Secrets of Scale – Event #3 (Powered by Entrepreneur Magazine & MESH Club)

Why Vinny Lingham says you don’t need funding to launch your startup

Fellow Shark Tank investors Vinny Lingham and Marnus Broodryk unpack why you don’t need an investor to launch – and scale – a successful startup. By Matt Brown

Too many startups are impatient, and it’s one of the key reasons why they can’t scale or secure funding, says Vinny Lingham, one of South Africa’s Shark Tank investors, and the founder of Gyft, which he exited for $50 million, and Civic, an identity protection and management startup based in the US.

“If you want to achieve something great, you need a plan,” he said at the third Secrets of Scale event that we hosted at the MESH Club in Rosebank. The aim of my show, The Matt Brown Show, is to give entrepreneurs access to the top entrepreneurial minds in South Africa, unpacking their experiences and top advice, and effectively helping business owners and startups to learn from their growth journeys.

Vinny Lingham and the other panellists at the event, Jason Goldberg, founder and CEO of 10X-e and co-founder of Edge Growth; Vuyo Tofile, CEO of Entbanc Group; and Marnus Broodryk, a fellow investor on Shark Tank with Vinny and the CEO of Transaction Capital SME Services, were all able to share valuable insights around what it takes to build a startup that will scale, and why the necessity of landing a funder is a myth.

Vinny’s advice was particularly on point: “Lay the right foundations and focus on your process. Don’t be impatient. Too many entrepreneurs are trying to run before they can walk or even crawl. Be thoughtful about how you put the business together and above all, go slow. Hiring more engineers and building bigger teams doesn’t necessarily speed things up. You can’t throw money at the problem and think you’ll get there quicker. Business doesn’t work like that.”

Start with the goal in mind

In my experience, based on hundreds of interviews with top entrepreneurs, as well as building my own business and brand, there’s the business you are now, and then the business you’re becoming. You need to always be innovating and keep that end gaol in mind: What kind of business will you become?

Vinny used his own experiences with Gyft to illustrate his point. “From day one we focused on high levels of user engagement. We needed conversion rates. We focused on that first, followed by what percent of return customers we achieved, and then who bought more and more. In other words, we concentrated on the metrics, and on our customers.

“If you’re moving too quickly, you end up with a product that’s not ready, people who aren’t happy and everyone in a hurry. Most importantly, you don’t have a scalable, repeatable product and market offering that’s ready.”

However, if you focus on your customers, not only will you have a revenue stream to build on, you won’t need external funding. “Not every business can be bootstrapped,” he admitted. “If your business is reliant on a product development cycle, you need external investment. But if you have something to sell from the word go, and a runway of 12 months, you can launch without an investor.

“From there, the biggest signs that your start-up is ready to scale are a high customer retention rate and good strong lifetime value of a customer – both of which you can only determine if you’ve been operating in the market. You need to know what each customer can bring in, your profit margin, as well as that there’s only a marginal fixed cost to each additional customer.”

Putting customers – and profits – first

Jason, Marnus and Vuyo all had valuable insights to add, sharing their top lessons in scaling a startup, and echoed Vinny’s sentiments that funding is not the most important element in launching a business.

“99% of business owners don’t start with funding,” said Marnus. “They change something, tweak things here and there and find a way to get revenue from customers.

“That’s how we did. We didn’t want to be the biggest accounting firm in South Africa, we wanted to be the most profitable. We focused on our pricing and product fit and made sure that if we took the business from ten people to 1 000, we could do it with the same model.

“There’s no point in getting 10 000 people onto your platform – all based on VC funding – and then the cash runs out and you realise you can’t monetise the business. It’s pointless and it happens a lot. Scale must be profitable. You can’t keep adding people and scaling the business if the costs are so high that you can’t monetise what you’re doing. Start small, get your customers on board, and use your own revenue to grow.”

Vuyo agreed. “Too many entrepreneurs don’t focus on the product. We all want to scale, but no one starts out trying to cater for 1 billion people. You need to cater for your first 100. Focus on them and make sure they’re extremely happy. If you aren’t focusing on your first customers and they aren’t happy, you won’t grow into other markets. We scaled as a consequence of that early focus.”

“When the market comes to you, you’re ready,” added Jason. “That’s when you have a repeatable model that’s scalable. What you want is mediocre people who can do an extraordinary job through how you’ve set up the business. Once you’ve proven that over and over with very happy customers, then you’re ready to scale.”

