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Impact Masters Podcast
#51 Titus Ndeto: Breaking Down the Walls Between Startups and Investors
Welcome to Impact Masters podcast, in collaboration with Africa's Talking Retold podcast, where every conversation sparks new insights. Join us as we delve into the stories of extraordinary individuals who are shaping our world movers and shakers in tech, policymakers, entrepreneurs, entertainers and all those whose stories are worth telling. Get ready to be inspired, challenged and transformed. Welcome, and let's embark on this journey of discovery together. Impact Masters Podcasts. You can check us out on all social media platforms YouTube X, facebook, linkedin, you name it. You can also find us across all podcast channels Apple Podcasts, google Podcasts, spotify, iheartradio, amazon Music. Simply search for Impact Masters, then subscribe, follow and share wwwimpactmastersio. Here's your host, michael.
Speaker 2:Kamathi. Perfect, perfect, perfect. Welcome to Impact Masters. In collaboration with the Africa Stalking Retour Podcast, brought to you by Michael Kamathi, you by Michael Kimathi. Yeah, so this is powered by Africa Stalking, and Africa Stalking is powering communication across Africa with simplified access to telco infrastructure, empowering developers to use powerful SMS, ssd voice, airtime and chats, plus insight APIs to bring the solutions to life. As we build and sustain scalable businesses, impact Masters is changing status quo, so today we have an interesting guest. The man himself, titus, calls himself.
Speaker 2:Titus TN Dungundeto. Yeah, that's a billionaire entrepreneur, investor and venture capitalist. He's an open minded to all ventures and he considers himself as a privileged billionaire entrepreneur who engages startups, founders and co-founders who strive to disrupt their respective industries. Ndeto, a founder and student of theoretical physics, econometrics and philosophy, who draws upon knowledge and principles of reason. He has applied these to finance business and manufacturing. He is also delighted to hear about everyone's journey, progress and success, as well as in experiences that have shaped their perspective, and this is the reason why we are hosting him here today. You know we bring movers and shakers in tech, entrepreneurship and any other sector that is moving Africa forward. So welcome today. You know we bring movers and shakers in tech, entrepreneurship and any other sector that is moving Africa forward. So welcome today.
Speaker 2:My name is Michael Kemadi, your hosts. I'm an entrepreneur Also. Currently I help build developer communities across Africa. It's a thing that I've been doing for the past decade plus years, and I've met so many interesting people across Africa. I've influenced tech ecosystems across different regions in Africa and my need is to see people building solutions that change the lives and trajectory of Africa, an economic powerhouse that it is, utilizing the resources, brilliance, capacity and the energy that Africa fronts in the world. So today we have this chief in the house, and he's one chief I've been looking for for some time now. He has a wealth of knowledge and his name is Titus Ndeto. So, titus, without further ado, I would like to know about you besides what I've said about you, let me start by the thanks.
Speaker 5:I rarely introduce myself, it seems like a brag, but now, at least now people know why. But for me, for my journey, I started venturing into finance way back in 2018. Back then I was still in high school. I was very, very passionate about theoretical physics. That's pure math and pure physics and I never knew there was another type of world called entrepreneurship or finance or venture capital. I never knew any of these things. Now, a friend of mine was employed and wanted to quit, but didn't know what exactly or where exactly to start.
Speaker 5:He reached out to me because in my social group, I'm the math guy. Apparently everyone thinks I know what to do.
Speaker 2:But, ndeto, where did all this start? Is it in high school? Is it in primary school? Were you born with it? So where did all this Ndeto start?
Speaker 5:Actually way back in primary school. I never performed well in mathematics or physics.
Speaker 2:Never.
Speaker 5:I was like the tail end. But I got into high school and now the spark came automatically. I actually don't know it. It's okay.
Speaker 2:You just started understanding math.
Speaker 5:In depth.
Speaker 2:Okay.
Speaker 5:I started recognizing patterns, I started visualizing equations, okay, and got very, very, very interested now in physics.
Speaker 2:So which primary school did you go to?
Speaker 5:It's called Mary Maculait.
Speaker 2:It's a private school. Where is?
Speaker 5:it Bahati.
Speaker 2:In Eastlands, eastlands, ah, in Eastlands.
Speaker 5:Eastlands, yeah, nairobi, eastlands, eastland born.
Speaker 2:Okay, okay, and high school.
Speaker 5:High school I partially went to a public school it's called Kaishanjiru and then I, where is Kaishanjiru? Kaishanjiru is. I don't know Like literally it's in Kaishanjiru, Muranga.
Speaker 2:Oh Muranga.
Speaker 5:Muranga and then now Kaishanjiru.
Speaker 2:Now a place called Kaishanjiru.
Speaker 5:Okay, now the name of the school is from the location.
Speaker 2:Okay, okay, that makes sense. And any vivid memory about primary school Did. And any vivid memory about primary school Did you struggle with those subjects or just math?
Speaker 5:No, I struggled with math, I was very very, very interested in geography, that's social studies.
