Entrepreneurship: Enjoy the Journey

Entrepreneurship means different things to different people. However, the one thing most founders can agree on, is that it is not for the faint hearted. When I talk of entrepreneurship I am not talking about ‘side hustles’, while this is a form of entrepreneurship, I am talking about how you build a business like Java. Java was never a side hustle, if it was then it would not be the business it is today.

When one looks at entrepreneurs who have made it, one may be tempted to think that they were ‘born entrepreneurs’ (entrepreneurs are born not made), or even that where they are now is where they have always been. Most don’t realize that “they started from the bottom and now they are here.” Kenya is home to the Silicon Savannah where entrepreneurship has been made into this ‘sexy’ lifestyle, university graduates are more likely to think of founding a Company today than they would have 20 years ago. But is it for everyone?

I founded InVhestia Africa Limited six years ago in 2012. InVhestia works with investors and entrepreneurs offering various services. For entrepreneurs we help them raise capital, carry out valuations, price their products appropriately, negotiate for deals etc. For investors we help in looking for investable deals, carrying out due diligence, working with their investees on the above issues etc.

I founded the company then with 2 co-founders from my business school, they soon left when the journey became tough. Truth be told there are days I have woken up and wondered if I should have done the same thing. When you are building a company not every day is a WOW day, there are days you fight your demons away and ask yourself some really tough questions and there are those that confirm to you why you decided to make the jump. If you ask many ‘real’ entrepreneurs they will tell you before you have ‘made it’ the former days are more than the latter ones, they will also tell you that the reason they keep moving is because there is no real alternative as far as they are concerned, what they are doing is what they were created to do!

In the upcoming masterclass I am hoping to share my experiences so far, I have not made it yet but I believe I have come a long way and have learnt a lot while doing this. I am fortunate to also work with many entrepreneurs on my day to day and can share a thing or two about the entrepreneurship journey. Some of the questions I hope to address include

  1. Should you start a business?
  2. What are the key considerations you need to think about before starting a business?
  3. What does it take to scale a business?
  4. How do you exit your business?

As a parting shot, if you want to be an entrepreneur you need to enjoy the journey just as much as the destination. If you do this you have a much better chance of making it. Come to Simon Page College of Marketing on 30th August, 2018 to learn and share on real entrepreneurship stories as well as figure out how to grow your business.

Stephen Gugu

Impact Investing: The Different Perspectives

I am writing this as I travel back from Chicago in the US after attending a two day conference of the leading faculty in the world in the area of Impact Investing and all other terms that are close to it, i.e. responsible finance, social entrepreneurship, corporate social responsibility etc. Impact investing refers to a perspective of investing wherein an investor invests with a clear intent to not only make financial returns, but to also have clear and measurable impact on the environment and social issues. In some instances the investor may also push for responsible governance of the institution where they sink their money.

This was my first visit to the US and I must say it delivered; the sights, people, shopping experience, everything was impressive. With everything going on in the US vis a vis travel bans, the leadership, the Black Lives Matters movement arising from racial issues; I was a bit worried and expected a tougher visit all the way from immigration and moving around. I was however pleasantly surprised. Imagine the odds of meeting an immigration official who had worked in Kenya assisting to address the elephant poaching menace that has seen Kenya loose a significant proportion of its elephant population. I expected a barrage of questions and a hold up at immigration however the official was really happy to see me, we even managed a chit chat around the political situation in the US and Kenya. Getting out of the airport and the rest of my stay was smooth. Technology has really changed the world, between Uber, booking.com, TripAdvisor, whatsapp and facebook I literally gelled in.

Chicago Skyline

Chicago is a lovely city, I was staying in the Evanston area next to Lake Michigan; the sights were breath taking! Jogging and riding a bicycle along Lakeshore Drive with a breeze from the pristine blue lake bordered by the luscious green vegetation was what I would call an eschatological experience! The architecture of Chicago is sophisticated and beautiful at the same time. Having done the architecture tour I was amazed by the engineering feats employed to make the city’s skyline what it is today.

150 North Riverside

The tour guide explained that on one of the buildings, 150 North Riverside, has a significantly low base ground built area to the actual base (around 35%) due to railway tracks and the lack of build space within the City. This building is one of the tallest buildings in Chicago, that easily dwarfs Kenya’s Kenyatta International Conference Centre and has a gravity defying appearance due to its narrow base. The engineers and architects behind the project had to create huge water tanks which would be filled with water and used to help ensure that in the event of extreme wind conditions the water would sway to ensure that the weight of the structure would not cause it to collapse. How’s that for clever!


I could go on and on about my impressions of the city but really I set out to put down some of my views from the conference I was attending. The faculty in attendance was world class. Harvard, Stanford, Wharton, Northwestern Kellogg, Maastricht were among those represented, of course not forgetting myself from Strathmore Business School in Nairobi Kenya. The attendees of the conference were largely Western, from North America and Europe; there were only two persons from Africa, myself and lady from University of Cape Town.

