1 00:00:00,840 --> 00:00:03,520 Speaker 1: The Money Shows some business focus. 2 00:00:04,640 --> 00:00:07,520 Speaker 2: You will often hear conversations on The Money Show in 3 00:00:07,560 --> 00:00:11,159 Speaker 2: small business focus about funding, about borrowing money, about what 4 00:00:11,360 --> 00:00:15,000 Speaker 2: funding is available. So Colobo Ubert, there's a co founder 5 00:00:15,000 --> 00:00:18,720 Speaker 2: and MD of Perpetuate. It's an SEME strategy implementation and 6 00:00:18,800 --> 00:00:24,040 Speaker 2: fundraising consultancy. How's it some Koba. You're a bit concerned 7 00:00:24,079 --> 00:00:27,120 Speaker 2: that sometimes this can be a bit of a funding 8 00:00:27,240 --> 00:00:32,400 Speaker 2: trap and you really need to make sure that there's 9 00:00:32,400 --> 00:00:35,120 Speaker 2: a moment where you can exit, that it's logical. Are 10 00:00:35,159 --> 00:00:36,479 Speaker 2: there a lot of those opportunities? 11 00:00:38,920 --> 00:00:41,080 Speaker 1: Evening, Stephen, thank you so much for having me on 12 00:00:41,120 --> 00:00:44,360 Speaker 1: the show as usual. I really appreciate it. So yeah, 13 00:00:44,400 --> 00:00:47,760 Speaker 1: I think I think there's so much talk about sames 14 00:00:47,840 --> 00:00:51,280 Speaker 1: raising funding that I think it just becomes an automatic 15 00:00:51,840 --> 00:00:54,760 Speaker 1: go to thing to do for founders, and I think 16 00:00:55,120 --> 00:00:58,360 Speaker 1: more and more I'm interacting with founders who are questioning 17 00:00:58,880 --> 00:01:01,640 Speaker 1: kind of is this right move? And I really think 18 00:01:01,640 --> 00:01:04,920 Speaker 1: it is around that exit conversation. It's a function of 19 00:01:05,080 --> 00:01:07,280 Speaker 1: as a founder, what it is are you building and 20 00:01:07,360 --> 00:01:10,600 Speaker 1: what is your long term plan? Are you building something 21 00:01:10,600 --> 00:01:13,640 Speaker 1: in order just to exit make ten x multiple on 22 00:01:13,720 --> 00:01:17,720 Speaker 1: it and effectively you know, go back to a early 23 00:01:17,760 --> 00:01:20,600 Speaker 1: retirement or whatever the story is, or are you actually 24 00:01:20,640 --> 00:01:23,559 Speaker 1: building something that you plan to continue running and create 25 00:01:23,600 --> 00:01:26,920 Speaker 1: an enterprise. And what we're finding is that it's very 26 00:01:26,959 --> 00:01:30,000 Speaker 1: different than the African continent compared to the US. In 27 00:01:30,080 --> 00:01:33,720 Speaker 1: the US, exits are many right, and the biggest part 28 00:01:33,760 --> 00:01:37,200 Speaker 1: of that exit market is effectively IPOs or being able 29 00:01:37,280 --> 00:01:40,360 Speaker 1: to list your business and actually continue to hold a 30 00:01:40,440 --> 00:01:44,760 Speaker 1: share a share shares in that business so that as 31 00:01:44,800 --> 00:01:48,000 Speaker 1: the share price grows, like the Mark Zuckerbergs of the world, 32 00:01:48,400 --> 00:01:53,200 Speaker 1: their net worth actually continues to increase. On the African continent, 33 00:01:53,280 --> 00:01:56,639 Speaker 1: we don't have a lot of IPO paths as an exit, 34 00:01:56,720 --> 00:01:59,280 Speaker 1: So what often is happening to founders is that they're 35 00:01:59,440 --> 00:02:04,200 Speaker 1: raising money, especially mature money like VC money, private equity money, 36 00:02:04,400 --> 