We were delighted to have Mikul Shah join us for the last event of 2019. Mikul is founder and CEO of EatOut Kenya, Yummy Magazine Africa & Nomad Magazine. He’s also behind some of the coolest foodie festivals in the region. He is an alumnus of the Stanford Graduate School Of Business SEED program and The University of Manchester. He currently also serves as an advisor to the board of UAP Old Mutual and Africa Technology Ventures Fund.
Mikul is an alumnus of Mombasa Academy, where he spent all of his formal school years (and met his wife Ami!). He founded EatOut Kenya in 2010, his 'oldest' startup, which sits at the nexus of tech, food and beverage, and media, and has since branched into hospitality and travel publication.
The discussion was moderated by Allamano, who was expert miner of information and lessons for us all.
This summary is going to read a little different than previous ones. Mikul very generously articulated his top 6 mistakes that he made along the way as a startup entrepreneur. These are lessons for us all that I am sharing below, peppered with excerpts from our discussion and my personal reflections on the same.
1. Getting the team right
Tech is the buzzword at the moment. Everyone wants to be a tech-entrepreneur and hence it’s logical to assume that tech startups need a super team of techies. I couldn’t disagree more. A start-up is like any other business and hence requires a good mix of sales & marketing people, financers, lawyers and more. If you’re a dream team of five PHP or PYTHON developers, you should be worried!”
“Do you find the people or do you work on your idea alone?” This was the question. Echoing almost all the founders we’ve had on the series so far, the consensus seems to be to not build a company alone. Mikul’s advice was to find a co-founder who brings a skill set you are lacking; invest heavily in your team particularly your management team; get a formal MBA education if you can, and make your organisation a fun place to work at.
There is a widespread academic and popular consensus that startups perform better when launched by a team of co-founders rather than a solo founder. Brings to mind the old African proverb about going further together, rather than quickly alone.
But some recent research on US-based startups suggests companies started by solo founders survive longer and generate more revenue than co-founder teams. Arguably not as fun though. Still on the subject of fun…
2. Losing Your Focus
“Sitting in a room, sipping on crap coffee and brainstorming on the whiteboard is arguably the most fun part of what we do. We come with hundreds of new ideas every week but the truth is that we all have limited time and resources, which is why we need to focus and prioritize. Settling on a clear focus — your product, your audience, your strategy — is critical from day one.”
Idea hacking is fun. You feel as though you are busy, but perhaps this isn’t the most effective use of your time when there are still assumptions to test and customers to understand. Do not diversify was the clear message. It seems so contrary to what we hear, or what feels almost instinctual to minimize our own risk. But I personally love this lesson, because it’s one we often all need reminding of.
3. Not thinking from the customers’ point of view
Every so often, take a step back and look at your business from your customers’ point of view. iPad apps are cool but not when none of your customer’s have iPads! We are often caught up in our want to build the next Facebook and constantly dreaming about the next ground-breaking, world changing feature! What we should be doing is speaking to our customers and analyzing how our business is meeting their needs.
Mikul thinks we should be wary about being fixated on ‘followers’, ‘likes’ and ‘engagement’. Ultimately, these don’t tell us much about what we can expect in terms of sales revenue, or even consumer behaviour.
This quote by Allon Raiz sums it up nicely: “Don't obsess about your product, obsess about the problem it should be solving. Build intimate knowledge about every nuance on how, why, when, you client experiences a problem and only then on how your product can solve these problems. A subtle but important nuance to approach”.
4. Protecting The "Light-Bulb Idea".
I’ve done it many times! Long, annoying Non-Disclosures before I’m willing to share my big idea. Chances are that if you’ve just thought of something, a thousand others have already thought about it and probably 18 months earlier. It’s more important to remember that an idea is by no means a business ... it is execution that makes a business happen!
Mikul doesn’t think he is that smart of a guy. Nairobi was undergoing a cultural revolution with a lot of interest in the arts, culture and food scene. Mikul was able to capitalize on that as a first-mover. I would add that, it is not always about being the first to market; but about being the first to get the market right, or understand it. He succeeded at this in Nairobi. But not quite in Mombasa (see point 7).
5. Fixating Over Funding
A lot of young startups assume that fundraising is an important symbol of success. Having successfully raised US$500,000 from investment funds for EatOut & SleepOut, it is really rewarding to see that someone is actually willing to put money behind your business and ideas. But remember that investors always want something in return. Actually, they want a lot in return! If your business makes money, then you may well be better off not fundraising, and in doing so; retain control and ownership of your business. And if your business doesn't make money then perhaps there are some bigger issues to tackle before you start pitching investors. The only thing that matters is building a viable, growing and profitable business.
