I have had a half written article titled “Will the Kenyan entrepreneurs please stand up” that’s been on my laptop for about 2 months. It was meant to discuss the dominance (my perception ) of foreign founders in the Kenyan startup ecosystem and try and analyze when it would be the indigenous Kenyan’s “turn to eat”. Real life took over and the topic was clearly more complex than I had thought — my initial rant about privilege given to foreign founders was not on solid ground so I decided to mull over the topic and return at a later date. Luckily for me, I read today the article “Why is Konga worth only $35mm and Jumia $1billion” by the CEO of Jumia Morocco. Thank you Jesus!
Its an interesting article and for those who haven’t read, here’s the summary :
In Conclusion, building an ecosystem, securing a geographical diversification, leveraging on its strategic investors and having secured consequent access to capital is according to me what explains the huge difference between the current valuations of two biggest e-commerce players. Now, the accuracy of either nominal valuation is still to debate…
The author identifies access to capital and Jumia’s early decision to pursue both regional and vertical diversification as key determinants of the valuation gap. I have a different view and its more nuanced. I believe the valuation gap is primarily a function of story telling and in this type of performance, both the orator and the listener have to be in sync.
I have spent the last 9 years fundraising for funds or ventures and I have been a victim of the Nigeria curse especially as a co-founder of Paylater. This is an affliction whereby every investor you speak to talks to you about the importance of focusing on Nigeria, because its so big and full of potential and why would you want to go outside when you haven’t cracked that one yet. Besides how can you execute in Kenya, or Côte d’Ivoire etc which have different networks, cultures etc. And by investor, I mean both local and foreign but primarily foreign, because let’s face it, that’s where most of the money is coming from. Let me just stop and say that there is merit to the argument — All our lovely Silicon Valley blogs talk about how focus is a really nice thing to do, conquer your local market first then expand blah blah blah. And I have been involved in businesses where in retrospect, the entity would still be alive if I had stayed local and delayed expansion.
So this brings me back to Jumia and my Kenyan brothers and sisters. The founders of Jumia are clearly master storytellers — you have to be to have raised as much money as they have to date. But I also think that for many African founders, the field is not level. This is my opinion but hear me out. First a caveat — I don’t know much about the financials of Jumia or Konga and none of the founders have given me insight into their strategies. But as someone that was a consumer in the Nigerian market, there is nothing that I saw in Jumia vs Konga, or Jovago vs Hotels.ng for example that gave me the impression that Jumia Inc were executing at a different level. Or that the vertical strategy made sense. So I guess the jury is still out on whether Jumia’s strategy in expanding vertically in Nigeria was the right one. But I can only imagine the reaction that would have greeted Sim Shagaya if he told his investors — “I know we haven’t conquered Nigeria yet but I want to expand into 4–5 countries and also enter travel, house rentals and food delivery because of the synergies in logistics”. Get the *&@^ out, I would imagine but maybe this is me speculating. The fact is that Jumia has been able to convince a collection of very savvy investors that they are able to execute several vertical strategies across over 23 countries simultaneously. And that my friends is no mean feat.
Bringing it home
But what has to be my pet peeve is the other side of the Nigerian curse. Which is the propensity for every investor who gives the “stay-local, stay focused” advice to have a portfolio full of companies that are expanding like a bad rash across different geographies. Its like if you are a foreign founder you have a greate ability to execute but please dont’ tell me that the Nigerian company wants to expand into Kenya. How unfocused!!!
I had a discussion with an investor some time ago arguing why our company One wanted to expand our Paylater brand geographically citing the need to diversify especially with a devaluing Naira. The investor told me to stay in my Nigerian lane, and they would do their own portfolio diversification.
Last year an investor chastised us for attacking SME lending, a sector even more underserved than consumer lending. Our offence? Expanding before dominating consumer lending. This year, see how i heard this same investor boasting about the new verticals that one of their portfolio companies was expanding into. As my parent would say, that founder that is expanding like that — has s/he got two heads?
Who executes best?
So what am I saying? Let me spell it out, I don’t think African founders looking to execute on the continent get a fair shake. There i said it, I have no data / evidence so shoot me if you want. When I thought about my Kenya article, I tried to think about all the Kenyan success stories that had raised funds or were featured regularly in the international press. In no particular order: M-Kopa, Kopo Kopo, Twiga, GoodLife, Tala, Branch, Bridge International. All foreign founders I think — there may be more prominent startups out there and if they are pls put them in the comments section. Are the indigenous entrepreneurs blind to the opportunities that others have seen? Or is it that they were not able to tell the stories in a captivating manner? Or maybe investors didn’t want to listen or didn’t understand. I don’t know. But what I do know is that to execute you need the funds and you need to know how to operate. So at the risk of making sweeping statements, who is better suited to execute on the continent? The foreign founder or the local?
The Ugly Truth
Sorry if you were expecting a definitive answer — alas it is not that easy. But there is an ugly truth that colonial mentality still exists on the continent. Put simply, its always easier for foreigners to get meetings than it is for locals. At the base it could be heightened curiosity — what is this American girl doing in the Oil & Gas sector? At a deeper more insidious level it can be as crude as “Let me take this meeting abeg — there is likely to be an avenue for some money or investment here”. It is an ugly truth but a deep truth. Until locals and local institution start investing in their startups, there will always be an imbalance between local and foreign led startups are treated. If you don’t agree with me take a look at any of this year’s “Investing in Africa” conferences. Pick one randomly and observe the make-up of the panelists of experts or investors. The colour of money is of a lighter hue. And as a result, so is the colour of opportunity. I suspect that most Nigerians would prefer to work for a foreign companies. Foreign companies generally mean the chance to travel, higher pay, job-security. That’s what you get at these big strong multinational firms — BAT, Exxon Mobil, Axa, GE- and unfortunately not many of these multinationals are African-run enterprises. Its therefore not difficult to understand why that sharp developer, or amazing data-scientist would associate all those lovely attributes to a foreign startup even though their local peer might be a better operator with greater understanding of the market.
I actually don’t blame foreign investors if they have a bias to foreign founders explicitly or inadvertently. Quite frankly, the mere fact that this foreign founder has come onto the continent is already a good sign that there is some entrepreneurial spark — not enough but a good start. If the locals now have this colonial mindset that gives foreigners an advantage then hate the game, don’t hate the player. Some may not like what I am saying and maybe attribute some of this to deep insecurities best resolved on the couch of a psychiatrist. Perhaps, perhaps.
If I repeat my Kenya exercise and try and think of the prominent Nigerian startups — the names that come to mind are Andela, Flutterwave, Hotels.ng, Iroko, Jiji.ng, Jobberman, Jumia, Konga, Paga, Paylater, Paystack. We are “lucky” that the many of these are led by local founders. But look to the cash and you will see that the majority of the funds invested came from beyond these shores. It is possible our harsh weather, volatile economy and the joys of malaria have prevented most foreign founders from visiting us more often than they do our Kenyan brothers and sister but they are coming. This is not a call to close the doors or anything silly like that. Its simply a call for us to recognize that we have the capacity to excel, and the funds local to finance the growth of hundreds of startups — if we are able to tell our stories. The Jumia vs. Konga comparison is by no means black and white (get it, get it?? ) and in my view partly a result of the unwillingness or inability to tell our stories. For investors, can you honestly say that you have been fair in judging local & foreign entrepreneurs? Have Jumia’s investors?
In pitching to investors I have been guilty many a time of changing the story to suit what I felt investors wanted to hear or what aligned with their strategies. In my view this type of action leads to $35mm vs $1bn.
I will muzzle myself no more.