Speaker 2:Social studies.
Speaker 5:Yeah, because that's my best performing subject back in primary school I struggled with languages, mathematics and science very very very badly.
Speaker 2:So social studies you mean.
Speaker 5:Politics, geography rocks. Okay, that was your favorite thing, Exactly.
Speaker 2:Oh nice.
Speaker 5:Now structures. Let's say things with structures. When you are studying geography, you have rocks to study Metamorphosis.
Speaker 2:Something you can see Exactly.
Speaker 5:I was a very, very visual learner but, I never realized until later on in my high school, exactly so, high school.
Speaker 2:At what point is it? From? One term, one term, three, when you now realize oh, math is good, I can do math actually it was in form two from two from two time two.
Speaker 5:Uh, I got uh, we were doing sads. Yeah, I think it's sad yeah I actually understood studsADS from an example, Okay. And then to me that was like a very, very big deal, because I don't understand much like literature and I just looked at the example, followed its structure and everything got into my head.
Speaker 2:And what is SADS if you break it down to someone who is not familiar with it?
Speaker 5:head. And what is sad if you break it down to someone who is not familiar with it. Sad is mathematics of power indices, now let's say two, to power three times uh two to power x plus one equals to four.
Speaker 2:Okay, now solve for x. Oh so you're the guy who really understood the defined x exactly.
Speaker 5:Algebra was your thing now, actually an interesting part was algebra was a very, very, very big part in my life yeah that's uh. When I realized algebra is the language of mathematics. When you're doing advanced level mathematics, you don't use numbers, you use variables. That's algebra. Now, when the switch came to me, my point of realization was I was picking maths. Like I can read maths without any calculations. I'll do it in my head Like, literally, I was reading an entire sentence from symbols.
Speaker 5:And remember this is 844, public high school. They are not doing that entire type of math. I got onto YouTube public high school they are not doing like that entire type of math. Yeah, I got into youtube. Uh, varitasium, that was the channel this post high school. Still still in high school, still in high school I I got into varitasium, three blue, one brown. I got got interested in quantum electrodynamics.
Speaker 5:Also I got interested in relativistic equations and the interesting part was I understood all this still in Form 2. And then I'm like and it's 8 for 4. There's a huge difference. 844,. You're just doing numbers, you study, revise, pass exams go home have fun, come back study repeat. There was nothing that interesting but 3Blue1Brown it gave me a lot what is that? It's a YouTube channel. I was mentioning. All those were YouTube channels.
Speaker 2:I thought it was a math problem for math, math problem, the math problem.
Speaker 5:That was a dilemma back then and it still is. It's called Collatz Conjecture. Let me not explain it because I will use at least three, four hours it's that crazy yeah, it's, yeah, it's, yeah, uh, it's a millennial equation, uh, millennial equations, the equations that has not been solved okay, of the past millennia. Okay, century equations for the past century decade equation oh yeah it's, it's, it's an old, it's almost something. It it's completely uh, not almost. It's relatively very, very, very complex, not difficult, much is really difficult much is complex, difficult much is complex.
Speaker 5:Now for the Kotler's conjecture. I can almost make it compared to it's called Fermat's last theorem.
Speaker 2:Guys, get your notebooks and pen, because it's going to get crazy around here. I hear different terminologies being thrown around. We need to refer to this in the coming few sessions I like even a little.
Speaker 5:I switched my life like a leaf. All my friends were astonished. They never expected I'd turn out how I've turned out.
Speaker 2:So first term from one you get an a in math so, uh, it was c, c or c plus.
Speaker 5:Yeah, second time, same c, c plus. Third time I got a b. First time from two I got an E, e already.
Speaker 2:In math, yeah, in math. And at this particular point, you are familiar with quantum physics, you are familiar with all the millennia.
Speaker 5:Nah, not yet. Not yet, no term 2.
Speaker 2:Term 2 in form 2?.
Speaker 5:Yeah, term 2, form 2, I got Now form 2, term 3, I got an A Literally straight, A straight please paint a picture like what is that?
Speaker 2:did you like sit down and, and, and? Or did you go through a book and you're like, wow, this makes sense all of a sudden there was professor michio kaku.
Speaker 5:He's, he's a doctor not a professor doctor, not a professor. Now he was doing this book which got me really, really curious on science. It was Physics for the Impossible. Is it that book? I don't remember, but basically he listed classical mechanics. That is where physicists, but basically he listed classical mechanics. That is where physicists have reached. Newton did this, paul Dirac did this, wanner Heisenberg did this, einstein then did this, and then Feynman is also a prominent physicist. He's called Feynman. Feynman is also a prominent physicist. He's called Feynman.
Speaker 5:Feynman did this, and then now we are here.
Speaker 2:So is he doing this in class? Is it a YouTube video?
Speaker 5:Is it a book?
Speaker 2:It's a book, you are reading it and you see the chronological account of different mathematicians Exactly.
