Please welcome our next curator Nyasha @nljaps He is an experienced engineer, inventor and entrepreneur. He has vast amount of experience in areas such as Wearables, Robotics, AI, IoT and Avionics. He has previously worked for multinational corporations such as... 
Microsoft and BAE Systems before embarking on a new journey as an entrepreneur and consultant. He has gone on to successfully build VC backed start-ups specifically focusing on the environment, sustainability and digital health.
Thank you everyone for the warm welcome. This thread is about financing your early stage business. I would like to focus on examples relating to the current economic climate of Zimbabwe. However, will touch base on other options I have explored.
This is not textbook finance. This is my journey as an someone with no finance background venturing into entrepreneurship. I hope my journey will inspire others. I will be active from about noon GMT due to some business commitments. You are welcome to ask any questions in advance
I would like to leave a challenge in the meantime to see what interesting answers we get. How do we create local successful solutions? Think about Mbare Musika informal traders. What profitable solutions can we provide for them?
Here is my initial answer which I will change later... There is there is no money in providing services to Mbare Musika traders. They will not pay much. Let us hear some thoughts and I will resume by revisiting my answer.
Got some good responses on Mbare Musika. These are potential hair on fire problems. I specifically chose Mbare because I thought it is thought provoking. Everyone else out there thinks they have a solution they can build.
But the truth is there is only one customer. The customer will always pay what they want to pay. You can not have a pricing model without the customer. You cannot develop a product without the customer. You can not promise a return on investment without the customer.
But customer development. What does it really mean? What does the customer really see as valuable? What will they pay for? 42% of start-ups fail because their product can not tackle a problem. They are excellent ideas that do not serve any market. shorturl.at/cltF5
My first mistake was not to understand my customer initially. In fact, when I make my first product, I had savings and passion. I drained my own finances on a product no one wanted. I did market sizing without understanding how much the customer would pay for.
In the end I ended up making a product that costed 5 times more than the average targeted customer was willing to pay. I had spoken to about 10-15 people. Just over half would buy and I thought great.
Investment did not come too. I had a brilliant idea and it did get me in front of VCs. I soon learnt I was not ready. I had no idea what massive problem I was solving. I did not speak to enough customers. In the end all my money drained up. Back to zero.
So for today I want to start with some tips on customer development. Most people ask me for help with funding, but I realise we always end up here. I will divide this into 2 sections. Customer development and Fundraising. I am willing to take some engineering questions.
Customer outreach is important. You really need to understand what the market needs. You need to understand the early adopters of your technology, you need to know who pays, who is the user and finally you need to reach out to as many people as you can.
If you send 5000 cold emails you will probably get 10% reply rate. That is 500 people. 25% of that will probably be interested. So, you have 125 conversations. 20% (25 people) of that probably want to meet up with you. 20% (5 people) of that will tell you the hair on fire problem
So now you have only 5 people of 5000 are willing to adopt your product early because they really need the solution and will pay. Talking to 15 people and 7 thought my product was great was not going to get me anywhere.
The most successful products are shaped by customers. After my initial failure, my next venture I got to really understand this concept. I was sending 50 or 60 cold emails a day for about 3 months. I got about 2 organisations willing to take my solution to their problem.
But what exactly is a cold email. Before you reach out you really need to understand some key concepts of what to include. There are many resources out the on “how to write a successful cold email”.
It was not just a cold email. I was aggressive this time around. I walked into busy hospitals asking to have quick 5-minute chats with key decision makers. I rung secretaries of top executives asking for meetings. I had nothing to lose.
But what exactly was I saying? I was not saying I have this great product do you want it? In fact, there is a technique to master here. Ask the customer about their current problems relating to your idea. I recommend reading The Mom Test amazon.co.uk/Mom-Test-custo…
There is a summary of it here medium.com/@feelinspired/…
So, going back to our Mbare Musika example, My decision was influenced about quick money. Other answers had solutions. But was any of us, right? Were we wrong? The truth is we do not know and only the customer can tell us. My initial answer would change to... I need to find out.
Understanding what solutions traders want will enable you provide affordable on-demand solutions for them. Going on the ground asking them the challenges they face using The Mom Test will give you insights you never knew. Can you make money charging $1 subscriptions?
Mbare is an interesting one because there are potentially two customers. You have the traders and you have the council. You can go B2B and B2C depending on who you speak to. Mbare can be a go to but you need to be able to quickly scale up to other markets e.g Sakubva
I will leave the customer development here and wait for a few responses. Later I will move on to the more exciting fundraising. I am going to focus on bootstrapping as I feel this is what most of us are really doing. We do not have a thriving VC/Investor culture at the moment.
To conclude this, I want to say the solution for Mbare is not going to be imported from London or China or from assumptions. Same applies to the rest of our other everyday needs. Go out there and find a problem to solve. You will find someone willing to pay even a small amount.
