SAAS: Stealing As A Service
A few lessons to learn from recent events
A few weeks ago when the Payday story broke out, I was ready to jump on my laptop and start writing about the similarities between the founder Favour Ori, and my favourite founder, Adam Neumann. I even planned to call it “WeCursed” (WeJapa and Wework, get it?). But I forgot to do so, and the opportunity passed, or so I thought…
Another story was recently published about a founder with a great idea, who raised money for it and then squandered it. This time, the story was about Prince Boakye Boampong, founder and ex-CEO of Dash, who took $86.1 million of investors' money as “dash” and ended up shutting down operations within 5 years.
“How?!” One might ask incredulously. Is this a thing? Raising large sums and losing it within such a short time? To be fair, this isn’t a startup-related problem, every sector has its own share of bad actors, and I think it’s worth noting that not all startups that fail did so because of mismanagement, this thread by Uncle Tunde properly elucidates the reasons for startup failures. I have found that in these two (and a few other) examples, the founders have made a couple of wrong turns, which I’ll try to share here:
Preaching to the wrong choir
The main reason why human beings die is that they stop breathing. The main reason why companies die is that they stop bringing in money (inflows). It’s very simple. The hard part is knowing where to get the money from. These founders chose investor funds as their major source of revenue. And they aren’t wrong to do that technically, because they are startups, companies that approach business with a growth/scalability model.
The insistence on inorganic growth is becoming something else, we see these founders scramble for customer growth with very expensive growth marketing strategies (like Payday), or even cooking up growth numbers (Boampong disclosed that his company had processed $1 billion worth of payments and had over 1 million customers-all lies of course), while forgetting to get the customers to pay for the product. Being spoonfed by investors can make the founder forget who the solution is for.
My favourite movie of all time, ‘The Fault in Our Stars’ has a line that I love: “As he read, I fell in love the way you fall asleep: slowly, and then all at once”. And while I think it is the best description of falling in love ever, I also think it applies to everything, including growth. Let’s take my beard for example (yes ladies, I’m fully bearded. Please DM), it started from a bare chin in my SS3, to a single strand sometime after graduation, to wisps of hair in my first year in uni, and now I can’t even remember what I looked like without a beard. I think all growth should be like this; find that product market fit (PMF), attend to that market, grow it organically for a while, and then, when you are sure that you have a base, begin your aggressive expansion. I know it stands against everything startups stand for, but sometimes taking it slow leads to the best rewards.
They say salaries are a bribe to forget your dreams
These founders must have had some expensive dreams. Because Boampong was taking $50,000 home monthly! Favour was earning $15,000 too, and is reportedly still gainfully employed by Github. Both companies were not even churning out profits, they just raised money and the founders thought they deserved their payday there and then. But what happened to planning a proper exit? The plan is supposed to be to build a company that will render you unbelievably liquid when you exit.
Common person
Reading Olumide Soyombo’s book, Vantage, one sentence that grabbed my attention was: “It’s business, and it’s personal”, meaning that all our business dealings are with fellow human beings, and we should treat them as such. A beautiful thing about entrepreneurs is that they never stop having amazing ideas. Remember that Favour is on his second startup, both of which were wonderful solutions for payments across the world. Will he get an investor in the future to back his next big solution? Probably not.
I remember reading an article where Adia Sowho spoke about how ThriveAgric’s Co-founder and CEO, Uka Eke asked her to take over the reins of the company because they knew that the vision was bigger than them, their egos, and their paychecks. They had people and families depending on their idea. I will always applaud the team for being able to make that move.
Investors aren’t just bags, wallets, and chequebooks, they are human beings too, they worked for the money that was given to the founder, and they will feel the brunt of the loss too. The least a founder can do is to be accountable to them. It's common decency.
It’s a startup, not a strip club
This isn’t a founder-related problem per se, but it is a problem nonetheless. If you read Uncle Tunde’s thread, you’d note that many startups were given a lot of money some years ago because it was a bull period, economic prosperity was at a high and everyone wanted a piece of the tech action everywhere. So astronomical raises were happening. It was so crazy that Paystack made a $200m exit and people were saying it was too small (speaking of, Ezra Olubi of Paystack in all his liquidity takes home around $3,500 monthly).
Of course with all this money, only a highly disciplined founder wouldn’t make the mistake of squandering it. If you give me a pot of yam porridge, I will attempt to finish it in one sitting. So, many founders saw plenty of money and decided to either experiment or start getting paid as the case may be.
Perhaps another bull period will come upon us in our lifetime, and if it does, we should remember that we are not in a gentleman’s club, it is the investor’s responsibility to give responsibly. Don’t be greedy, it will rub off on the founders too.
In the end, founders should understand that they are not the company, they are not even the idea. They are just executing it. And no matter how great the idea is (both Payday and Dash were created to solve cross-border payment issues, which dare I say, is one of the biggest problems in the Fintech space), it will fail if not structured and managed properly. The goal is to build something that outlives you and your children.
It’s easy to be carried away with all these stories, and start looking for ways to malign startups. But these events are in no way indicative of the African startup space, we have startups of various levels of success that are grinding and doing the work required to create a more prosperous and successful Africa. Don’t let a few bad eggs ruin the basket.
What Have I Been Up To?
Nothing really, to be honest. The week has been so-so.
Found out about Hamas’ attack on Israel. Growing up, I was told to allow people who have problems with each other to fight it out, that they will be better for it. Seeing these decade-old wars re-emerge clearly nullifies that theory. Dialogue is the way, kids. Just to add, as a Christian who went to Sunday school as a child, my heart and prayers are with Israel. But, as someone who also read my Dad’s books about the treatment of Palestinians by Israeli troops and officials, I understand why Hamas became what they are. I pray that they find a lasting settlement.
I still roll with Sycamore. Check us out. We just might be what you’re searching for.
Today’s Newsletter is dedicated to Inx because she likes my beard.
Till next time guys.
Yours in unbelievable solidity,
The Juice.
Loved this! If you want a reminder of how you look without a beard, I have pictures. Might just release some throwback soon (with the right bribe, I wouldn't *wink*)
As always, thanks Juice.