Speaker 5:Now, where we have reached mathematically to the academic front, it's like a history book for equations, because he was, he's like, he's a big guy in academia. Because he was listing out an equation with symbols Okay. Because math and physics we use Greek symbols a lot.
Speaker 2:Yes.
Speaker 5:Now, I didn't know the symbols.
Speaker 2:So that was a bit confusing for you for a long time.
Speaker 5:Very, very long time. Now's just decided now to sit down and now read the entire Greek.
Speaker 2:And understand why are they using it and what they mean. So did you now reading Greek? Were you reading it from the symbol perspective or just to understand how to speak and write Greek?
Speaker 5:Symbol. Reading Greek was never interesting because also later on, they started using Latin. Now, if you wanted to learn how to speak Greek, you'll also learn how to use. Latin yeah, you get it.
Speaker 5:Now it's just all mathematical Greek symbols. I had a sit down with myself and then I looked them up a lot. Youtube is a university. I've done a lot of things on YouTube on my research. When I was getting interested in advanced level mathematics, I did a lot of things on YouTube and then now Google Scholar came along. Now I was going to.
Speaker 5:YouTube, lot of things on YouTube. And then now Google Scholar came along. Now I was going to YouTube First I get the paper on Google Scholar. Google Scholar is literally like a database for scientists.
Speaker 2:White papers are published there. Some books are published there. Exactly Some books are published there.
Speaker 5:Or are discovered. Yeah. Yeah, and then now, once I get the paper, I don't understand anything.
Speaker 2:I stop you, go and research.
Speaker 5:Exactly the entire thing, yeah, and then I come back Okay, because I was not using a curriculum. Okay, like literally.
Speaker 2:You're just curious.
Speaker 5:Curious Curiosity, like literally nothing else. I was just curious. Let's say I'd go read the first paragraph, only the abstract. The abstract will take me like two, three days to complete. Yeah, because grammar shida, choice of words, alignment of words, shida Like need.
Speaker 2:So grammar was a problem to you or the mathematicians?
Speaker 5:The grammar they use, like, let's say an example don't do that. Okay, a mathematician will tell you you need not do that, need not. So which one is which as in? Need not is the word I learned. Don't do that. So which one is which? Need not is the word I learned off the don't do that. That's it. Like. This is what I learned, or like legal jargon. A lawyer can tell you two words with a paragraph. You get it.
Speaker 2:Lawyers in the house.
Speaker 5:No hits. No hits, by the way, I'm just, it's an analogy.
Speaker 2:No, you made your point, so I'm just trying to emphasize on the point. Yeah, same same.
Speaker 5:Now, also mathematicians use a lot of jargon when it comes to doing proofs. Okay, because?
Speaker 2:But do you think that also is highly contributed with the background of that particular mathematician, as opposed to using the? Because, you see, if maybe you learned Greek, like there's a background of Greek and Latin, even English is made from, you know, combination of so many languages, does it influence how? Even you? You know, like you see, right now, if you are explaining something, you'll add a bit of Swahili here, some Shang. It's just not because you want to be complicated, it's because you want to make a point and for you it's just obvious, like if I say this, people will understand more.
Speaker 5:I get what you're saying. To some level. Your background affects your speech Always. To some level. Because also there was a time I was very, very interested in neurobiology. Now studying psychiatry for the brain. Why were Now studying psychiatry for the brain?
Speaker 2:Okay, why were you studying psychiatry for the brain and at what point? Still in Form 2?
Speaker 5:No, that was in Form 2. Like completely, I'd switched off.
Speaker 2:So you're just curious, learning anything and everything that is interesting.
Speaker 5:I was not even doing my assignment. Like, literally, I'd go to school with a book the size of a dictionary, learning anything and everything that is interesting. I was not even doing my assignment. Like literally I'd go to school with a book the size of a dictionary. Archimedes' principle Archimedes is yeah, something similar. Encyclopedia Archimedes' principle. It's not that difficult. Let's say something like rocket science, because for rocket science, the main reason why it's that big, it's because we there's a lot of factors affecting rocket science when you're doing when you're doing speeds uh above mark three, mark four hey that's that's.
Speaker 2:That's that's you're speeds above Mach 3, mach 4. You're defying nature in some way, exactly.
Speaker 5:Anything that defies nature has a lot of mathematics going around. Now back to your question. For mathematicians, it's actually because I am one. What I think is not the background, because I am fluent in Shakespeare English, it's because of what you're trying to explain. Okay, maybe, like, let me liken it to a dev.
Speaker 2:Okay.
Speaker 5:Talking to an agriculture enthusiast. Two completely different words. But they both come together because of tech. You do Now we try explaining HTML, the difference between HTML and CSS, to the farmer, and then you're like, like, I cannot use my language, because if I use my language, there is nothing. You'll get there now. Same to mathematicians. There's a level of speech mathematicians used between mathematicians and mathematicians yeah mathematicians and physicists, and then mathematicians and engineers yeah and then my summer, then mathematicians and engineers, and then mathematicians and non-academic people like, also like biology.
