Startups should seek bare minimum funding to protect valuation – Kopo Kopo


African startups looking for funding should work out exactly how much they need and obtain the minimum money possible in order to protect their valuations and avoid devaluing their shares, according to Ajode Joash, director of business operations for Kenya at Kopo Kopo.

Joash, speaking yesterday at an event organised by Nairobi Garage, was explaining how Kopo Kopo, which launched in Kenya in February 2012 and enables merchants to accept payments through a variety of electronic methods, had gone about raising funding and the startup’s key takeaways from the process.

The startup has raised funding from both private equity and venture capital investors in Europe and the US, with its lead investors – Khosla Impact and Javelin Venture Partners – based in Silicon Valley. It currently operates in five markets across Sub-Saharan Africa and plans to be in at least two non-African markets by the end of 2015.

Joash advised startups to work out before the process begins exactly how much funding they actually need and to ask for no more than that.

“One of the things that we learnt was that you should go for the minimum. Because if you go for the maximum, by the time you go for the second round there isn’t much left and there is really a problem,” he said, saying in spite of its funding rounds Kopo Kopo had seriously bootstrapped at certain points since it launched.

“One thing we came to learn with Series B is that when investors understand your business the hardest thing to do is turning them down. Some investors will want to give you too much money, which will end up messing you up.”

He said it was important to know how the funds a startup is being given are going to affect the valuation of the company.

“We don’t want to reduce the value of the shares so we really take the minimum and do it one step at a time,” he said.

Joash stressed that raising funding was a difficult and time-consuming process that requires a lot of effort on the part of the startup. He said Kopo Kopo had visited as many as 150 venture capitalists (VCs) during its rounds.

“Funding is hard. A lot of back and forth, a lot of sleepless nights. If the investor decides it is time to have a call, it is time to have a call. Rain or shine, when they call on you and want the numbers you need to have the numbers,” he said.

“Going around Silicon Valley we really had to go into our pockets. It was a sacrifice we made.”

Aside from actually meeting and speaking with the investors, startups also have a lot of work to do in convincing the investor of their value.

“When you get the Series A funding there is a lot that you really need to prove to the investor,” Joash said, adding that good data could play a crucial part in this.

“You need to understand where the investor is coming from. What do they want and what are they looking for?”

Being a startup from Kenya makes the process more complicated, he said.

“Most investors don’t understand the Kenyan market. It is really hard to explain to someone in Silicon Valley. You spend an hour explaining what M-Pesa is, what the Kenyan market is,” Joash said.

“For them to give you the money, you need to convince them why they should invest in Kenya and not the US. Why should they invest in Kenya? These are the kind of talks we have had back and forth with investors.”

Kopo Kopo avoided approaching local investors, instead focusing on Silicon Valley. Joash said this was both a strategic decision and one born of the team’s feeling there were very few such investors active locally in Kenya.

“I think what we are trying to do as startups is going to open the eyes of the people that really want to invest. Right now I can’t explain why there are no local investors that are being really aggressive. Most people that have the money to invest in businesses don’t think the same way as you. They want that and they want this,” he said.

Disrupt Africa reported in February Kopo Kopo was targeting the digitisation of one million businesses through its platform.


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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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