Mikul started EatOut Ke with $10,000 from a Dutch investor before Facebook arrived on the scene (and could offer what EatOut was offering to restaurants). The investor believed the ‘founders story”. He also happened to be “in the right place and the right time” as he put it, hanging around with other entrepreneurs at iHub in its early days. He has subsequently raised half a million dollars from more institutional venture and PE funds. We touched on some of the tradeoffs of taking in external resources, particularly from the VC ecosystem. “We’ve successfully raised several rounds of funding. You must understand what comes along with funding” he said. The real question is what you want to achieve by founding you startup.
This topic brought to mind Noam Wasserman’s The Founders Dilemna. Wasserman analysed over 10000 venture-backed startups and concluded that at one point most founders will have a choice to make, to either be Rich or be King. “Founders who bring in outside resources imperil their control of the startup; conversely, founders who resist imperiling their control often fail to attract the resources necessary to realize the full potential of the startup”.
But perhaps the question is not whether you want to be wealthy (rich) or powerful (king); and more about whether you want to grow fast or grow slow. According to many founders in the series, the largely foreign-based funding ecosystem has pushed many startup entrepreneurs to focus on fast growth that becomes largely unsustainable, instead of building “real businesses.” Mikul made a really interesting point about not rushing to pitch your business to investors until you have found the ideal business model and are making net profits, lest you get comfortable and lose the drive to find the right model.
If you do choose to look for funding, remember fundraising is a full-time job. “You need one person dedicated to writing business plans, and meeting investors and following leads” said Mikul.
Elusive funding and where to find it
We spoke a little about the alternatives to VC funding. The first being the emergence and growth of social impact funds looking to invest in startups providing solutions to the bottom-of-the-pyramid population or solutions that address complex social issues. I sense that Mikul is thinking more about social impact when he says “I’m helping rich people get discounts on coffee when there are a lot of people who need help.”
The second, angel investors, like EatOut Ke’s first investor. Unlike institutional funds, angel investors provide smaller amounts of startup capital (often seed stage) and take a more long-term view with the startup. But angels are not easy to come-by, and local angels harder yet. “In Kenya, people rather invest in land versus ideas” he said. But therein lies the opportunity: to grow more local startups we need to see as well as hear the success stories from more local angels. We know they exist and it’s only a matter of time before we see the emergence of more robust angel networks in Kenya.
6. Worrying about failure
There's no substitute for hard work. We must try to have some fun at the same time. Work and play hard and the rewards will come. But most it is really important to remember that there is nothing wrong with failing. If you're going to fail, make sure it happens quickly, pick yourselves up and start again.
Mikul made several points about the importance of embracing one’s mistakes, summarised below. Entrepreneurship is all about mistakes. But you need to make them fast, and cheaply to allow your startup to pivot. Unfortunately our ego gets in the way and we start telling ourselves that our idea is going to work, despite all the evidence to the contrary. King-mentality perhaps? We need accept that there is no recipe for success in entrepreneurship, and learn to embrace failure as an opportunity to learn and grow.
7. On Mombasa
Before the interview began, Mikul asked me what the objectives of founders is. I said that MombasaWorks wanted to provide a risk-free learning opportunity for entrepreneurs to hear raw, unscripted and honest accounts from those who have gone before them; provide relevant content about doing business in the region; and lastly to demonstrate that there is an entrepreneurial community and that Mombasa does work. He was nodding politely until this point. “Well Mombasa didn’t work for me” he said.
Nairobi is cosmopolitan city, there are over 4million consumers and the per capita spending power far surpasses that everywhere else in the country. “If you’re in tech, go to Nairobi ASAP” Mikul said. He speaks from personal experience having tried and failed to launch EatOut Ke in Mombasa. His tone suggested a sort of nostalgia for Mombasa. But for the EatOut Ke business model, the market was not there at the time. Tourists largely stayed in their hotels, and the spending power and interest was just not there. The cultural revolution that was sweeping through Nairobi, hadn’t quite found its way to Mombasa. And perhaps it’s just a matter of time until it does.
A very big thank you to Mikul for sharing his journey with us. To Allamano for moderating the discussion, and for our engaging audience. Founders is not possible without you.
More unscripted, real stories about building businesses in this region in 2020!