A business idea and the question of funding

For those who remember, a few months ago Chris Kirubi received a message from a young man with ‘a great biz idea’. Kirubi slammed him and the social media police were all over with their usual vitriol. Everything went silent and we moved on. Kirubi did what any other potential investor would have done.

How much is your idea worth? Well, zero.

An idea is worth nothing and that’s why no one buys ideas. Unless such an idea in itself is a product and already patented. No investor will give you a second to discuss an idea. No one. An idea is like wind. If ideas had a cent worth of value, we all would be very rich because everyone has ideas. Many ideas. Lofty ideas. According to the brain expert, Tony Buzan, the possible combinations and permutations of ideas, thoughts and insights an ordinary person can generate are equivalent to the number one followed by eight pages of zeros. I don’t know what that number would be (maybe a gazillion) but you can imagine the volume of ideas we generate or are capable of generating.

Many young wannabe entrepreneurs out there have fantastic ideas but have not put a dime in it to actualize their ideas. All they do is peddle around PowerPoint presentations.

There’s a misguided notion with entrepreneurs that we’ve got some wealthy dudes out there with so much money and waiting on the table to splash it to whoever comes along with some fancy ideas. The wealthy investors are extremely frugal. Extremely cautious with how they spend their money. Ask me. I once went with one of our investors within the streets of Nairobi to look for a Forex Bureau where he could change some dollars into KES. We moved in and out of shops looking for the best deals. After the 5th Bureau, we decided to go back to the first one as they were buying USD one KES more that the rest. When we got there, my friend took out a 20 Dollar note. So, all the shopping we were doing was for the 20 dollars? Even after transacting, he kept asking me, ‘Are you sure we got the best deal?’ This is a guy who is heavily invested in Middle East and Asia. This is how they behave. 

So, don’t you think that you’ll sit with them in a coffee house and they just pay for your bills. Wrong.

I have had a privilege of being invited to speak to entrepreneurs on few occasions. One questions that always comes up is a questions of funding.

_How do I get funding for my business?

Well, no normal thinking investor will fund an idea. Drill that in your head. And if you put your idea in any of those online platforms and you get a curiously zealous ‘investor’ sending you emails, it’s very possible it’s one of those Nigerian Yahoo boys. I have had a face-to-face experience with one. If you have an idea that you think is great, put your time and money on it. Put your soul into your idea. It’s responsibility by risk. When you’ve put own money into it, you’ve got a stake. You’ve put something in the line of loss should things not straighten up. Putting money in your idea also shows that you believe in it. Your belief and faith in your idea is one of the greatest foundations of success not the amount of dollars you get from investors. Investors gain more confidence in you if they realize that you’ve got confidence in your business.

Investors like startups that is already in operation and has numbers as a proof of concept. So you have to bootstrap your way. And the rule has always been: START SMALL. START NOW. START WITH WHATEVER YOU HAVE IN YOUR HANDS.

Back to the question of funding…

My answer has always been consistent. If you can, avoid selling your ideas to investors. Some of the investors are smart chaps. They will take your idea and implement without you. You’re sharing the blueprints and details with everyone whom you come across? Well, soon you’ll be talking to your friends, “You see that idea so and so are implementing? That was my idea”. Sad part is that no one will believe you. 

Two, bootstrap your startup and refrain from investors as much as you can until that time when you feel you need them to scale up, but also not so desperate. The worst point to board investors is when your cash flow is weak and you feel investors are the only savior. They will invest yes, but on the flipside, you run the risk of being invested out of the business. Most investors, given an opportunity are so hostile. They will take over your business and kick you out. I have read and listened to enough stories of really brilliant entrepreneurs who were kicked out of their own businesses. A good example is Steve Jobs, Founder of Apple Inc. He had been kicked out of the company that he founded. He only managed a comeback when NeXT (a company he founded after being shown the door at Apple) was bought by Apple in a strange turn of events and he made a miraculous comeback as a CEO. Recently I listened Munyaradzi Gwatidzo, a Zimbabwean entrepreneur, narrate how he lost two businesses to clever investors. In one of them, he was called to the boardroom and given an offer letter. He was to be an employee from that time on or he’ll be kicked out. How do you get an offer letter and become an employee in a company you solely founded? 

If you think am cooking stories, then you’ve not done enough research. Inviting investors when you’ve not created substantial value to your startup will make you a weak partner at the bargaining table. Worse case is when your business is in distress. 

Seek investor funding when you’re sure that your business is on upward path and want to scale up. Not to cushion you against cash flow distress. And don’t do it desperately. This will give you bargaining power at the transaction table with your would-be investors.

WHAT ABOUT A LOAN?

A commercial loan is a big NO when you want to invest in an idea. It’s also advised that you should not take a loan when your business is broke. 

If you’ve got an idea worth it, you’ve got to bootstrap or get a soft, non-commercial funding that does not come with prohibitive and expensive financing cost or one that puts your business in the path of auctioneers. Investing your money in your idea or startup shows that you’ve got tangible investment in it and therefore you’ll have your heart at it.

Finally, my message for 2019:

(a) Let’s all put down some resources and time to work out on our ideas so that we have something tangible to show for it. Always remember that if you’ve not invested any money and/or time in your idea, don’t expect anything from it. 

(b) Keep your ideas a SECRET.

HELLO 2019!