00:02:06,800 Speaker 1: and all it means is that they gradually decrease and 37 00:02:06,880 --> 00:02:10,560 Speaker 1: decrease and decrease their equity portion of the business. And 38 00:02:10,680 --> 00:02:13,400 Speaker 1: if they eventually find an exit, which on the continent 39 00:02:13,480 --> 00:02:18,480 Speaker 1: is actually often rather or floaded to another investor or, 40 00:02:18,520 --> 00:02:21,720 Speaker 1: you actually are exiting through selling your business to a 41 00:02:21,800 --> 00:02:24,520 Speaker 1: large corporate that kind of puts you in for a 42 00:02:24,600 --> 00:02:27,760 Speaker 1: three year or so on safe handover a set of 43 00:02:27,800 --> 00:02:30,160 Speaker 1: time and kind of a check at the end of that, 44 00:02:30,280 --> 00:02:33,040 Speaker 1: and many founders don't actually continue to be part of 45 00:02:33,080 --> 00:02:35,720 Speaker 1: the business beyond that period. And I think that's what's 46 00:02:35,720 --> 00:02:38,880 Speaker 1: forcing this conversation and reflection around is it a trap, 47 00:02:39,160 --> 00:02:41,639 Speaker 1: because it is a trap if that's not the outcome 48 00:02:41,720 --> 00:02:44,280 Speaker 1: that you were initially chasing. And I think that it 49 00:02:44,360 --> 00:02:46,280 Speaker 1: is something that founders need to be a lot more 50 00:02:46,280 --> 00:02:47,560 Speaker 1: discerning about. 51 00:02:47,840 --> 00:02:50,720 Speaker 2: So, I mean, there are a lot of funding readiness programs, 52 00:02:50,800 --> 00:02:54,799 Speaker 2: but do they always result in funding sometimes? I mean 53 00:02:54,960 --> 00:02:57,000 Speaker 2: lots of people will advertise, you know, apply to us 54 00:02:57,040 --> 00:02:59,320 Speaker 2: for money, it doesn't always seem to end up with 55 00:02:59,360 --> 00:03:00,760 Speaker 2: actual fund at the end of it. 56 00:03:03,080 --> 00:03:06,800 Speaker 1: I think, unfortunately not. I think unfortunately, a lot of 57 00:03:06,840 --> 00:03:12,360 Speaker 1: funding readiness programs and funding readiness boot camps and funding 58 00:03:12,400 --> 00:03:18,880 Speaker 1: readiness you know workshops and webinars or even kind of 59 00:03:19,000 --> 00:03:22,160 Speaker 1: let's do a you know, specific program and intervention in 60 00:03:22,200 --> 00:03:25,240 Speaker 1: your business for funding readiness, I think sadly, most of 61 00:03:25,280 --> 00:03:27,840 Speaker 1: the time it doesn't land up in funding. And I 62 00:03:27,880 --> 00:03:30,359 Speaker 1: think part of the challenge there is that you've got 63 00:03:30,400 --> 00:03:36,120 Speaker 1: almost very siloed institutions assisting the SME. The organization that 64 00:03:36,160 --> 00:03:39,400 Speaker 1: gets involved with assisting to get the business funding ready 65 00:03:39,800 --> 00:03:42,960 Speaker 1: is oftentimes kind of playing in the est space or 66 00:03:42,960 --> 00:03:46,520 Speaker 1: in the consulting space, and then you've got the funder ecosystem, 67 00:03:46,560 --> 00:03:50,280 Speaker 1: which sits kind of in its own silo. Very rarely 68 00:03:50,320 --> 00:03:55,120 Speaker 1: are you seeing deep entrenched relationships and overlaps between those 69 00:03:55,120 --> 00:03:58,600 Speaker 1: two ecosystems. And one would argue that that overlap and 70 00:03:58,640 --> 00:04:02,520 Speaker 1: that collaboration is actually going to unlock true funding and 71 00:04:02,640 --> 00:04:06,000 Speaker 1: reduce the amount of time that passes between a funding 72 00:04:06,040 --> 00:04:09,240 Speaker 1: readiness program and actually being able to unlock funding. 