08/03/2019
If you have an idea, get started (Part 2)
__You need a co-founder.
In my last post, in which I talked about what you need to do when you have an idea, I said, “You must be honest in assessing your own capability, as well as weaknesses”... When I started Econet in 1993, I had already been in business for six years. I was running a successful engineering construction company, then I had this brilliant idea after learning about a new technology called GSM...
Every day after hours, I would read sometimes until 3am, doing research on this new industry. There was no Internet at the time so I could not do a “Google search”. I also travelled to trade shows to learn more. I was convinced this was the future.
Next I began to work on a business plan. It showed me that I would need US$10m. This was like a billion dollars in those days for someone in my position. The most I had ever raised was $300,000! When I talked to guys at the bank, they started using banking terminology I had never heard before!
It was beginning to sound like I was out of my league.
“You need about $5m in equity, and as the business grows, you will need even more equity. You are going to be diluted to maybe 5% or less, by the time this is off the ground,” a banker friend explained.
Yes, I had six years of experience. Yes, I had 700 employees in my existing business, and had already won both "Businessman of The Year," and "Industrialist of the Year" awards (the country’s highest awards for business), but I knew, listening to the advisors, that I did not have the capability, YET, to raise this kind of money.
__Next: I needed to find someone to advise me who had experience in raising big money.
My research turned to looking for the type of people who had the experience...
I approached the only banker I knew with this type of international exposure. He worked for one of the international banks. I was excited when my research showed me he had a degree in physics. That is how detailed I was in my research!
I made a very technical pitch to him, and he was excited.
“We will act as your advisors,” he agreed.
They were not cheap, but I knew it would add to my credibility, so I signed their mandate.
__Next: I knew my company accountant would not be able to handle this.
“We need someone on your team who understands Project Finance. This business of yours will need continuous financing.”
I started to search for someone who had banking experience.
“I want to hire a banker, as Finance Director,” I told a friend.
“Why would a banker want to come and work for you?" my friend asked. "They are highly paid!”
Then I heard that there was a banker who had just returned to the country and was looking to start his own bank... (This reminds me of a conversation I heard between PayPal co-founder, Peter Thiel and LinkedIn co-founder Reid Hoffman on one of his "Masters of Scale" podcasts. I really urge you to look up!)
This is what I said to Jeff Mzwimbi:
“Come and work with me for a few years. I will teach you how to be an entrepreneur, and you can teach me how to raise Project Finance.”
“I don’t really want to work for someone,” he protested.
“It’s not a job. You can be my partner," I said. "Free equity, 10%. You can leave as soon as the business is up and running.”
Initially, he agreed to come as my advisor to meetings with the banks. But after a few weeks, he was hooked!
Soon he took over all discussions with banks and financing partners. I returned to being an engineer, and Chief Entrepreneur!
We would be together for several years, and true to our agreement, when the company listed in 1998, he left to go and start his own business. I headed to South Africa for the next stage in my journey:
Continental expansion!
Lessons:
Notice how I addressed the problem of raising capital:
__I focused on getting knowledge. My own capability was being the "ideas guy" who had an engineering background. But I had a weakness: I did not know how to raise the kind of money needed to build a business.
How about you?
__What weaknesses do you have that needs to be addressed before you can move to the next level, and what are you willing to pay to deal with it?
Despite his extraordinary genius, Bill Gates needed co-founder Paul Allen and CEO Steve Balmer; Mark Zuckerberg needed COO Sheryl Sandberg; Larry Page needed co-founder Sergey Brin, and soon they both realized they needed CEO Eric Schmidt. The list is endless!
They are called “co-founders”! Some venture capital investors will not even consider investing in you, if they don’t see your co-founder. The co-founder is there to take risk with you, share your vision and also to plug a gap in one of the 3Ps! The best co-founder is not an employee, but an entrepreneur themselves.
__Sometimes they are looking to launch their own ventures but also recognize their own weaknesses which can only be solved by becoming someone else’s co-founder.
Some of you are trying to find some big company or established Big Man, when what you need right now is a co-founder!!
Let me close with this secret:
Some of you have been on this platform for as long as five years. By now you should already have used this platform to reach out to potential co-founders of your venture.
END.
Image caption: Google co-founders Larry Page and Sergey Brin at the Frankfurt Book Fair in 2004.