Earlier we spoke briefly about finding the customer. Before I go over to talk about bootstrapping, I just want to talk about raising investment quickly for those who may want to know the basics.
There are so many things you would want to do to compliment customer development to raise investment. Venture Capitalists (And angel investors too) are businesses too looking for a return on their investment.
To raise investment, you really need to sell your traction. Traction, Defensibility and Market Sizing, Competition and your own capabilities. This is where customer development really works a charm. You will not be a unicorn over night, but investors want to see this potential.
Now let us look at traction in detail. Weak traction for a B2B business idea would be customers saying they want to try out your product. Average traction would be signing customers for paid/unpaid pilots. Strong traction involves having paid customers already using your product.
On the B2C side, weak traction is having known users using your product. Average Traction includes your user base growing at a moderate rate. When your product gets exploding and there are referrals and people are talking then you have some strong traction as a B2C play.
Going back to original example a software product being used at Mbare will explode and you will see traders in other markets looking out for your product. This is strong B2C traction.
A slow market that is unlikely to grow is a weak case for investors. An average market sizing where you have done some bottom up evaluation may be plausible. To really hit home with your market, you need huge incumbents but still growing rapidly. That market excites investors.
Investors want to know your business has good defensibility. If you are not the first mover and have no competitive advantage you have no defensibility. Having a patent and ‘ok’ unit economics is average. Strong defensibility involves network effects and proprietary data.
Finally by the time you finish customer development to speaking to investors, you want to show investors you can develop the product. Being sure you can develop, or a mediocre prototype is weak. Going in there with a live and fully functioning product is amazing
Another important point, have a financial model. A justifiable spending forecast. A roadmap helps you test underlying assumptions of your business and investors love it when founders demonstrate they understand the business.
When you accept investment, you lose part of your company and power but increase chances of accelerating growth. Bootstrapping is exactly the opposite, retaining power but with extremely limited resources which can inhibit growth. In other cases, your product quality suffers.
Ideally you want to bootstrap for a while until you can command a term sheet in your favour from investors. Unfortunately, in our current economic climate most will not get to this point. So how do we survive? Bootstrapping is tough, but doable.
Where does one really get money from to bootstrap? If you are in a well-functioning economy, you could work part time. If you are developer, you may find freelancing jobs online. Bt for majority in our current economic climate it becomes a burden to build a non profitable venture
The first tip I will give you is going back to customer service. When you do customer development you are not restring yourself from working full time. You can schedule calls and meetings at more convenient times. That way you can carry on with your daily hustle
When your customer development matures, and it is ready to give you results you will know. This is the time to work fast and do a quick turnaround to sales. Customer development should end when a potential customer says deliver this to me by this date and I will pay.
Do not do it alone. You want to allow yourself to get help. Find a co-founder you can trust. And find other partners willing to take equity and not cash. That way your workload in the new venture is significantly reduced. And you could be working just weekends in the end.
I have a co-founder for one of my ventures. She is the CEO and I am the CTO. It means I focus on product development and she focuses on customer development and strategy. She has an MBA from Cambridge making her the ideal person for this.
In fact, for all my ventures I am CTO. I used to be CEO. But realise I hated it. I needed someone who loved it. I want to focus on what I am good at. Which is make products and lead engineering. I let the clever business minds take over. We hve failed in some & succeeded too
When you have a CEO take it like dating and be open. It is not always going to go your way. There will be friction but over time you will learn to understand each other. You both bring value.
Before, my strategy was to get MBA students as interns for all my ventures. Most of these guys are experienced. They would do it for free and take equity for the future/take little cash. They would do the whole strategy etc. They did it all better than I would do it.
Utilise cheap outsourcing methods. Fiverr is a great place to do this. There are others out. Google "freelancing websites". You will cut your expenses and work quickly to the top. This concept is not just online. On ground you can find cheap places to do jobs.
Cut expenses and be tight with your budget. Forget an ideal current life and focus on your ideal future. Be transparent about your own finances. For example stay at home with parents or relatives. Don't let the pressures of freedom force you to spend.
Finally, humble yourself and be open with your inner circles about your venture. Your business is your focus. It is your baby. Make sure your close friends and relatives understand the ups and downs. They will be more willing to support and help.
Treat your close circles as investors. These are the guys who will push you throughout the journey. When you run out of resources they will accommodate you, give you loans and give you moral support.
I am going to close the thread but i will stick around for new questions and revisit some questions asked already. I have really just scratched the surface so make sure you go and read more on these topics. Do a lot more research on topics.
Make sure you check out this great book too amazon.co.uk/dp/0804139296/…
My handle is @nljaps and feel free to ask more about my engineering background. I did not touch on that as it is a finance & accounting week but I'm always happy to go down this road.