73 00:04:10,080 --> 00:04:15,160 Speaker 2: So, I mean, I suppose when you at the earlier stages, 74 00:04:15,240 --> 00:04:17,880 Speaker 2: grant and debt funding would make a lot more sense 75 00:04:18,000 --> 00:04:20,680 Speaker 2: to go to a business than it might towards the end. 76 00:04:20,720 --> 00:04:22,440 Speaker 2: I mean, you can get can you get trapped in 77 00:04:22,480 --> 00:04:24,480 Speaker 2: a sort of funding cycle in some ways if you're 78 00:04:24,480 --> 00:04:24,960 Speaker 2: not careful. 79 00:04:27,080 --> 00:04:29,400 Speaker 1: So I do think that at early stages, you know, 80 00:04:29,480 --> 00:04:32,200 Speaker 1: at the beginning, you're bootstrapping as much as you can, 81 00:04:32,240 --> 00:04:34,480 Speaker 1: and there is a limit to that. There is you're 82 00:04:34,480 --> 00:04:38,159 Speaker 1: getting money from friends, family and fools, and they also 83 00:04:38,200 --> 00:04:40,360 Speaker 1: is a limit to that. And at a certain point, 84 00:04:40,480 --> 00:04:43,480 Speaker 1: kind of grant money that is readily available makes sense 85 00:04:43,760 --> 00:04:46,839 Speaker 1: at certain times, kind of you know, debt funding that 86 00:04:47,000 --> 00:04:50,640 Speaker 1: is at preferential rate makes sense, but you need to 87 00:04:50,680 --> 00:04:53,200 Speaker 1: make sure that as you unlock, especially debt funding, that 88 00:04:53,320 --> 00:04:56,400 Speaker 1: you actually have a business that has a turnover that 89 00:04:56,640 --> 00:04:59,719 Speaker 1: can service that debt. I see a lot of businesses 90 00:04:59,760 --> 00:05:03,200 Speaker 1: in f founders opt into funding from a debt perspective 91 00:05:03,480 --> 00:05:07,080 Speaker 1: with kind of an interest free or repayment holiday of 92 00:05:07,160 --> 00:05:10,480 Speaker 1: the number of years, and they're not clear that after 93 00:05:10,520 --> 00:05:13,600 Speaker 1: that repayment holiday they will actually be able to service 94 00:05:13,640 --> 00:05:16,760 Speaker 1: the debt and actually repay that capital. So I do 95 00:05:16,800 --> 00:05:19,560 Speaker 1: think that there are reasons why it makes sense at 96 00:05:19,560 --> 00:05:22,120 Speaker 1: the early stages, but I think as you move into 97 00:05:22,200 --> 00:05:25,760 Speaker 1: kind of more mature funding such as VC funding or 98 00:05:25,839 --> 00:05:29,440 Speaker 1: bank funding, it really can become a trap. I see 99 00:05:30,040 --> 00:05:33,000 Speaker 1: examples of businesses that have been going for twelve years. 100 00:05:33,440 --> 00:05:37,120 Speaker 1: The business technically sounds amazing, looks great on paper, but 101 00:05:37,560 --> 00:05:40,520 Speaker 1: the business is actually in this funding cycle or trap 102 00:05:40,560 --> 00:05:43,719 Speaker 1: where they actually have not broken even they are actually 103 00:05:43,760 --> 00:05:46,960 Speaker 1: not profitable. And what generally happens is just before they 104 00:05:47,040 --> 00:05:49,760 Speaker 1: run out of runway, they go in and raise more 105 00:05:49,800 --> 00:05:54,159 Speaker 1: funding and talk about further geographic expansion, and that cycle 106 00:05:54,360 --> 00:05:56,719 Speaker 1: just continues, and what it means is that you're