Rarely do you find a healthy self-funded startup, Most have to go through some phases in life called the acquisition or funding/investment phase. We all know the joy of that and according to the Report from Disrupt Africa 2016 Funding Report, South Africa, Nigeria and Kenya were the three most popular investment destinations on the continent, accounting for 80.3% of funds secured: this is a huge amount of funds cutting from the total raised all over Africa $129-million in 2016. This Saw an Increase in the number of startups in the Region which is a boost to the Ecosystem.
It’s not an uncommon thing to see after funding the startups die or disappear from the scene, then only a few rise up later and you may hear them again after another round of investment or funding. We kinda lack something in our ecosystem from the hubs, founders, mentors and the investors, we just like have a breach or something which doesn’t seem right. Maybe We might blame the founders, some lack a proper way to use the funds, having landed a huge amount of funding on your first round and emergence in the scene, can make you go crazy, money just politicises things in some ways, you will have founder fights, unclear read of contracts landing you into trouble and expanding your startup into un unfamiliar path separate from what you did. Can we place the blame on the hub’s who incubated the failed startups after funding for not offering correct mentorship? wait this could roll back to the founders maybe the ignorance? damn! this is a mix-up! it’s not a new thing to see startups struggle in the valley of death after funding series, though some come out as victors the major percent are just shadows behind the curtains, ” yeah! that was a very good idea, I wonder what happened to the company?“.
Life starts after venture Capital, that when the startup foetus is connecting to the world, you are all mixed up with ideas, your own idea doesn’t event match up the standards of the ecosystem. Here comes the trick, you need something and you need it at a certain amount for the right purpose, so too much is poisonous, and when you raise it too much, you will have to sideline the tracks to fit it in your goal, and this will make you achieve next year’s goal during an era that the goal doesn’t fit, which will also near your exit plan in the market, damn! ” we have achieved what we wanted so early so we have nothing to do “. Just raise the correct amount for your next stage, a manageable amount and once you get an interested Investor he won’t back out until he gets the real feed.
Talking about getting stuck with an Investor, yes they may come in as glues, rarely do you see VCs investing in different startups, they have a specific set of startups, round after rounds you hear startups getting different series of funds from the same venture, and this creates a comfort zone for the startups, you are now at the stage where your things are going on well, wait until you propose and idea that the board doesn’t agree with, and guess what you can’t fire your VC, you have already developed a bond, a relationship and partnerships: by any chance you try to mess them up the quorum to dismiss you may be hit and that’s a fear, you are not the Late Steve Jobs to find the luck of leaving your own company and come back purchase it. So the curve starts to bend, you hit your plateau stage, no ideas flowing, you are stuck in a quagmire, so what do you do? Aaah!, “let me side with the board for once” and guess what the board was wrong, The venture wins, your company dwindles down, they have earned what they needed, and you are now stuck in the Richard Hendricks quagmire.
Companies typically die around ~20 months after their last financing round and after having raised $1.3 million. Companies in the social industry saw the highest of number of startup failures in the period in question.
This is a bad image for the Orphan startups, it creates fear of joining the VC-backed gang! not just the fear of failure but the life after VC is hectic for startups for the pre-mature mentored startups. We need to help the early age startup gain a momentum before just leading them into the world that exists in an abyss, and for startups don’t chase after the investment if you really are not ready for a mayhem, some just go for the pitch up to try and then you are like whaaat! I never knew it would turn up this way, you are given a 60-day notice to get things done, you rush and file things incorrectly, you form a team that never existed when you pitched.
We rarely know what happens to the startups backed up, you will only hear they expanded, hired and produced more, and that happens after one or two years from then, you will hear struggles or no more news since the exit plan is being executed.;
Featured Image Eric Palma Illustration