Today I spent my lunchtime at one branch of the largest asset management companies in Africa. They were my stockbrokers in my teens and you could say they still are my stockbrokers because I don’t buy shares for speculative purposes.
Today my visit was different. I wasn’t buying or selling shares. I had gone there to discuss funding, specifically a private placement for Prosper on Farms. A private placement involves raising capital from private investors privately. I know the firm can do it because they were involved in the listing of a number of companies on the stock exchange. They also have offices in South Africa, Zimbabwe, and well, London, we don’t call it the UK. LOL
Anyway, they told me that they only focus on deals worth US$5 million and above. Good for Prosper on Farms’ farmers right? LOL
For global readers of this post, the firm I am talking about is more of a Morgan Stanley or a Goldman Sachs than a venture capital firm, except that it is in Africa.
By the time I left I was of the opinion that Prosper on Farms will have to raise funds from the London Stock Exchange (AIM). It was actually my idea and it comes from years of reading and actually investing on the stock market.
But what I will tell you right now is that as great a company the stockbroking firm or asset management company is (they do all sorts of financial things)… the company is just a copy-and-paste of the UK way of doing things. If you ever read the US venture capitalist Bill Draper’s book on venture capital (The Startup Game: Inside The Partnership Between Venture Capitalists and Entrepreneurs) and how he funded companies in the US… that is not how this company does it.
The investment company I visited wants your startup to be worth US$200 million when you come to them for US$5 million.
The US$200 million is my idea but you get the point. The only money for startups in Africa is for fintech (financial technology) not irrigation.
Oh yes, we did even talk about the funding of Facebook and others. It wasn’t me who started on that road.
Let me save you your time. The truth is, given the chance to go back in time, the investment company would not invest in dorm-room Facebook. Their way of doing things and style is Orthodox Oxford, Cambridge would be a lot better. Oxford! It is not American or Silicon Valley-style. If Mark Zuckerberg went to them, with dorm-room Facebook, they would only want to invest valuing the company on assets, computers, yet Facebook was on paid hosting and Mark Zuckerberg only had a laptop. They would not invest in Facebook’s growth potential.
Oh yeah, one of the things they said was they would want to look at the team to see if the team is capable of using the money in a way that investors will not lose their money. LOL. I mean, come on! I have a great and capable team, but think about this for a minute. Facebook had university students as the founders, that is all there was when they started and it was up and running at Harvard.
I told you these guys are Orthodox Oxford.
No offence but, name one world-changing startup from Oxford? Just one, that you use every day or whose products you use every day. Just one, not two. One. Excluding books that most investment managers in the English-speaking world, especially former colonies, will read and be influenced by to be afraid to take risks. I don’t know any. Maybe it is because I didn’t go to Oxford.
Cambridge at least has ARM (mobile phone chips) and others. The investment firm would never have been an early investor in Facebook. To invest in Facebook when it was still operating out of a dorm room, they would have wanted the team to be maybe full of managers from Intel and Procter and Gamble, – or even better, be former Friendster or MySpace employees who have social network industry experience – before they could be convinced to invest US$5 million.
Like I told you, they are my stockbrokers. I know the companies they floated or listed on the stock exchange. Banks, and companies that sell things, old companies, not startups, and when they were doing that they were sponsors and underwriters (financiers). If you look at the Zimbabwe Stock Exchange, there is probably just one tech company there. The rest of the companies are service and manufacturing companies.
In that meeting I was even told that, oh, actually, it was put to me like this – name one US startup that is profitable? Then I was told that Tesla is not profitable, and Uber too. So, you can see what I was dealing with. Maybe all those people putting money in Uber and Tesla are not very clever hey. LOL
I mean, there was a time when Amazon was making losses, for years, and then it started to make profits. Uber recently made a profit. I admit I don’t follow news about Tesla much.
The mindset of most investment companies in Africa is really orthodox, like Oxford Orthodox, and it follows the Oxford tradition.
What a lot of investment managers educated in former UK colonies will tell you is exactly how investment managers in the UK are trained to invest, Oxford-style, and that is the reason why you find UK startups complaining that UK startups are not even supported by UK venture capital companies that they say are very risk averse compared to US venture capital companies. It is also the same reason why an investment manager trained in a former British colony will fit in right at home in the UK. They will all speak the same investment language in the office.
When I got home, and I was reflecting on that meeting, and how Mark Zuckerberg raised funding for Facebook, I just said to myself every entrepreneur needs a Sean Parker. Yes, I know Eduardo Saverin invested his money in Facebook before Sean Parker, but it was Sean Parker who really drove the fundraising for Facebook.
The guy who funded Apple, the very first investor, was funding 20-somethings.
I get it, sometimes job security concerns can make you not take that risk with investor’ money.
A fun story I will tell you right now is something that Strive Masiyiwa once said. At least, starting from Zimbabwe, his company invested over US$1 billion into Zimbabwe over 10 years.
Masiyiwa, who is now a billionaire, said when he was starting Econet, and he was looking for capital, he went to the bankers and he said he needs like US$10 million. The bankers then said why don’t you start small, maybe with one base station. LOL
(That is also what the investment company said to me. I wanted to tell them about Masiyiwa’s experience then I decided not to because it would then take me a lot of time trying to make the investment company understand that one base station does not a mobile network make.)
Masiyiwa said the banks did not even understand how a mobile network works. LOL. Maybe the bankers expected one transmitter to cover 1000km.
You can literally see the difference from US venture capital or Silicon Valley investors. When US venture capital invests in Uber or AirBnB when they are just pitchdecks, the founders and investors are literally bent on building a massive institution from day one and within the shortest time possible.
The bankers and investors of the Oxford tradition, – the Oxford tradition which is now the DNA of the investment tradition of former British colonies in Africa -, on the other hand, want you to start with one base station or one borehole or one farm, and then gradually and painstakingly slowly give you loans or funds to also grow slowly and maybe – but surely.
I will call it the Oxford method.
If you are intent on increasing irrigation penetration in Africa from 6% to 50% of the cultivated irrigable land, you will take 473 years to achieve that goal using the Oxford method.
Using the US venture capital method, you could achieve that goal in less than 10 years, in your lifetime, at the very least.
LOL. Whether we prosper or we fail, I am going to have lots of stories to tell.
May you prosper.