4th May, 2017
Q: What do you look for as an investor when an idea is presented to you? A: An entrepreneur is most likely to arrest my attention if they have diligently done their homework and covered the basics. I’m not interested in concepts that have been gathering dust in a shelf, you must have gone an extra mile and started implementing what you are selling. From this stage we can then venture into conversations about the product, markets, delivery channels and projected revenues.
Q: You watched over 20 different pitches in the den. Which presentations did you find the most captivating as an investor and why?
A:BTrack Global, the owners of car tracking device that uses Google maps which is embedded into their iTrack Software had a very interesting proposition. The fact that they had already done extensive ground work is a plus. The profit margins are also attractive save for the operational challenges that they are currently facing, but that is a challenge that we can resolve.
Distant Relatives Eco-lodge and Backpackers business concept is environmentally sound and socially conscious, it was a breath of fresh air. These entrepreneurs saw a significant market gap and established a unique and affordable alternative to the expensive hotels and resorts that are the norm at the Kenyan coast.
Their alternative accomodat also offer a chance to pick; dormitories, safari tents, camping, private rooms and exquisite bandas. The fact they are ranked no. 1 of 321 existing hotels in their category, they have certification from Eco-Tourism Kenya and have more than 250 excellent reviews on Tripadvisor is also a pointer to the work they have put in. This is why I decided to invest in the venture; the concept is sound, has social impact and the opportunities for further expansion are immense.
Q: What was the hardest part of being a Lion?
A:I have had to realign my calendar often times because being a Lion is time consuming. The viewers get to watch the show, but they don’t get to see the work that goes on in the background. After the selection process, there are other deliberations with the entrepreneurs and paperwork that follows. Mark you, this is a long term commitment, successfully running or even managing an enterprise is no walk in the park.
Q: It is said that we make a judgment on person within 30 seconds of meeting them. How much does an entrepreneur’s appearance matter?
A: It is good to put some effort in your grooming and look presentable, but I’m not one to judge a book by its cover. I would rather pick someone’s brain first before making any judgement.
Q: How much does the social impact of an enterprise affect your decision to invest?
A:If your products and services do not have any impact on the society, then that beats the logic of being in business. As entrepreneur, it is my firm belief that beyond return on investment; social impact of an enterprise is critical, 40 percent of my decision to inject funds into a venture is influenced by this core component.
VALUING YOUR COMPANY
Q: Which is the best way of raising capital for startups?
A:The suitability of capital raising for any venture is based on the nature of the business. A long term loan may work well for a capital intensive venture that promises high long term returns, this may not necessarily be the best route for a trading business with quick sales turnover. There are a multiplicity of factors that come in to play, if you are service oriented business that operates with minimal overheads, you may want to consider approaching family and friends for the initial capital before approaching a bank or an equity partner.
Q: In season 1 many failed to make deals in the den because of poor valuation. What is the best way to determine a company’s worth?
A:There are various commonly acceptable ways to determine the value of a business and this will vary from one enterprise to another. The simplest of them is looking at the book value where one focuses purely on the financial statements; assets vis-à-vis liabilities. However this can be the least reliable method as there are aspects of a business that are intangible such as brand equity and sales projections.
Business valuation is more of an art than a science, unlike a fully-fledged businesses or publicly quoted companies, valuing a start-up can be a little bit tricky. As a start-up you have to do revenue forecasts and defend your value. The market forces and trends in the industry which a start-up operates can also dictate the value of a company, there’s no absolute method of valuing a business.
MAKING IT ALL A REALITY
Q: Many business concepts/ideas never move from imagination to execution. What do think brings about this problem?
A: There are instances where potential entrepreneurs conceptualize ideas which they then file them under a to-do-list to gather dust because they have no courage to start. There is a reason we call them start-ups, one needs start with whatever they have. I can name several bands and music productions outfits that started in a garage.
I always believe you have to have enough grit left at the end of your passion. You never give up; entrepreneurs are often times made of sheer grit. Timing and innovation of course critical in business, but resolve counts for much more.
OWNING YOUR IDEA Vs SHARING IT
Q: The phrase Kenya uniform speaks to how much we ‘copy’ one another in our society. Do think this hinders new business ideas from flourishing?
A: You can copy and tweak a few things in a business model and become more successful than an enterprise that had the first mover advantage. But I would of course encourage the ingenuity of pushing the frontiers and coming up with novel businesses ideas that bring unprecedented solutions to the table. If we were to encourage duplicity, Kenya would not have M-PESA which has put Kenya on the global map when it comes to mobile transactions.
YOU, THE SHOW AND THEM
Q: We saw a jet engine and an app created to save lives come into the den. Did you feel inspired by the ventures presented to you?
A:There were ideas that were a bit far-fetched. An entrepreneur does not operate in a vacuum, you have to provide affordable and realistic solutions that can resolve real life challenges. Some businesses were inspirational and well thought out in regard to their execution, while others were completely out of sync with existential market realities; they were somewhere beyond utopia.
Q: Angel investors take calculated risks. Are things different in the den in comparison to the boardroom?
A:There is definitely a difference between the boardroom and the Lion’s den. You have to be gutsy to sell your idea on national TV, I really do appreciate the conviction of some of the participants. But the decision to invest boils down the same principals, even a CEO has to take calculated risks in boardroom decisions which may translate to profits or losses.
Q: What was like being in a competitive environment with other investors?
A:It was fun and a great learning opportunity as well. No one is beyond counsel, you get to pick a lot of insights from other Lions as well, especially in light of the fact that we are in different businesses.
Q: In your experience what creates good chemistry between entrepreneur and investor?
A: Honesty, trust and open communication are integral to a smooth working relationship between an entrepreneur and an investor. Whereas investors can give sound advice to grow the business based on their expansive knowledge and experience, this can only work in an open relationship where an investor is constantly updated on performance of the business.
Q: Unemployment amongst the youth of our country is a major issue. Comment on the efforts being made by the youth, to change the Kenyan employment landscape themselves?
A:Young people aged between 18-34 years old constitute more than a third of the entire population, while 80 percent of Kenyans are less than 35 years old. This youth bulge presents enormous socio-economic opportunities and I have seen them harness their numbers through collaboration.
I have recently noted the emergence of several youth driven innovation and business incubation programmes that are nurturing entrepreneurs and building enterprises from the ground up. The youth are quickly learning that they cannot sick back and wait for solutions contrived and administered to them by others. They are taking the initiative and collaborating to engage in income generating ventures.
Q: Are there any other learnings from this first season that you can share?
A:Kenya is not short of ideas, there is a treasure trove of entrepreneurs out there with brilliant business concepts who need funding and mentorship. Homeboyz Group runs a business incubation center, dubbed Y-Hub, which nurtures promising, innovative and nascent ventures that are in their formative stages. In fact, the Lion’s Den lends itself to the same ethos espoused by Y-Hub, our virtual hub that harnesses and nurtures various youth skills.
Apply for the second season of KCB Lions Den Here or visit any KCB Bank branch countrywide.
Article first appeared in the Standard Newspaper
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