His advice was simple. “Silicon Valley has a great analogy – are you selling a vitamin pill, or a headache pill? Your customers can stop taking a vitamin pill and they might not notice for months. If you’re selling a headache pill though, they notice every minute without you. Your customers must feel pain in the absence of your solution – and no one else must be able to take away that headache as quickly or conveniently as you. Shift away from product-based pricing to value based pricing. What is taking the headache away worth?”

Focus on your business

“Don’t waste your time on investor meetings,” was Vinny’s final word to the entrepreneurs in the room. “The percentage of deals closing is extremely low, and it’s a total distraction. You spend so much time chasing investment that you aren’t concentrating on your startup.

“Focus on your business. When you get your KPAs right, you know what your north star is, and you have your metrics, then investors will come to you. Raise as little as possible at the right price at the right time. The wrong price at the wrong time can actually damage your business.”

VIDEOS & PODCAST

PART 1 – BUILDING THE AEROPLANE

This segment will be the majority of our focus and will cover practical “how to steps” for scaling your business. We’ll be revealing how to design a scale ready business and walk you through common pitfalls that all entrepreneurs will encounter as they “build the aeroplane” and how to avoid them. We’ll also reverse engineer how to design a scale ready business from a 150 strong team all the way down to a 5 person team.

PART 2 – BUILT FOR WINTER

This segment is all about how to ensure that you remain profitable as you scale. We’ll unpack how to bring different revenue streams, partnerships and products/services to together to help you weather any storm.

PART 3 – SCALE BLUEPRINT

In this segment we’ll explore the systems that can help you scale, how to automate repetitive processes and outsource non-essential tasks and how to design a business that makes more money while you sleep than when you’re awake.

Business Instinct with Kutlwano Founder of Moja Cafe

Meet Kutlwano founder of  Moja Cafe, Orlando East. Listen to his journey to success and what inspired his entrepreneurial foodie move.

Business Instinct is a weekly look into the minds behind successful business ideas. Check in every Wednesday for a new episode of Business Instinct, where David chats to different business people about their journey to success. Get inspired, get informed, and get entertained as we talk to the best in business. Business Instinct is brought to you by ABSA Business Banking. Do better business. Prosper.

Source: SoundCloud

 

BUSINESS INSTINCT (TSHEPO MOKHOLO)

Meet Tshepo Mokholo, the managing director at Brima Logistics. Listen Tshepo’s story about his journey to success.

The new advertising campaign from Absa Business Banking is designed to inspire current and prospective clients to act on their ‘Business Instinct’.

Absa Business Banking understands that business-people are smart and get things done. They have an intrinsic knack for knowing how to run a business, how to spot an opportunity and how to act under pressure.

Businessmen and women go with their gut. They have a thing called… ‘Business Instinct’.

Source: SoundCloud

 

The Money Show with Bruce Whitfield

A wrap-up of the day’s business news as well as insight into trends and expert advice on all things money-related.

Award winning financial journalist Bruce Whitfield hosts The Money Show each weeknight on 702 and CapeTalk, offering a wrap-up of the day’s business news as well as insight into trends and expert advice on all things money-related..

Bruce interviews blue chip company CEOs as well as entrepreneurs whose businesses are both inspiring and helping shape a better South Africa.

A variety of expert contributors and regular features pepper the show, all designed to help audiences make sense of money, from personal finance to markets and big economic matters.

Follow Bruce on twitter @brucebusiness

Bruce Whitfield is the host of 702 Talk Radio and 567 Cape Talk’s The Money Show.

The producers of The Money Show are Cecile Basson – [email protected] and Thekiso Lefifi – [email protected]

Listen to The Money Show

 

Source: 702

On Your Marks For 2018: Is The Lean Startup Approach Legit?

In the first full African Tech Roundup podcast of 2018, Andile Masuku mulls over Gefira SolutionsFounder and CEO Bert Bruggeman‘s assertion that we can’t just “app our way” to solving all of Africa’s problems. Click here to listen to Andile’s full conversation with Bert.

Then, he ponders which hybrid investment approaches might prove successful in fueling African startups in 2018, and echoes the questions posed by Seyi Fabode’s blog post entitled: “Is It Time To Dump The ‘Lean Startup’ Approach?”

Also, in this episode, Andile gives a quick update on the #NotOurManifesto dumpster fire that Co-Creation Hub Nigeria Co-founder Femi Longe lit late last year and shares some encouraging news regarding the AfricaManifesto.com initiative that was subsequently launched. In case you’re not familiar with this whole fiasco, here’s the low-down.

Source: African Tech Roundup

 

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