Speaker 5:Uh, neurobiologists used completely different terminology than mathematicians okay also, structure of thought is completely different when, when you look at it in a thought perspective, how they align their words, it's completely different.
Speaker 2:Absolutely so. At this point I thought the teacher is supposed to break this down for you. They didn't do a good job on that, or?
Speaker 5:We don't understand each other. Why? Because I was young, so that's a faction of my youth. I usually started because maybe I've not done an assignment. And then now the teacher says why have you not done an assignment? Because I know, so it's useless for me to do an assignment.
Speaker 2:Oh, you used to be that kid.
Speaker 5:I was that kid, so you don't do an assignment. Oh, you used to be that kid, I was that kid.
Speaker 2:So you don't do an assignment because you know the assignment.
Speaker 5:For what? Why do I need to do an assignment? Your curriculum tells you to test me. I am telling you I am already better than your curriculum. You are testing me for what? How?
Speaker 2:did that end up. You know it's very interesting to do that one.
Speaker 5:A few punishments, some few suspensions, because it was repeated, mothers were present. Parents had to be involved Because I was not listening to teachers and on the grounds of I understand mathematics better than them. I also bruised their ego, because back then that was, I was 16, 16 or 17 now, and then you're like a full-grown man with a family and then you're like a full grown man with a family. Then there's a kid here tells you, with your 40 hours of mathematics experience, can teach you mathematics.
Speaker 2:But did you do it actually, or it's just a matter of exchange of words?
Speaker 5:No exchange, because if I did it physically, wow, it would have been chaotic.
Speaker 2:No, I mean I had a friend of mine that I keep referring to. He used to solve math in his head, so he has done math, I don't know, a couple of times, or he could really picture the math. Then if you made a mistake in the flow, you would not.
Speaker 5:Yeah, he'll sing aloud, so for him.
Speaker 2:He could not say you know, I know that he was my seatmate. He always pointed out like oh, there's something wrong there, maybe check it. You change that, everything flows. And actually most of the teachers consulted him with love. Did you consider that as an option?
Speaker 5:I was young.
Speaker 2:He was young too.
Speaker 5:I was not exposed to that type of communication channel Because, mimi, back then, now there's a sense of pride. When you're doing academia, anything complex, there's a sense of pride that comes along. I was young, pride took.
Speaker 2:So you didn't know how to express the knowledge.
Speaker 5:Yeah, exactly, and plus, a big problem was I was blunt. I didn't know how to break bad news to people, anything negative.
Speaker 2:Yeah. So let me now ask you do you think maybe how people learn in school should change A lot, and how would it be better should?
Speaker 5:people do homeschooling.
Speaker 2:Should people not even homeschooling?
Speaker 5:like the biggest problem, even with it for curriculum, is an interested teacher teaching an uninterested child. Now, like even now, child. Now, like even now, let's say in uni, can you like even in your social group, ask, like, do a random survey how many people actually passed exams because they learned? Or they passed because of their education or they did something illegal. That's why there's a high unprofessionalism rate.
Speaker 2:So people do not really pass exams because they are learned. There are other factors.
Speaker 5:A lot, but now no one is ready for that.
Speaker 2:The percentage that passes, because they learned. Where would you put it?
Speaker 5:At maybe, let's say, 2% 2%. Maybe 1.5.
Speaker 2:1.5%, not even 2%.
Speaker 5:Nah, 2% is a lot, because the people who a lot of people my age back then, when we were doing campus even you, you had ambitions, you had you wanted to learn this and that you get to campus You've been told to do something that's not completely related. And then now the lecture. You ask you know campus? Most people think they can question why do, why do we do?
Speaker 5:this why do, maybe? If it's coding? Why do you use HTML? How did you debug this? Why do, maybe? If it's coding? Why do you use HTML? How did you debug that? The teacher tells you now the lecturer, you finish your exams and leave.
Speaker 2:I'm not paid enough to explain this. I didn't say that.
Speaker 5:Because, yeah, the topic we're talking about what?
Speaker 2:is the excuse, because some of the guys who taught me are from Yale, others are from Stanford ah, no you know, went to you know big big Ivy League schools and the approach was different a bit.
Speaker 5:Completely, yeah, completely the problem with Kenya is corruption is very, very, very painful for you to pass a driving test you have to charge some money you have to, it is mandatory but that has changed for us now for a while let's hope so it has improved.
Speaker 2:You know one thing also, and I need to say the way it is corruption is everywhere. It's not just.
Speaker 2:Africa or Kenya, but in Africa it's put in a way that it doesn't really even work. You know, because also I feel like tipping is a form of depending on if you tip before or after is a form of streamlining things for you, because if you've gone to the US, actually tipping is a form of streamlining things for you, because if you've gone to the US, actually tipping is a culture. If you don't tip, you're considered rude.
