#AfricaTech #Reflections: So boards and DD aren't 'cool' anymore I hear. Both are wasting #founders time, and entrepreneurship is all about 'move fast and break things'. So - some #oldschool stuff here - or as they say, yes... *BUT*... (thread 🧵👇)
1/ Two different topics - but very related. So starting from DD, and will develop thoughts from there.
We are still in the 'money falling from the sky' era to an extent. Public markets are in the deep red, multiples are so south that IPOs and SPACs are almost irrelevant.
We are still in the 'money falling from the sky' era to an extent. Public markets are in the deep red, multiples are so south that IPOs and SPACs are almost irrelevant.
2/ Many of the larger funds, sitting on billions in cash, understood returns will not come from pre-IPO rounds. As cash raised recently, and model requires quick cycles and showing uprounds, best turn to early, and why not do so in 'exotic'/less crowded geographies...
3/ #AfricaTech came to play. As an ecosystem, we celebrated and rightly so. 2.5x growth in a year, hundreds of deals, dozens of large rounds per months. Yes, a lot of piling in a very narrow band of sectors, but all in all - great to finally get the recognition from global funds.
4/ As all got more competitive (globally and in Africa), DD soon became a thing of the past. In some cases, it turned just ok, or too early to know. In others... Well - a few lessons to think about.
5/ #Africa isn't the US. Or Europe, or Israel or China. In each, local funds did the heavy lifting for years, until many things became very structured and standard (maybe not yet in India - so leave it aside). All have fairly clear regulatory frameworks, clear marketing channels,
6/ clear mobile usage and consumption behaviours, clear spend dynamics, centralised large players in every vertical and so on. #Africa - low and behold, does not. Raw talent - a ton. Giant opportunities - all across. But different market dynamics and peculiarities - oh yes.
7/ More and more deals close with no (or very little) DD. Usually from far. When we say we need a couple of weeks - we're usually met with raised eyebrows. So why do we do it? and what does it entail?
8/ When we invest - and our model is concentrated by nature - we need high conviction. In the founders, team, model and market. So, the few weeks allow us to spend more hours with the founders. Plus speak to all key members of the team.
9/ Then speak to clients & partners, which may give truly unique insights not just for us - but also to the company. We try and ask hard questions. Make sure we understand the model. the service. the product. the tech. Assuming it's 'another one of x', or 'x for y' won't cut it.
10/ Thing is - African markets are VERY different. The nature of the problem may be high level similar, but the solution in Nigeria or Kenya or Egypt can be very different. Regulation is different. Society is too, as is market structure and nature of the supply / demand etc.
11/ All of those one can not learn from 1 or 2 calls alone. Or from just looking at the Data Rooms (I recently learnt real 'friendly' funds don't need either - they just send a TS...)
12/ the other thing happening in DD - is the company gets to know us. Their potential partners for the next 5-10 years. I'll never understand why founders are happy to give this up. So counter intuitive - saving 2 weeks at the cost of a horrible 7 years joint journey at stake.
13/ More and more stories about foreign investors forgetting to check if the company has the right license are coming up. It's not just to check. is to open a channel with the regulator. To speak to some Bank or Telco MDs and see what they think.
14/ It's not that we decide based on this alone, but we all must know what we are facing at the gate, and it helps us calibrate our support, and focus the founders on the stuff that matters from experience. Skipping it may save a few days, but may cost a fortune later.
15/ The other thing is that if those things come up post investment - trust might break down. Trust me - being a founder is among the most lonely jobs on earth. Dealing with trust with those who suppose to support you - is that last thing yo uwant to manage alone.
16/ Which ties to the new 'no board' fashion. 'Our US investors don't want it'. Well - true. Because you're one of many, and if things do blow up, they want ZERO fiduciary responsibility. They don't want board summaries and minutes - so they can never be responsible.
17/ Think carefully if this serves founders in the long run. Not having responsibility, allows anyone to turn the other way at the first serious problem and run far and away. Remember feeling lonely on less stressful times - think again about that.
18/ We are all capable enough to replicate the Board rights outside a board, power with no responsibility. the questions is who actually benefits from that...
19/ It is our (VCs / Investors) role to prove we are worth founders time. its a competition out there, and that's fair and known. Question to founders is what are you optimising for, is it short or long term, and who will serve you best over time.
20/ These are Marathons. The better investors will help you get to the finish, even if it may feel slightly slower at kilometre #1.
end / Of course I'm biased. But some of the recent post big rounds blowups are a warning sign. 'TechCrunch headslines' are important, but what's more important is building winning companies that last.
Feel free to share, comment and counter as always.
#AfricaTech #AfricaVC
Feel free to share, comment and counter as always.
#AfricaTech #AfricaVC
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