Part 2 — Ally Angula lessons from running a start-up in the Desert

A desert is defined as a barren area of landscape where little precipitation occurs and consequently living conditions are hostile for plant and animal life

The start-up ecosystem in Namibia, my chosen birthplace for my start-up lives up to that definition, sadly — it is currently barren; barren in that the ecosystem that could support startups to have a fighting chance of survival is barely existent; barren in the appropriate work ethic amongst people that you employ in your startup who would be required to push beyond the normal 8–5; ….should I even open my mouth and talk about seed funding, our desert is … indeed very very barren in start-up/seed funding; it is also barren in providing the backdrop to driving innovation because the biggest spenders in our economy — municipalities, Government and its State owned enterprises will listen to your innovative idea and tender it out; the list is endless….

Suffice to say, I have, now accepted that the start-up ecosystem in Namibia as well as the start-up itself must both be birthed at the same time, lets denote this to the birthing of an elephant. As Pioniers, our lessons cannot be the only inheritance we leave to future generation entrepreneurs that are destined to die attempting the crossing of the desert due to a lack of water points along the way. Least we forget the Namib is the oldest desert in the world 😳 but as we birth both the eco-system and its pioneering startups we can take motivation from a not so good looking plant but one that has for sure adopted to endure in the Namib Desert; the welwitschia. We therefore can do it, it wont be the easiest task but the way I see it the desert is waiting to be crossed…. And now that we know we are in the startup desert nation of the world, our journey can be better prepared.

….so as a self appointed active startup ecosystem builder, herewith follow some more lesson learnt in what I can describe as the hardest period of my life to date, starting a startup in the desert:

  • The saying goes revenue is vanity, profit is sanity and cash is reality AND king. So it goes without saying that any entrepreneur worth their mantle is well aware from day 1 that running out of cash is not an option. So with my title of entrepreneur, with all of my cleverness (or so I thought) and planning to boot, I dismally failed to plan for where I was operating from — ”The Namibia Startup Desert” . My startup books informed me that we should ask for money required sometime in the future before we needed it. This is because its harder to get any facilities when you are desperate. So we planned to have a minimal amount of overdraft facilities on our accounts. So we set off to apply for some form of overdraft for lean times when they come. Having just left KPMG as a Partner I had some form of security I could offer but when it was asked it was certainly not in the form I expected it — the bank insisted that I could keep my funds in an account however I should pledge over these funds to the bank for them to advance any amount of overdraft, I found it strange money for money. Even with my Chartered Accountancy, my backup cash that “my bank” knew about, the answer was repeatedly no and at times I was told in my face by “my bank’s” CEO “you are just an accountant, what do you know about farming or what do you know about clothing manufacturing” not withstanding the fact that we had hired operation managers with skills in these fields albeit the rest of the team was learning. So after realizing that “my bank’s” response wont change, we did what we could and used our back up cash to get started and because we went into asset intensive businesses i.e no farmer in Namibia would farm potatoes without irrigation even “the Accountant” knew that 😂 and overhead irrigation is not cheap nor is developing a field and having to pay for transformers that you hand over to the power utility company after you have paid for them so are not on your balance sheet 😣 So lesson learnt is don’t use up your working capital cash to fund fixed assets, so what I mean is, anything that you can finance and which can be its own security, leverage it by financing it with a bank and shop around all of the banks. I was stuck on “my bank” — the one that has how can we help you? in their tag line, even when they kept saying no and when they did eventually say yes they charged us prime plus 4% and 20% deposit on assets being financed over a million although they would never do it for a home loan or a personal car. This not so clever “Accountant” stayed with them because they were “my bank”. “My bank” unfortunately choked our startup and suffice to say when I did need “my bank” I ended up emailing the CEO in sheer frustration and calling the bank racist (and no it wasnt a race card being used, they were genuinely being racist), their response was quick and swift with cancellation of all facilities (personal accounts included because they tied everything to the business accounts) leading to multiple INSTANT defaults. So dont treat any bank as “your bank” — Preserve all of your cash for as long as possible AND and bank with all the banks at the same time and approach all of them for asset finance. Because unfortunately for Startup in this desert, currently there is no escaping the banks, due to no fault of yours or ours just because unfortunately Namibia’s financial landscape is one built on banks predominantly without other appropriate instruments or institutions suited for startup funding due to the risks associated with startups. These banks are mostly owned by shareholders (in our case foreign) who are chasing risk free returns and thus are financing home loans, cars and buying government treasury bills (which we all know are not coming back into economic generating activities in any form or shape). Innovation in the banking space is also slow because their interest, being mostly foreign owned, are not spurring on Namibian Economic growth.
  • Incorporate your company formally and when you do, keep business dealings separate from your name, don’t co-sign for the company’s debt. Although we incorporated right from the beginning by forming PTY’s (which are by the nature and definition limited liability legal entities), and even went as far as having different entities that had different risks. However, I so believed in the idea that when asked to co-sign for company debts, I co-signed even for things that really I shouldn’t have co-signed for, like rental agreements which had nothing to do with me as shareholder in a company that is one level up. So I signed for a company I had no direct shareholding in. The structure was right, the actual shareholding company was jumped in the signatory process and I, excited that we had FINALLY managed as a company to have jumped all of the hoops to eventually getting our rental space, especially given the fact that we were requested to submit documents that South African brands were not requested to submit, at this point of exhaustion I signed because in any event none of the negotiated changes were made by the mall owners as we just had NO voice at all. We were a stand alone store in the mall and we were not a “national store”. Just for laughs, a national store are by definition South African chain stores 😂 and these nationals stores come with 4 — 5 brands of stores to a mall owner and as Namibian retailers we are just not there yet, so we remain at the mercy of mall owners.
  • Another lesson learnt is that in terms of structure, structure your company, where you are planned to have direct shareholding to be owned by a trust to really protect your name so that in the event your startup fails and chances are very high that your first venture could fail, you would still have your name intact. I stupidly so believed in what we were doing not factoring the absent ecosystem and signed as stand-in for the company debt and continued to pour in money, for 4 years straight, meaning when I ran out of money so did the company and naturally the sharks all circled and unbeknown to me I had also entered the political waters by serving as an State Owned Enterprise (SOE) chairperson and thus invited enemies (unbeknown to me) who were happy to magnify with their newspaper what would be a normal business difficult period by making it seem as though I had pulled the moon and smashed it into Namibia. Sadly so entered our period of steep uncontrolled decline that even I with supposedly super moon pulling strength couldn’t halt. So I watched as my start-ups failed and all I could do was watch as this happened without any ability to help, in one swift move in a perfect storm we shed 89 jobs and failed.

Besides structural advice, we also learnt some hard operational lessons and some of these were:

  • From day when your product is ready, with it warts and all, focus on generating cash through sales— task your team to generate cash from either your services or products. All activities of your team and you as team leader must be on generating cash. As team leader insist on having daily conversations on why targets are not being met and be comfortable with having hair on your teeth with your sales staff when targets aint met. Let them call you insane because when your startup fails they will move on and you, dear business owner will be left to face the music by yourself. Sales, sales, sales every day, every hour, cash in the till.
  • Be a hawk every day and focus on your stock and cash. Your employee will steal from you and smile at you. Get over yourself and do body searches. We recovered only about 60% of our sales and the rest was stolen. We kept coming across theft in every instance we investigated.

Until next time…