Speaker 2:So here in Kenya buying someone chai, which is considered corruption. If it's put well, it could be tipping, like you know, maybe this guy doesn't earn enough. But now the problem is. Let me give you the problem where I see it. If you don't bribe someone, they might put you in a very difficult situation, to an extent that it might cost you even a life.
Speaker 5:Let's use the term forced tipping.
Speaker 2:Oh forced tipping.
Speaker 5:Yeah, you're forcing me to tip you or I'll use my power against you.
Speaker 2:Now, that's pure corruption, pure.
Speaker 5:Because now if you check, let's say, government offices, passport At least it's changed, but even government itself admitted you can go two years straight without tipping. Without no first tipping, two years straight you don't get your passport. Let's say you are traveling to India as a medical tourist Two years you're dead.
Speaker 2:I mean, yeah, there's a discussion there that some services you could have the normal process, that if it takes three weeks, it takes three weeks, yeah, but if you want it for two days or three days, maybe you pay a bit higher to be facilitated. Exactly yeah, and it should be very pure. I know, if I want to get my passport in one day or whatever service it is, it's officially, it is taxed, it's a revenue generating process and it's quite out there.
Speaker 5:If it's public, so long as it's public, I feel like that will address some of these shenanigans. The problem is internally at the government offices. They will hike.
Speaker 2:That tipping Exactly All right, all right. So, titus, you are a person who is really interested in the money markets investment, venture capitalists, startup founders, ceos and you have a lot of curated knowledge around. This helped with your mathematics background and liking. I think that's the next thing that we should discuss in this conversation, but ideally, I wanted to know, particularly after Form 2, were you able to progress to Form 3, form 4? How did you perform your KCC?
Speaker 5:Actually, I never did my KCC. I got to a private school. Getting to a private school, I switched from 844 to IG. I became double interested. After now I'm double interested. Now I talk to my parents. I, I want to do advanced level. Mm. Mathematics. My dad wanted me to do a medical course. Mm Tried it. Mm. And it turned out well. Yeah. Because I I actually realized, other than curiosity, you need strength.
Speaker 2:To do medicine.
Speaker 5:Yeah when.
Speaker 2:Where were you doing this medicine?
Speaker 5:I was doing KMTC.
Speaker 2:Do you do medicine or clinical office or whatever?
Speaker 5:Not medicine Orthopedics.
Speaker 2:Orthopedic.
Speaker 5:Yeah, I was doing, I don't remember something related to bone. Okay, now the problem is, I have to work with dead people.
Speaker 2:What are you doing with dead people?
Speaker 5:And I am an academic. I also asked myself the same question you teach me here. Why are you taking me to the morgue? I'm going to do a Zoom class.
Speaker 2:Okay.
Speaker 5:You need to have direct contact with the situation. I am okay.
Speaker 2:Are you afraid of dead people? I'm not afraid.
Speaker 5:I just don't like them seeing them on a Monday morning. No, wait a minute.
Speaker 2:You know this is becoming interesting. What I understand is all medics may be the lower medics, like nurses, and you know the pedic and clinical officers. Uh, to the doctors and phd, most of them learn through dead peoples that they can transact them and what you know. Just see the real that. I mean go deeper in that person, right. If it's the pain, you're told it's your altar, you're showing the outer it comes from. Yeah, in that person, right. If it's the vein, you're told it's the aorta, you're shown the aorta where it comes from.
Speaker 2:Yeah, where it's from this person died because of heart attack. The heart is opened up. You're shown where this clot happened. You know for practicality yes, exactly. And in high school I remember we used to dissect frogs right. Frogs, yeah, or rats, yes, exactly. So why would you have a problem with that way of learning?
Speaker 5:No, the problem is I just don't prefer looking at dead people Monday morning.
Speaker 2:But Tuesday morning you can look at them.
Speaker 5:Let's say evening.
Speaker 2:In the evening. What is the logic around this?
Speaker 5:I didn't have First. There was a time that I realized I could not do medicine, anything related to medicine, because that's still. I wanted to pivot from bone to neurosurgery, but do they do?
Speaker 2:neurosurgeon.
Speaker 5:Nah, I don't know yet.
Speaker 2:Of course they don't. That's a specialization. You have to do medicine for five years and then you specialize in neurosurgery.
Speaker 5:Yeah, as you've said, dentists, doctors, nurses they still learn the entire human body.
Speaker 2:For sure, but you see, you wanted to specialize.
Speaker 5:Yeah, no.
Speaker 2:No.
Speaker 5:Yeah.
Speaker 2:Obviously that's a specialization.
Speaker 5:I wanted to pivot, but now that's not pivot.
Speaker 2:That's specialization. Pivot is where you stop doing this. You can come back.
Speaker 5:I wanted to specialize, but now it didn't make that sense, because you cannot pivot that. You cannot specialize from that far angle. You are learning everything from born and then now you want to study.
Speaker 2:Neurosurgery. So wait a minute, there's something you have said there that is very interesting. So nurses also have neurosurgeons.
