Ways to Fund Yourself

(Eric Halsey) #1

Without a doubt, the number one challenge we’ve heard about from African entrepreneurs is the difficulty of getting funding. Besides techniques like getting grants, lowering your startup costs, and using free tools, there are a variety of ways to fund yourself while you get your business started.

Here’s how three African companies did just that.

##Getting a Job

“I had no money. I had to pay rent, eat, it was really hard. My team at that point, none of them had a job, we would always convince ourselves, slowly we began getting job, we agreed that one of us can get a job and support the rest. Since the idea was initially mine and the technology and expertise was mine we decided I stay behind and they work to support me by giving me some of their salary.”
-Edward Amartey-Tagoe, Founder of Nandimobile, MEST Incubator

Edward’s technique was to start with a team and everyone else work and use their salaries to support him while he built their product. This carried risks, it was possible that team members could argue over who was supporting the team more by either working a regular job or working on their product. But that risk was necessary to get the company started.

“I wanted to grow the company with revenue. We’re getting people to pay us for subscriptions. Our technology runs on a business model where businesses pay us monthly or annual fees to be on the platform, and for tech companies that are doing so, it’s a recurring fee that companies pay you that makes you financially successful. The most important question was whether or not we could convince enterprises to pay us recurring fees. Now we have 540 of them actually paying us that much money. As I used to say sometimes we are lucky, sometimes we work hard. We’ve built the company to a point now where we want to scale into different markets one, and we want to focus on our new platform which I could talk about.”
-Edward Amartey-Tagoe, Founder of Nandimobile, MEST Incubator

Ultimately, this team structure worked well enough for Edward to get the company earning enough revenue to bring other members of the team on full time. It was a temporary solution, but it worked for him.

##Paying the Bills with a Service Model

Philip Walton used a hybrid model to get his business going in the early days. Edward’s model wasn’t possible for his company, so they had to get creative.

“It’s always better to use your own money and bootstrap if possible. I like doing hybrids - service business generating cashflow, helping the R&D, getting a little money from mom and dad, and leveraging a service model to grow the business. Nairobi is a very difficult place to get capital, local investors don’t understand tech, they go to real estate. A lot of entrepreneurs in and around ihub can’t get access to capital so they burrow from mom and dad, bootstrap the rest. Sometimes you should ask yourself if you can do this without outside capital.”
-Philip Walton, Co-founder of BRCK

Ultimately, Philip created a service business as a part of his larger product development business. This side project was designed to bring in enough revenue to fund the long-term product development goals the business was ultimately focused on. While burrowing money from family added to this, creating a service business was what allowed him to fund his company in the early days.

##Sharing Living Costs

“What you need to keep in mind is that we aren’t on a stable salary, if we’re going to give someone an allowance, it wouldn’t be favorable, they might spend all their money on rent. It was a no brainer, living in one place would let our allowance have more value.”
-Samuel Njuguna, Co-founder of Chura

Funding yourself isn’t just about finding ways to bring in revenue during the early stage of a business. It’s also about cutting costs. Chura did this by deciding to have the entire team live together. Like with Edward’s strategy, this carried some risks if the team would argue or fight. But those risks were worth it to allow the entire team to save money by sharing rent and spend more time together developing their product.

##Finding the Right Mixture for Your Business

The good news is that all of these tactics can be combined. These three examples show how many ways there are to fund yourself and your business. The first step is to consider how they apply to your situation.