early employees that within few months, Hutbay will “hit it”. By that I meant we’d have lots of traffic, tonnes of real estate agents and developers knocking at our door to pay for subscription on the website. After a year in the jungle, we were only seeing around 4,000 unique visits per month. We had been working for a full year coding night and day, come up with the website and three apps and still we were yet to make a dime.
To make matter worse, our cash was running very low, reaching near bottom. I never knew it was going to be that long before Hutbay got airborne. I realised late that it would take longer, far longer, than I had planned and that I would need far more money that I had thought. Within a year, some of my initial team members left to get the tried and tested secure jobs. Eventually, I was alone with two newly recruited interns.
Gradually, I was beginning to realise the inextricable link between following your dreams and having enough cash to run with. Forget that an employee loves your company or identify with the vision; if you can’t guarantee their pay, basic pay, they will abandon you at the slightest opportunity. The pressure your team members will have from their families will be applied on you.
Be crystal clear on why you are in it
Notwithstanding the importance of capital, it is not the most important element in startup success. A lot of startups with lots of money have gone under in the same market where those with lesser capital have thrived. Money is like fuel with which a car may move almost effortlessly.
However, without, for instance, tyres, even a car with lots of petrol will have a very hard time moving. A car can still move without petrol. For instance, it can be pushed. It can be towed. It can roll down a hill in a free fall. The only limitation is that it won’t move fast.
Hutbay has ran out of cash before, but as a startup and as a company it continues to operate and function. The only problems were slowness in product development, and the inability to efficiently attend to customers and increase traction as there were few hands left to handle these tasks. Without money, we were still able to continue. But it would have been totally different if the vision and the drive and the passion does not trump the running out of money.
I have kept the vision constantly before me: to bring the real estate market to consumers’ fingertips and make the process of finding property in Nigeria a hassle-free experience for everyone.
Always have a legal contract in place
When the going is good, everyone is a friend, a jolly good friend at that. Nobody prays for bad times, but the good time is the best time to put legal agreements in place. Waiting until later is to put the venture into potential jeopardy. Never depend on oral agreements. Contracts may be a formal signed contract, email exchanges, and so on. Agree on remuneration, shares, vesting, and other key legal points as soon as possible.
At any rate, ensure it is written in black and white and always have a copy, just in case you may need it. Life is unpredictable; anything can happen. Your best friend or the so nice investor may sue you when lots of money begins to get involved. The last thing you want is to have your lunch before you and not have the mouth or appetite to be able to eat it.
I have experienced how even a simple legal contract can keep you out of trouble and save you from unnecessary headache. It makes things a lot easier than any other alternative, including blind trust!
Run lean but avoid raising too little capital
If you are going to raise capital at all, raise enough cash that will take you to the next level. Raising too little capital is to call for trouble, as you may not be able to execute as fast as you should, hire quality hands and you may find yourself in the funding market sooner than you expected. And every time an early-stage small startup goes fundraising, operations always slows down to a critical level.
However, whatever the amount of money you raise, the expectation of investors is likely to remain the same and you will be held to a very high standard to produce results. Angani, the Kenyan startup comes to mind! So you need to have enough ammo with you and use it very wisely.
The “fail fast” advice has many exceptions
Yes, I know it is not a rule. But the way it’s been brandished all over startup-land, you would think it was.
“Fail Fast” is a popular saying in the startup world, meaning you should try executing an idea and if you think it is not working, kill it and move on to the next thing. But the truth is that some things just require a longer time to break even. You should only nip your idea in the bud or kill a business if you are reasonably sure that you are solving the wrong problem; the market isn’t there for your product or not yet ready, or simply when you run out of steam (idea, market, capital) and there is no way to justify going forward anymore.
To fail simply for the sake of failing fast is dangerous. Rather than “fail fast”, it should be “fail smart”, like pivoting to a new business model.
Above all, you want to avoid getting too much advice, especially from those who do not have startup or entrepreneurial experience. “Experience is invaluable, but opinion is questionable”.