Speaker 5:No, not to that level, but they still learn the entire human body, human anatomy, everyone entire human, body, human anatomy. Everyone learns human anatomy. And then, after now, fifth, fourth year depending on where you are, I'm sometimes seven Fifth, fifth, mostly it's fifth. Now you decide where you want to specialize. It's dentistry, neurosurgery, cardiology, oncology, depending on now, someone who is learning. But me, the person I met was someone who came with very, very bruised, let's say, to a practitioner. It will be interesting, an interesting case, yeah.
Speaker 2:Dead body.
Speaker 5:No, not dead. Almost the guy was snoring but was unconscious. Now you have now where is the snore coming from? And then now the doctors know, the nurse know, they know where it's coming. Now you're asked. This is a great learning opportunity.
Speaker 2:I'm interested in the answer that you gave.
Speaker 5:I wouldn't give that answer, but it was completely different. It's not even a medical answer but they were saying now come closer. This is a great learning opportunity. Interesting cases like this don't arise. And then, I'm like we should not expect interesting cases. And then now I'm looking at the guy. The guy is bleeding, snoring, unconscious. It's a big accident and I'm like, by the way, medicine is not necessary. I am young, I have parents, I can learn something else. Actually, I did it because of my dad.
Speaker 2:Ok, not that you're interested in it.
Speaker 5:I was, but if it was medicine, I wanted to get into clinical practice. Clinical practice is getting to the academic part of it. You're doing, maybe, comp science. You're doing a doctoral in comp science. Now maybe you start doing something to do with philosophy. You shift from actual practice coding now, like now, doing the philosophy of compliance same to medicine, you shift to now being the erotic exactly now you are coming up with equation, not new equations, some do, I don't.
Speaker 5:You know, there's a beef in our community, uh, let's not get into that beef. But let's say some biologists come up with equations, some come up with cure, a new cure. But now, when you're coming up with a new cure, you see you're not treating someone and you cannot try the new cure on someone. So now that's a lot theoretical. Now, clinical scientists, you're actually now becoming an actual scientist, because that was my goal before I went.
Speaker 2:So did you do that?
Speaker 5:I will do it.
Speaker 2:Or it's something that is in the process.
Speaker 5:Yeah, I got into finance.
Speaker 2:Okay, how did you get there? Because that's actually the main topic.
Speaker 5:Yeah, the main topic of today.
Speaker 2:So did you leave that school altogether? I didn't leave.
Speaker 5:I got interested in finance back when I was in form 3, form 4, form 3, because I did. I did graduate. Let's say it's what I got interested into how the market moves. Now, when you say you've placed an order, what does that mean now, like when you've placed an order and then the market goes up. How does it go up now? Like the opposite of it, it has gone down. How exactly has it gone down? What is market sentiment?
Speaker 5:What is fundamental analysis, because also in economics you do a lot of sentiment analysis and fundamental analysis. Now I was interested. There's a guy, it's called Abdi. Now Abdi was doing Econ back then.
Speaker 5:And then telling me if you get into Econ, I'm sure you'll innovate something. Because back in high school I was very, very innovative. I had a friend we're still solid. He's called Amfrey. We were trying to build a pyramid, literally, from the resources that the school provided. We were trying to build an actual pyramid, or try to create a model that will resemble the intricacies of pyramids of Egypt.
Speaker 5:Yeah, they are very, very, very challenging Because no one up to date we still don't know how exactly. Because you look at the size of the stones, you look at the level of technology back then and then like how did they get it up there? Like they were using pulleys, but how long is that pulley? How big is that pulley? Because if you look at the size of pyramids, those things make humans look like ants.
Speaker 2:Now, from a couple of theories around that that have been prompted by so many theorists and mathematicians, but ideally it can be done and it was done.
Speaker 5:Exactly, Exactly. That's also my. I live by that how it was done no one has established that. But it was done.
Speaker 2:But the evidence is there, so it was done Exactly.
Speaker 5:Because if you look at when you're doing numerology, study of numbers, there's a lot of correlations. When you're studying the pyramids, there's a lot. It's the center of something. It's the center of I don't remember, I don't speak, what I don't know, Like what I cannot ascertain. Now for us, what we are trying to do with Humphrey.
Speaker 5:We were trying to create a model that will equally distribute force to the entire structure Because we assume inside the pyramid there is no pillar or pillars holding the walls. It's literally a triangular way of arranging stones Big, big stones. But if you look at weight distribution, it's equal how? Where Egyptians? Because up when the conspiracy theory comes, it was built by ancient aliens, it was built by Stuart, immunology, that stuff, but I actually don't believe it, it's just that white people.
Speaker 2:What do you believe?
Speaker 5:for that. White people don't believe black people have that type of IQ. Kwanzaa, if you've been to the states you might have experienced it. There's a type of superiority it's called white privilege.
Speaker 2:Yeah, that's a huge statement right there but let's move away from that, because, yeah, sounds like you're saying what you believe.
Speaker 5:That's a huge statement right there.
