💬 In this issue:
- Do Difficult Things: Investors value guts and drive as much as innovative ideas.
- The Art of Active Listening: Leaders who don't listen to feedback are more likely to fail.
- When The Going Gets Tough: Keeping investors in the loop could save your startup.
Last month, I asked an angel investor who had backed a founder whose venture had gone up in flames in the worst way possible why he invested in the founder. Given the stories making the rounds at the time about the founder’s character, it seemed to me that the angel investor shouldn’t have invested. ☕️
“In his first venture, which I funded, there were several times it looked like the company was going to die, but the founder kept it running for much longer than I thought possible,” the investor told me. He described several situations where the company had little or no runway left, and how the founder would pull a rabbit out of a hat just to keep it going. While knowing when to give up is a skill, every startup founder has moments where only grit keeps things going. 🔥
Simple insights like the importance of grit and making sacrifices can seem obvious, but what they look like in real-time can be fascinating. This week, the co-founder of the Nigerian startup Piggytech shared an email sent to her by the prolific angel investor Olumide Soyombo in 2015.
🤯 His email chastised the co-founders, who were scaling Pushcv at the time, for not making sacrifices as the company ran out of money. “I have a big issue with the lack of further sacrifice/delayed gratification,” part of his email said before advising the founders to give up 50% of their salaries for the previous month. Per the co-founder who shared the story, the co-founders earned N50,000 ($63) at the time! But they still gave up 50% to demonstrate to the investor that they could make sacrifices to keep the business running. That’s what sacrifices look like in real time. 📍
🦾 Investors like guts and drive as much as innovative ideas
A founder I worked with once shared the story of his career progression. He had worked at great companies early and got a lot of learning before landing his dream job. The role was cushy, the pay was excellent, and his equity stock option plan was fantastic. He only needed to stay two years for some of his options to vest.
Yet, less than a year after seizing on an idea that he was compelled would be a game-changer, he left his full-time job to start a company. What early investors liked more than the strength of his idea was his willingness to take risks immediately after he had a conviction. Morgan Housel says, “You don’t have to know exactly what the future holds to know that some people will handle it better than others.” 🔌
📢 Leaders can’t do it alone. Active listening matters
“He would never listen to a second opinion. It was either his way or the highway,” said an ex-employee who spoke anonymously to a journalist after the company they worked at shut down. The company boasted a bevy of big-name investors, a superstar management team and an idea that most people agreed was a winner. But it could not deliver on an MVP before it shuttered.
In the company’s post-mortem, several ex-employees said the company could have survived if the founder wasn’t in a hurry and was open to different views. Of course, there was no guarantee that the company would have been successful anyway, but it could have gone some distance and probably made a dent in the area where it was trying to solve a problem. 💡
🔗 All quiet on the comms front is a risk. Investors want to be included
This week, I watched an unusual scene play out. A startup founder announced that after two years of trying to scale the company, he made the difficult decision to close operations. One of his investors responded and claimed he had communicated poorly while running the company. Per a recent Wimbart report, “71% of African tech investors will not invest follow-on funding in a startup failing to provide them with regular reporting updates.” 🤔
Failing to communicate not only puts your current venture in jeopardy, it ensures that investors will be sceptical about investing in your future ventures. Send investor reports, keep your investors in the loop and remember that hiding your head in the sand when things get difficult is not how superstar founders are made.
📚 What we've been reading
- In Nigeria, startup founders are investing in film projects
- The Arm IPO is here, but many ETFs will not be buyers
- This post will not go viral
🔫 Parting shot
What's on your mind? Drop us a note via firstname.lastname@example.org to let us know. Or, tag us on socials using #africanpreseedpodcast, #APSnewsletter or #APSVibeCheck.
That's it for now. See you next month! — Olumuyiwa