Top 10 Failures Expat Entrepreneurs make in East Africa
This is the first post by Malaika Judd, Mzungu Principal and Mentor
A recent weekend white water rafting trip resulting in raft flips, lost paddles, popped shoulder, painful sunburns, and miserably failed sing-a-longs in Kiswahili led us to hashtag #MzunguFail to all our classic Mzungu (foreign person) mistakes on the river. This blogpost is the outcome of a Nile inspired #MzunguFail brainstorm about our experience with expat led startups.
At Savannah Fund we focus on startups actively operating in Africa and find local and expat founders often run their operations so differently that they naturally categorize themselves into different pools. Expat entrepreneurs need to realize This Is Africa (#TIA) and not London, NYC, or SF.
The following is a list of the top 10+ #MzunguFails we’ve seen over the past year:
1) High Burn Rate. Yes that means you’ll have to cut your salary. And probably much more than you’re expecting. In our portfolio startups, salaries range between $300 – $1000/month. While we’ve seen lots of expats that decide not to pay themselves at all, those that are paying themselves a salary start at $1500/month. Most of the time it’s much higher. Several expats are taking home $4000/month. That’s not competitive. #TIA
2) Sitting in the US, UK, or anywhere other than where the startup is focused. It’s time you realize that if you want to understand your market, move faster on the ground, build traction, invest in a network, and recruit locally, you’ll have to finally move yourself to the region. Too many times we see teams from the West Coast running a social impact startup in Africa and sitting comfortably in the USA. Not only is it a problem for your burn rate, It’s also a signaling problem. How invested are you into your startup if you’re sitting in another country? We see your comfortable life in SF as a sign that you don’t care enough about what you’re doing to make the personal sacrifice. We’re in the business of investing in founders that live and breathe their work. Can you invest 120% from a continent away with an 11 hour time difference?
3) No Co-Founder. Don’t be too proud to think you can do it on your own. Even the best need help. Would you be running your company on your own if you were based in London, NYC, or SF? Don’t be afraid to share some of the power. Having a co-founder will let you focus on your stronger skills, split workloads, collaborate, and keep your irrational power trips in check. We recently watched a company fall apart because its founder refused to delegate major decisions to the experts. Just because you started the company and sit at the top doesn’t mean you’re the expert.
4) No local Co-Founder. While having any Co-Founder can help with the workload, crucial decisions, etc. there are several added benefits to having a local Co-Founder (or C-level exec).
Network & Connections: Never underestimate the benefit of the local network. Especially when it comes to dealing with government regulations, partners, and bureaucrats. Having that family friend of a friend of a friend always helps.
Culture: Do I even have to explain this one? How to behave in a meeting. How to appeal to a client. How to relate to family or religious issues. The list continues. Whether it’s dealing with new potential business clients or managing a team of local employees, it’s important to understand cultural context inside and out.
The ‘Bar’: While the ‘bar’ to invest is consistent across all startups, there is a common argument that a local founder has to jump through more hoops to get where he is than an expat, thus he must be more motivated than his competitor.
Press: The press loves the successful African startup story. Unfortunately they only report if the founder is ‘local’. Thus consider the benefits of having the picture perfect African startup story. It carries more weight and sway than one might expect.
Funding: Similar to the press story, many grants and foundations are limited to local entrepreneurs. An expat living in Africa often doesn’t qualify.
5) Staying inside the expat bubble. Following on the last point – too many times you find expats that only live and interact with other expats on a daily basis. While the expat network is great for business advice, support, cultural connections, and collaboration, not venturing outside that network can be very limiting to your business. For example, we are approached on a weekly basis asking for help with hiring good local talent. Build your own local network. Easiest way to hire good local talent is through your connections!
6) Using fancy first-world tech. First of all, be prepared for your iPhone and MacBook Air to be stolen. If you can’t afford to replace these tools regularly, then you should be downgrading to a more affordable solution. Mzungus are prime target for robberies. Understand this and take precautions. Secondly, understanding your target audience means acting like one of your own customers. If that means using a basic feature phone, switching to an Android or Windows platform, or adjusting to mobile money such as M-Pesa, than do it.
7) Not using your own product. If you are trying to solve the payment model on matatu buses with a top-up card (think Clipper Card or Oyster Card for local minibuses), I sure hope you’re taking a matatu on a regular basis. Yes, matatus are hot, sweaty, overcrowded, and very loud, but that’s no excuse for you to take a taxi. Live and breath your own product.
8) Too good for accelerators. We have expats coming to us for funding all the time. When we recommend they apply to our accelerator program, they back off. Expats often overvalue their work and rate themselves better, further, more educated, etc. than the rest of the competition. Are they beyond the Accelerator? Have you run a startup before? Successfully? If not, what makes you more advanced than any other local first-time entrepreneur? Its important to remember that the Accelerator program is not just soft-skills business training but also key Mentor sessions, connections to Advisors, brand awareness, and investor introductions.
9) The 2 year plan before an MBA. Building a successful startup is a long term play. Don’t expect to build something, see significant growth, and sell within your ‘two years abroad” stint. Come and commit. This is not a checklist for your CV. Two years in Africa? Check. Development work? Check. Run your own startup? Check. Climb Kilimanjaro? Check. When we look to invest, we’re looking for commitment. Not the person trying to figure out how to get into an MBA program.
10) Pitch it as a Social Enterprise – just because it’s Africa. Yes, running a social enterprise opens doors for grants and foundation funding, but it also triggers alert signals to other major investors. Are you really trying to solve a serious BoP problem, or do you think that sneaking in the buzz words like Social Enterprise and Impact will attract more investors? The truth is, we are in the business of investing in high growth, for-profit companies. While we love that you’re helping the BoP, we really care about high margins, exponential growth, quick expansion, and clear motives.
++) Not learning Swahili. This is where I’m going to call myself out. I moved out to Kenya in May and my Kiswahili vocabulary is still limited to the lyrics of a popular song for expats – Jambo Bwana. Speaking the local dialect helps to build connections with your local team, is an easy win with local business partners and basic negotiations, is a signal of your commitment to the region, and a no brainer if you’re looking for an added level of personal security. My New Year’s resolution for 2014: start Kiswahili classes.
Before I wrap up this post, I want to articulate my appreciation to all the expats in Africa building a business. Starting a company isn’t easy. Starting one in Africa is 10x harder. The list of #MzunguFailures above is not a ‘fix or fail’ list. These are basic behavior mistakes that may end up holding a business back. That said, if you’re serious… it’s time to re-read this list above and see what New Year’s Resolutions you should be making for you and your business in 2014.