Speaker 2:Yeah, but let's move away from that, because Shift shift, yeah, sounds like you're saying what you believe and others believe something else, yeah, yeah, yeah. It becomes a fight of belief which no one wins.
Speaker 5:No one, yeah, yeah.
Speaker 2:Can you briefly explain what a VC termsheet is and its importance in the investment process is? And?
Speaker 5:its importance in the investment process. A VC term sheet is an unbinding agreement, the same way you can talk with your friend over dinner, over drinks, over coffee.
Speaker 5:Talk about I want, I have this business we want this much for this much, and this might be your exit strategy. Now the other party becomes interested how exactly does someone fund you? And now, let's say you've been funded, what will govern the funding? What will govern that relationship? Now the VC term sheet. Let's say not VC, there's a term sheet. Term sheet is literally an unbinding agreement of discussing how much who has control over what. When voting rights, you're speaking of liquidation preference. You're speaking of Some might not be that complex, but now when it's a VC term sheet, because there's a term sheet, a bunch of papers. Now, when it's a VC term sheet, most likely it will be very, very detailed. Now for the term sheet, its importance. It will give a preliminary of the relationship, how, you personally, we are speaking.
Speaker 2:As a founder or a CEO.
Speaker 5:As a founder or CEO are you willing to accept my terms? Okay. Before we sign anything. Yeah. Before we sign anything. These are my terms. I've laid out on the table. Let's talk about liquidation. Liquidation preference it's more of when I am giving you money, I will put a clause that will say I, I will not give you, uh, I will not take back. I will not give you. I will not take back any amount, that is 1x, 2x, 3x my initial investment.
Speaker 5:So, if I've given you, let's say, $10, you'll put a clause, as there are two people the fund owner and the fund receiver. Fund owner is now the VC. The investor. Fund receiver is now the founder CEO.
Speaker 2:Or the company, or the company.
Speaker 5:Now fund owner will put a protective liquidation. It depends how you use it. It can be used as a protective provision, but industry standard it's not being used currently okay, because a lot of fund owners started using it as a way to hurt financially these young now these big companies or startups, startups that have made like literally good amount good returns, because a liquidation preference will say I'm giving you $10, I will not accept anything less than $10.
Speaker 5:When and if I'm selling my, if I'm selling my shares, I'm selling it to any investor, I'm selling it to the market, I'm selling it back to you, I will only take 1x. If it's 2x, I'll take $20.
Speaker 2:Now, if you now and most of the time it's not 1x time it's not 1x.
Speaker 5:Mostly it's not 1x. People don't realize it.
Speaker 2:So what is the average? Is it 2x, 3x, 4x Average?
Speaker 5:should be 1x. Average should be 1x.
Speaker 2:Should be, but what is it?
Speaker 5:Because mostly what I've seen they're doing 2, 2.5. Because imagine you've been funded, let's say $1.3 million, you are returning 2.6. Yeah. What will you be left with? No, I mean it's a debatable kind of yeah, it's very, very Because at the end, of the day, before I give you money.
Speaker 2:There's what you promised me Exactly. I'll get maybe in X years, right?
Speaker 5:Yeah, yeah, yeah, because at the end of the day, before I give you money there's what you promise me exactly I'll get, maybe in x years, right?
Speaker 2:yeah yeah, do you think maybe founders over promise, uh, sometime they are a bit angry and they will just want money. They overlook some of these things. What goes wrong? Because also, maybe I'm thinking from both end the investors yeah they are business people. You want to put in money and make money more money, right they want to make more money?
Speaker 2:yes. Are they too also greedy, right? Yeah, would they maybe be reasonable and say, okay, especially where the developing markets maybe take 1.5? If in the developed market they are taking 2.5, they should maybe, in developing market, consider to lower that expectation so that it doesn't hurt the founder Also, for the founder, are they over promising? And then by the time they are liquidating or maybe they raise the next round, they find, whoa, this money, I'm raising it, but almost all of it I'm giving it back to the first investor or seed investor or you know series A, you know. So please expound where, where does it go wrong and how can you do this the right way, even with a VC term sheet?
Speaker 5:First of all, like when you're funding a startup, it's a lot of guesswork, like literally. I won't lie because I've been. I've done a lot of financial models. Valuation yeah, it's evaluation for startups yeah, there is different ways to value a startup, yeah, so you can use the vc method, you can use trading comps, you can use DCF I'll expound later on those but the problem, the core problem, is your financial slide, not you, because most of these founders so in Kenya are usually non-financial and even if they are financial, they are not technical. So we have one problem the team is not matched. There is no founder market fit. Founder market fit is the company you're investing in as an investor.
Speaker 5:You're asking yourself do they have the type of talent to manage corporate stuff, to manage financial stuff, to manage product development, to manage marketing stuff, business development, legal stuff, exactly? But now, you see, at this early age, people don't have finances to bring all these people on board. Now maybe the perfect combination for now will be one financial, one tech person, one financial person. Now let's say the problem is the founder is non-financial and a tech person. The founder will rely on estimates from Excel. Excel, like forecasting. Maybe you've made maybe some sales, three, four months. You've made some sales and now you think that will be the rest of your life.