Do your due diligence on investors and angels
Light will always attract different kinds of creatures. Humans are attracted to light, so also are those irritating flying insects. There is a class of “angel” investors who are experienced in lurking in the dark for the weary budding entrepreneur. They abound locally and abroad. They may be blacks or whites. These guys drain precious time and energy. They have neither the traits of startup investors nor reasonable amount of capital to commit. Most times, they want to have equity in return for some “professional service” or a mere promise to help raise capital.
Their tricks are as varied as their faces, but one way to quickly identify these folks and move on is when they brandish their educational profile without work or portfolio to back it up or how they help raise money for some unknown, unverifiable startups. Ask for names of startups they have funded in the past and do your own due diligence to verify their claims. Beware, above all, of signing any document with any investors until your curiosity and conscience have been fully satisfied.
The market is more important than the competition
It is not the first to get to the market; it is the first to get it right that wins the day. Before Google there was Altavista and the rest. Before Instagram there were dozens of other photo-sharing apps, including good ol’ Flickr. Before iPhone there was BlackBerry and Nokia! I learnt that the only thing I should have sleepless nights about is what I have left undone or what I have done amiss, not my competitors.
The market is the reason why running lean at the early stages make lots of sense. At the beginning of a new venture (especially if you have not travelled that road before) you are only running your startup on some assumptions. To you, everything may sound perfect but the market will always correct your proud assumptions. Rather than be afraid of the competition, I have learnt to be afraid of the market. It is the market that pick the losers and the winners.
A large market and a clear revenue path is a winning strategy
Capital is critical if you are to see your vision come to grand reality. To hire the best programmers, business executives and do sales, you need money, lots of it. The bulk of this capital can come from investors but you will only be able to attract investors and eventually get funded depending on how big the market you are addressing and your strategy to capturing the value you’re providing.
Also, the nature of the present African funding market is such that big money doesn’t really exist, especially for inexperienced or young entrepreneurs. To make allowance for the local investment you have got, you may have to start looking at revenue earlier than you think. This has its downside because you won’t be able to really focus on getting the product right and working on customer satisfaction. But since the competition, if any, are also focusing on revenue a lot sooner, you won’t be really disadvantaged if you also start sales sooner. You will have more money and command higher valuation. However, you run a risk if a startup like Facebook emerges and you are MySpace focusing only on revenue and pleasing your investors.
I wish Hutbay had started sales efforts sooner. You never know how big your product is regarded until you go out.
Don’t lose control too soon
At one point in your venture, especially if you take outside funding, you will eventually lose or cede control to your investors. But if you lose control too soon, before the startup morphs into the shape you have in mind, you run the risk of seeing your vision tossed into the waters as your investors take a radically different but disastrous path that ends up squeezing life out of your baby.
“Most startups waste a few years dawdling and gather speed only after year three” – Mahesh Murthy.
A lot of startup investors are short-term investors with a voracious appetite for a quick exit. They want to “pump and dump” their investments in this startup and move on to the next hot, new startups. If you don’t have the power to say “no” to their persistent urges and pressure, you will have to follow their bidding or they will toss you out of the company. To build enduring businesses, a strong vision is a necessity and at the early stage it is the founders that most likely posses that vision.
You need to be in control for the first few years to set the tone of your startup. Things may seem slow, like the first trimester of a pregnancy, but that is the most important time to set your company’s DNA; you don’t want to leave it to chance. Thereafter, if your homework has been well done, the growth will follow.
It’s been a tough three years since the journey started. But it has been the best three years of my career. I know a lot more about writing software, running a business, raising funding and a whole lot more that have made me better suited to using technology to achieving my vision.
Above all, I take pleasure in knowing that thousands of people have used and are using our product to find property and connect with real estate pros in a way unprecedented in this country. I can’t wait for the future. It’s going to be interesting times for African technology entrepreneurs just a few years from now. There is still a lot to be done, far more miles to cover; but the lessons of these past three years have enabled me to be better positioned to take advantage of the future and the wealth that is being – and will be – created.
The African startup ecosystem is still at its infancy, but it is growing fast. Budding African entrepreneurs have the golden opportunity to get it right faster when they learn from those of us who have gone before.