Tomi Davies is a key lynchpin of Africa’s startup space – “collaborator-in-chief” at Lagos-based entrepreneurship support organisation TVC Labs, chief investment officer at Greentec Capital Partners, co-founder of the Lagos Angel Network (LAN), and founding president of the African Business Angel Network (ABAN), among other things.
After graduating from the University of Miami in 1982, Tomi led innovative technology-enabled transformation initiatives for influential global brands such as Elf Aquitaine, Marks & Spencer, Ernst & Young, and Sapient across Europe, the United States and Southeast Asia.
He them went on to become, as we have noted, one of Africa’s most eminent angel investors – and now he’s shared some of his wisdom in his book “Investment Worthy Startup”. The aim is to “help startup founders and their investors have a conversation about how best to build a successful startup” – and help founders see what is needed many steps down the line.
Here are a few key takeaways from Disrupt Africa’s reading of the book – but many more are to be had from a deeper read!
Be part of an ecosystem
All startups globally face the same set of basic challenges, like poor market research, incorrect business model, poor execution, lack of funding, and so on. African founders face an even bigger set of hurdles, such as lack of simple tech infrastructure, sporadic government support, and a growing talent drain.
“The only way startup founders can overcome these local challenges is to leverage available ecosystem support. There is, therefore, a need for an ecosystem that supports these startup ventures through every step of their development, from pre-seed funding at incubation to seed funding for acceleration and scaling, then on to Series A and beyond. This ecosystem needs to be built around the unique challenges faced by our founders in Africa.”
Tell your story!
“Every startup begins with the founders, those amazing individuals like you, inspired enough to dedicate time, effort and money towards bringing their vision of a startup venture to life.”
According to Tomi, founders share various key traits, such as persistence, passion, drive, intelligence, openness, focus, and integrity. Additional traits that have personified successful African founders he has worked with are being visionary, passionate leaders, who are good managers who can clearly explain the delivery of an organisational structure.
If you have all those traits then, and thus the ability to successfully scale a business, you should be able to tell your story – where you came from, what and who has shaped you, and how you came to be running this business at this moment.
Share the future you see!
“The question of what exactly it is you’re building, assessing and learning should start with some old-fashioned thinking about what you see in the future.”
This, Tomi says, is your vision. You need to be able to walk yourself through a process that recognises you’re preparing to build or may already be building a business that could change the world. You need to be able to articulate this well enough for somebody else to understand the viability of your vision, and that takes practice.
Key questions? What is the problem, and who is facing that problem? How will you solve it, and how is that different to how others are solving it? What structure will you employ to do so? What are the economics – how much funding do you need, and then how much money will you make? What are the milestones?
How will you bring your vision to life?
So you’ve got the vision. But the next question is how you go about bringing that vision to life, which is more challenging than many appreciate. There are several key aspects here.
One is becoming familiar with your market, which Tomi says is a “critical step in the process of initiating your startup because it determines whether or not there is enough room for growth”. How is business done, and who are the competitors? What is your total addressable market (TAM)? Things like this.
Next up is understanding your customers. “Successful founders really understand their customers. Knowing your target customer is half the battle when it comes to developing a successful startup.” So who they are, where they are from, and how best to acquire, serve, and monetise them, are the key questions. Key to that is having a valuable product or service to offer them. Rather than hoping for a lightbulb to go off, Tomi recommends having a “methodical, iterative, experimental process” when it comes to product development.
Next up is organisation, and how to structure your company, as well as the team. Who the managers are here is vital. “For a startup to be effective, it must be managed effectively. The people in charge of running the company need to have the right skills and knowledge to make sure the business is profitable and grows in the right direction.” Knowing how to get things done, and with what technology, are key.
Get your economics right
Economics, Tomi says, are the “measures of the startup’s use of available capital for funding expenses that generate impact”. Yet planning for the future is challenging when there is no certainty as to what that future will look like, so using the right methods and tools for cash flow management is pivotal.
“Capital is the lifeblood of a startup, but expenses are the fuel that fires the income engine.” he writes. So getting burn rate right is very important indeed, which means managing expenses sensibly, but also ensuring you have enough capital to hand, especially when the time it takes for cash to actually hit the bank can be longer than you think.
What is your impact?
Just as, or almost as, much as profit, impact is also important for an African startup, Tomi says. There are various types of impact – economic, environmental, social, etc – and startups should figure out what kind they want to have, but also how they want to make that sustainable.
“Operating sustainably is not an option. It is a business imperative. Leaders and business owners are under intense pressure to build sustainable organisations that provide financial value and societal and equitable impact for all stakeholders,” he says.
Buy your copy of “Investment Worthy Startup” here!