The conversation over the two days was fascinating. My main takeaway was that there is a double lens from which to view the impact investing discussion; that of the investor and that of the investee /entrepreneur. In my day to day job at InVhestia as a principal, I work a closely with both private equity and venture capital (PE/VC) investors focused on Africa as well as entrepreneurs. One of the key characteristics of these PE/VC investors is that they have raised most of their funding from development finance institutions, family offices and other Western investors for whom impact is more than a financial return. Bearing in mind the attendees were largely Western and their major audience were these investors carrying out investments in emerging economies, the discussions we had were mostly from the investor’s perspective. We had really good discussions on why it is important to include the impact lens in any investment decision, measurement approaches, the needed research in the field, what students should be learning etc.

The on the ground lens, that of the entrepreneur who receives the capital was not covered as much, almost non-existent. This lens would reveal that for most emerging economy entrepreneurs, impact is mostly just measured by the number of jobs they create which for the most part is a sufficient criterion. Consider an entrepreneur who sets up a bakery in Nairobi and goes on to open 20 other branches across the country. Just by growing her business to these 20 branches she employs an average of 5 persons per branch making for a total of 100 employees. These 100 probably support a family of 4 each taking the impact number to 400. In addition, the entrepreneur sources for raw materials used in production from various stake holders hence having even more impact on more and more lives. What’s the implication of this? As far as the entrepreneur is concerned, they are having significant impact by being core to what they do… growing their business. Now enter a Western based investor who has a ‘sophisticated’ understanding  of impact and now requires the entrepreneur to ensure that 50% of her employees are women, that they source their raw materials from small holder farmers, that all employees have private medical insurance, are market rate wages etc. The entrepreneur’s life is now more complex than it was. While before they were content with creating employment now they need to add all these other factors together with the relatively tough operating conditions in emerging economies.

In the above case both the entrepreneur and investor are right. The investor needs to feel that their cash is having the impact they feel is right and the entrepreneur needs to have a business that is not too complex so as to jeopardize its very existence.

As said earlier, the impact investing discussion for the most part is being driven by the investors, in most cases with investors who lack the relevant context of what their decisions and expectations in board rooms mean for the teams on the ground. Two things need to happen to ensure proper alignment. First, any impact investing course should be coupled with a context creating discussion. This could be achieved through ensuring any ‘would be investors’ are required to have an experiential visit to places where they expect to carry out their investing to appreciate the on the ground challenges. Hopefully such visits would show to the investors that impact should be viewed from a spectrum and any impact metrics set for an investee should take into account what they are already doing. Second, entrepreneurs need to understand the investor mind-set. In my teaching of PE/VC courses, I have to admit that the impact discussion has not been pertinent, bearing in mind how critical the investor is to the realization of the entrepreneur’s goals. The entrepreneur needs to understand what the investor is looking and discuss how to ensure that both parties are aligned at the point of investment. A thing entrepreneurs could do is to agree on various metrics with a time based implementation plan. The most important thing after all is to ensure that the tail is not wagging the dog but that the two are in sync.

Authored by: Stephen Gugu


By Collins Kuindwa

When it comes to fundraising, mergers and acquisitions, the most common question asked is, “What is the business worth?” A seemingly simple question, however, in order to get the answer one must carry out a valuation.


So what does a valuation entail?

Carrying out a valuation is not complex; we (the people who practice valuation) just choose to make it complicated. I’ll tell you why.

In layman terms, valuation of a company is a short process involving the followings steps:

Step 1: Determine the value of existing investments or assets that are currently generating cash flows in the business today. Typically the value of such assets will be the summation of all future expected cash flows from these assets.

Step 2: Determine the expected value of future investments. This can be referred to as growth assets.

Step 3: Sum up the value of existing assets (determined in step 1) and growth assets (determined in step 2).

Step 4: Determine what is owed to third parties by the business; the value of borrowed moneys.

Step 5: Deduct the amount of total borrowings (determined in step 5) from the total asset value (determined in step 3)


But does this mean anyone can do valuation?

Not necessarily. Here’s why?

In mature companies (and by mature companies I mean those that have passed the test of time) – most of the value is derived from existing investments that have already been made. However, in young growth companies, commonly referred to as startups, existing assets are minimal and can barely form a good justification for value. It gets more challenging when you come across a young company that is not making any money (commonly referred to as idea companies)- where then do we get the value?

We get the valuation from expectations, perceptions and future hopes as guided by the founders of these young growth companies.

