The ‘dos’ and ‘don’ts’ of launching a start-up in Africa – the investors’ view

Entrepreneurs and innovators risk alienating potential investors by demanding non-disclosure agreements (NDA), according to the ‘money men’.

A team of ‘angels’, accelerators and seed investors were put together at AfricaCom 2012’s Entrepreneurs Incubator session on Tuesday and ideas of best practice were discussed.

Mark Elias is Chief Executive Officer of Seed Engine, a group of venture capitalists based in Johannesburg and said he views companies asking for a NDA as one showing a weakness.

He said: “Ultimately your secret is in our interests to keep private. You need to be open and honest because we are trying to build a relationship.”

Alan Knott-Craig Jr, who resigned as CEO of Mxit in October, agreed and said a company could be demanding a NDA because they have had a bad experience in the past and are “paranoid”.

Jesse Green, founder of shopping mobile app Perk and managing director of UbuntuDeal.co.za, believes an entrepreneur or innovator can get ahead by proving their idea works by getting any kind of revenue in the bank, however small.

He said: “Guys have more interest to invest if they can actually see as idea works. Just get something out there as soon as possible and get some money in the bank. You don’t need to get trillions, but prove something has bought something you have built.”

Elias added: “If you think capital is the only thing you are missing then the company has got real problems. In terms of a little tip from a venture capitalist – follow up. We get hundreds of emails every day and we don’t to reply to all of them so you need to keep on at us.”

“Just be ready all the time. Once you get in touch with your incubator or accelerator they will phone you at all times of the day because we work all the time.”

Knott-Craig Jr added in South Africa businesses are much more obsessed with substance over form – the opposite of the “San Francisco model” – but said entrepreneurs in Africa should aim for a happy medium.

Posted in: Startups

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