In this exclusive guest post for Disrupt Africa, Tourism Radio founder Mark Allewell, who for most of the past year has been on sabbatical, takes a close look at funding and whether entrepreneurs overstate its importance at the expense of building their businesses.
I’ve done a lot of reading on funding in the tech industry recently. My wife, toddler twins and I are more than eight months into our one-year, around the world sabbatical, and I’ve had the luxury of time away from the office to be able to read up on the business of running businesses.
During my travels, I’ve also made a real effort to meet entrepreneurs from the tech world in each place that I’ve visited, which has allowed me to compare their experiences with my own understanding of the South African tech space.
Entrepreneurs around the globe are all very similar in their passions and their beliefs in what they are doing. They also share a common bond in the incredible amount of hours that they willing to put into making their business flourish.
There are however, two worrying themes that seem to keep popping up in my conversations with today’s entrepreneur: funding and company vision.
I believe that funding a business should be a last option, while bootstrapping it should be the first. Entrepreneurs can create incredible value in their business if they can build it to a point where they are actively in the market and have earned revenue, regardless of the amount. More than a few entrepreneurs I’ve spoken to focus on how much funding they can get, instead of on building a business with as little as they can and then looking for some sort of expansion funding. Too many entrepreneurs seem to rate the success of a company by how much money can be raised through funding, which is not the way it should be.
There are plenty of examples of really successful entrepreneurs who have made millions without much funding. A case study on who approached funding and expansion the right way would be Adii Pienaar, who bootstrapped his business to great success, or even South Africa’s favourite son, Mark Shuttleworth, who has done the same on numerous occasions.
I’m not saying don’t get funding. I’m saying that it shouldn’t be your main focus when starting a business, as it takes away from what should be your 100 per cent commitment to making your business successful regardless of whom you have financially behind you.
Another aspect that entrepreneurs I have spoken to often bring up is their exit strategy. It’s great to exit a company you’ve built and finally get your just rewards, but great entrepreneurs focus on changing the world in some sort of way. Success, recognition, exits, money; these will all come after that.
Entrepreneurs need to maintain a company vision that builds on a sustainable business that invoices more than it spends. There are, of course, businesses that are built specifically for the exit. South African entrepreneur Daniel Guasco did this with Twangoo and selling to Groupon, but it’s important to realise that constructed exits like these are very few and far between, and should not form part of your overall company vision.
I’m sure many other successful entrepreneurs have their own recipes for success, but mine is based first and foremost on building a sustainable, growing business. Everything else will follow.
I’m always willing to hear from up and coming entrepreneurs with great ideas, so feel free to drop me an email.