just 107 00:05:56,760 --> 00:05:59,839 Speaker 1: getting more and more and more kind of investors into 108 00:05:59,839 --> 00:06:03,120 Speaker 1: your business, taking equity in the business, and if ever 109 00:06:03,240 --> 00:06:06,440 Speaker 1: that funding line stops, as we saw around kind of 110 00:06:06,480 --> 00:06:09,760 Speaker 1: COVID on the African continent, when that funding line stops, 111 00:06:09,920 --> 00:06:13,560 Speaker 1: a number of startups and ventures actually fall over because 112 00:06:13,600 --> 00:06:15,920 Speaker 1: they actually were not washing their face. 113 00:06:17,320 --> 00:06:20,640 Speaker 2: So I mean, what exits really exist then for founders? 114 00:06:20,720 --> 00:06:24,000 Speaker 2: I mean, how do you make that ensure that that 115 00:06:24,040 --> 00:06:26,160 Speaker 2: creates wealth creation for founders? 116 00:06:27,920 --> 00:06:31,960 Speaker 1: And I think that's the reality. I think, I'm going 117 00:06:32,040 --> 00:06:34,560 Speaker 1: to be honest, I think the amount of exits that 118 00:06:34,640 --> 00:06:39,440 Speaker 1: exists are limited. Effectively, what we find as common exits 119 00:06:39,560 --> 00:06:43,120 Speaker 1: is you know, ending up going from VC to private 120 00:06:43,120 --> 00:06:47,719 Speaker 1: equity or into some sort of debt instrument into a 121 00:06:47,760 --> 00:06:51,800 Speaker 1: commercial bank, or you'll find that kind of family offices 122 00:06:51,880 --> 00:06:54,800 Speaker 1: are effectively buying a stake in your business, or like 123 00:06:54,839 --> 00:06:57,760 Speaker 1: I mentioned earlier, kind of corporates are buying a stake 124 00:06:57,800 --> 00:07:01,160 Speaker 1: in your business through corporate venture cap all all corporates 125 00:07:01,160 --> 00:07:05,320 Speaker 1: are actually driving an M and A strategy, or rather 126 00:07:05,440 --> 00:07:08,160 Speaker 1: an acquisition strategy of your startup, and kind of that's 127 00:07:08,160 --> 00:07:11,240 Speaker 1: the exit. I think it's important that one is very 128 00:07:11,280 --> 00:07:14,800 Speaker 1: clear as a founder on what their long term game 129 00:07:14,960 --> 00:07:18,000 Speaker 1: is if it is wealth creation. I do think that 130 00:07:18,320 --> 00:07:21,120 Speaker 1: one then really does need to think about when to 131 00:07:21,320 --> 00:07:25,480 Speaker 1: stop taking the funding drug and actually make sure that 132 00:07:25,520 --> 00:07:28,680 Speaker 1: the funding they've received to that point in time is 133 00:07:28,720 --> 00:07:31,239 Speaker 1: funding that they're using to make sure that they've actually 134 00:07:31,320 --> 00:07:34,960 Speaker 1: got a viable business that's broken even and is profitable 135 00:07:35,240 --> 00:07:38,720 Speaker 1: and actually will not need massive funding going forward, and 136 00:07:38,760 --> 00:07:41,320 Speaker 1: if they do, it's actually commercial funding that they can 137 00:07:41,360 --> 00:07:45,160 Speaker 1: repay without needing to continue to give away equity in 138 00:07:45,200 --> 00:07:48,800 Speaker 1: the business in order to continue down the path of growth. 139 00:07:49,080 --> 00:07:51,680 Speaker 2: Some Corbet, thanks so much. Some Corba. Ulbert is the 140 00:07:51,680 --> 00:07:55,280 Speaker 2: co founder in MDA Perpetuating It's Any Strategy, Implementation and 141 00:07:55,320 --> 00:07:56,680 Speaker 2: Fundraising consultancy