Image: Aisha Pandor and Alen Ribic, SweepSouth
When Aisha Pandor and her husband, Alen Ribic launched SweepSouth in 2014, they sold everything to fund the business. They even ended up living with Aisha’s parents for the first four years of their start-up.
Today, the business has raised successive rounds of venture capital funding, including Draper Dark Flow, established by Silicon Valley-based investor, Tim Draper; international retail solutions company Smollan; Vumela Fund and blockchain investment services firm, Newtown Partners, owned by Vinny Lingham. When Newtown exited the business after five years, it had made a 10x return on its initial investment.
The business could have grown organically, but securing investors has been the rocket ship that has helped to fuel growth - and it all started with a pitching competition in Cape Town.
"I entered the competition at a tech conference without telling my husband and business partner. When we were selected as a finalist, we needed to use precious funds to fly down to Cape Town - funds we should have been using to build the business."
The risk paid off. While Aisha admits that her projections of growing 100 times within a year were way off, the pitch was strong and attracted the attention of Vinny Lingham, an investor in the tech space and one of the dragons on South Africa’s Dragon’s Den.
"We won the pitching competition, and afterwards Vinny approached me and said that he was interested in investing in the business. He asked me how much we needed and I gave him a number - and he responded, ‘no, that’s the valuation of your entire company, be realistic about what you want to raise’."
It was an important lesson for Aisha - first, that most investors know exactly what they’re talking about and have a keen idea of valuations and what start-ups are worth (and how much money they need), and second that it’s not a good idea to raise too much money too early. Capital is really to help you grow, but you don’t want to be giving too much equity away too early - particularly when your valuations are still so low. Losing 40% of a R2-million business is very different to losing 40% of R200-million business. Early equity tends to be expensive later on.
An angel investor joining the team also taught Aisha another lesson - the value of investors doesn’t only lie in the cash they bring to the business. "Vinny’s experience helped us to navigate start-up pitfalls and accelerate growth. His network also opened doors for us. In 2015, we were selected to participate in the Silicon Valley-based start-up accelerator, 500 Start-ups as a direct result of that conference."
Raising capital doesn’t mean that the business stops facing cash flow issues. "People think that once you’ve raised money, all your money problems are over. We still faced cash flow issues. We needed to be smart about how we used the capital we had to grow - we needed to be strategic with it."
Katlego Maphai, CEO at Yoco
At the start of our journey, we had a funder pull out at the last minute, which was scary, but also a blessing in disguise. It meant we had only angel investors and family invested in the business, which gave us the capacity to think long term and not take shortcuts. It’s imperative to have product/market fit before you chat to VCs.
Jessica Boonstra, Founder, Yebo Fresh
Whether or not you have investors to answer to or not, always be hard on your numbers. If you want to succeed and have sustainability, you need to know exactly what is happening in your business.
David Torr, CEO at UCOOK
Our growth is the result of a few different things. First, the capex investment was critical, but we’ve also leveraged our negative operating cycle well. We have great payables with our suppliers. We’re fair when it comes to costing things out and have grown with our community suppliers, but we also pay in 40 to 60 days, while our customers pay us upfront.
Originally published on Ecommerce.co.za.