The way you come up with a valuation will be very different based on the type of company you are looking at. If it is a mature company, you need to be very focused on the earnings reports. If it’s a startup, focus should be in the expected value that will be created by future investments! Because, ideally speaking, the valuation of a young growth company does not come from what happened last year; it is coming from the value that will be created in the future. This makes valuation a little bit messier. This is because this is a value attached to investments expected to be made one year into the future, two years into the future, three years into the future… so on and so forth. This involves forecasting the expected stream of cash flows from the growth assets, their expected level of risks. This gives room for ‘manipulation’.


‘Manipulation’ you ask?

I could tell you more but the purpose of this blog post is not to make you a valuation guru but rather to help you identify when you should be in doubt of a business valuation.

No matter how sophisticated or simple the valuation methodology is (which is what we have tried to highlight above) or how experienced and knowledgeable the valuers are, or how glamourous the presentation is, the first thing you need to do after receiving a valuation number is to carry out a reality check!


What do you mean, ‘reality check’?

The valuation has to be practical.

The valuation has to be realistic.

The valuation has to be in sync with what is happening on the ground and not just an abstract number supported with abstract assumptions. And that is why you’ll hear the rather common phrase, ‘Excel money is real money!’

What are you buying when you are buying the company? Or, if you are on the sales side, what are you selling when you sell this company?

A great way to carry out a reality check is to ask a set of very specific questions. Assuming that the valuation you are staring at, (yes, that unreasonably big number you have in front of your screen, highlighted in bold and prepared by a team of highly intelligent consultants) is a correct representation of the value of the company and you were to spend that same exact amount (yes, that unreasonably big number) in purchasing property or land in a prime real estate location, would the value you receive from the prime property or land be the same? If the answer is yes, then by all means, that unreasonably big number is a good representation of the value of the company. If no, then ideally the company has either been overvalued (good news for a seller, but terrible for a buyer) or undervalued (not so good news for a seller but great news for a buyer).

We therefore advise that before you are comfortable with a valuation that you have either come up with or one that has been presented to you, do a reality check! If it adds up, all is good to go. If not, you might have to go back to the drawing books!

Happy valuation folks! And remember, there is no such thing as a correct valuation.

Unreasonable East Africa

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man. ~ George Bernard Shaw

Unreasonable East Africa was started in 2013, aiming to develop the East African economy by supporting the growth of early stage impact entrepreneurs. They mainly work with teams building products and services that both provide access to basic human needs and create jobs. Unreasonable have worked with 21 companies from Kenya, South Sudan, Tanzania and Uganda, raising over $5.2 million in growth funding, impacting over 850, 000 people in the region. This can be largely attributed to mentors who have freely shared their wealth of knowledge and networks with the entrepreneurs.

This July, a five week program by Unreasonable Institute in Uganda featured entrepreneurs creating solutions to East Africa’s biggest social and environmental issues with the Unreasonable furnishing them with that ‘unreasonable advantage’ that would allow them to reach their full potential.

The role of the mentors in the program is to form a bridge between the problem entrepreneurs would like to fix and how to actually fix it. The guessing and ‘miracle’ that is often in this gap can easily be cleared up by talking to a mentor- an industry expert with years of experience. The mentors were in the same position as these entrepreneurs, they make excellent guides and cheerleaders because after all, they can ‘feel the pain’. They can therefore provide a change of scope, that is, how a problem looks, and helps the entrepreneurs see beyond their current challenge.

Some of the value addition that mentors have is to build lasting relationships, share their networks and seek to understand the entrepreneur and their venture.

Stephen Gugu, the co-founder of InVhestia Africa Limited was one of the mentors this year, providing advice on financial management and business models. He sums up the experience as the following:

“A world of possibilities! The mansion is a place where as a founder you interact with others and mentors to rethink your business in a way that you scale and touch as many lives as possible! You almost get to think through all possibilities.”

It was his second time as a mentor for the Unreasonable Institute and he quite enjoyed his experience in the Unreasonable mansion.

One of the aspects that captured him that the institute practice is the life map exercise. A life map is a framework within which one gets to explore the many different factors that have shaped who and where one is today. He suggested the exercise for the next InVhestia team building event- it would be the perfect way to better understand what motivates its employees. He stated that what he loved about it was that this exercise help one learn people; see who they really are and what influences people to do what they do.

Some of the companies present for the program were FarmDrive who improve livelihoods of smallholder African farmers through innovative technological tools that increase lenders efficiency and operational capacity, and Inagape Limited, Africa’s first coconut chip manufacturer.

What made him sad however that there weren’t many indigenous African entrepreneurs in the program. However, entrepreneurs selected by the Unreasonable Institute are those who focus on the people at the bottom of the pyramid. Their problems are often simple and their lives can be improved significantly through introducing means to solve the problem. Such entrepreneurs often look to break even and do some good as compared to for profit organizations.

Key takeaway you may ask? The key driver for a social entrepreneur is how many lives they touch… And often they touch quite a number.