Speaker 2:How are you able to tell if the future doesn't look like that?
Speaker 5:Now there's a couple of ways you can do sensitivity analysis. You can do whatever.
Speaker 2:But now you're not financial, so how do you do that?
Speaker 5:Now that's the problem. Now you're not financial, now you trust your gut. Your gut is telling you.
Speaker 2:But how do you do it the right way? Do you hire PwC? Do you hire KPMG?
Speaker 5:You can All this. All this you can if you're non-financial and you don't have the resources. I'm assuming you don't have the resources, of course. That's why you're raising the resources.
Speaker 2:That is the obvious thing. How are you raising funds if you have the funds?
Speaker 5:So now let's say you don't have funds. You know why have you taken the liberty to teach yourself this stuff?
Speaker 2:So now you have to learn about economics.
Speaker 5:If you are not ready to learn about economics, don't start a company.
Speaker 2:Oh, that's a big statement.
Speaker 5:I usually tell portfolio companies I work with a couple of portfolio companies I usually tell I can get you a job, go do 9-5. Startups have a lot of stress.
Speaker 2:I cannot advise you to start, but there's another way to look at it, because from the when the world was created, you can't learn everything. Why don't you hire an expert in this? There are people who have done economics. There are people who have done up to PhD. Yeah. And they know ins and outs of these things. Yeah, especially financial things. Why not hire those guys straight up, or even give them some equity to be part of the team.
Speaker 5:Yeah, but now, yeah, that's very, very. That's a good way to bypass a problem. You've only bypassed, you've not, you've not solved, you've not solved why.
Speaker 2:Are these guys going to screw you up? No, not even screw Not even screw you.
Speaker 5:you are their leader now, sindhu, you are their leader. These guys are. You've gotten the perfect team. You've gotten the financial people and you've gotten people on tech development, yeah, marketing and all these teams. You've arranged, so you understand nothing about finance, about these teams. Exactly. Let's say you understand maybe two of them. You understand marketing. You understand product development. You don't understand marketing. You understand product development. You don't understand legal and financial. Now, the biggest problem is it will cloud your judgment. You might have cash, but you're not liquid.
Speaker 2:But your financials will say you're liquid, but actually what is having cash and what is liquid?
Speaker 5:Being liquid is being able to purchase anytime, meeting your debt obligations as they are due. So say now to mean immediately.
Speaker 2:And when you have cash and not liquid, what does that mean?
Speaker 5:You have maybe cash that you can't spend. Exactly, you have very, very, very good. It's called account receivables. Account receivables is money coming in, like Netflix. Let's say, yeah, netflix For Uber, upon Uber, you pay on the spot. Or if it's, let's say yeah. Netflix, netflix, uber, uber, uber. You pay on the spot, or if it's, let's say, uber corporate, Something.
Speaker 2:So they have to pay at the end of the month or maybe mid month.
Speaker 5:But you have to pay everyone every week. Exactly.
Speaker 2:So that means the money that is coming in from other guys which is not much, maybe assuming which is not much, maybe assuming you have to pay now this corporate and then wait for the corporate, exactly.
Speaker 5:You're not liquid. Remember, you're not liquid. You're depending like it's this water. Let's use an example that will create a visual image. You are waiting on a tree like a fruit let's say avocado. You are. You are waiting on tree like a fruit, let's say avocado. You are waiting for an avocado to ripe for you to sell it. But if you have a customer now, that means you don't make that money you don't make that money.
Speaker 2:I get you you are getting.
Speaker 5:Yes, there are petty stuff when it comes to financials. Okay, now this comes when. Now you start doing that, but when you're in school, you learn them at an advanced level. That's why I prefer learning as you go. When you get the perfect team. Let's say you have the tech person, you have, you're an un-tech, you're an un-tech, and you have financial persons. This, let's say technical jargon. Let's say development, because development is something that's considerably highly abused.
Speaker 5:I saw you did once a website for one month, and then now you're telling me you'll do the same something that looks the same to my eyes, in three months. You are screwing me, you want more money, but now you remember, this looks the same, but one is a web app, one is a website.
Speaker 2:So you are saying it's very important for any founder to understand two things, Especially if you're in tech understand tech, understand finance. How will you make money for it If you're in? Agri-tech. You need to understand agriculture, technology and finance Exactly.
Speaker 5:If you're starting any company, you know there are the passions, the burning emotions. You have ABCD, abcd. Yeah, that's very, very, very good. But remember, even if you bring me on board, I am not eating your passion, my wife, I need to.
Speaker 2:You need to pay rent, you need to pay school fee, you need to take your girlfriend out.
Speaker 5:First of all, women are expensive. And then you're telling me that you have passion. My girlfriend is yapping there, needs makeup. But why do you take a girlfriend with yapping but needs?
Speaker 2:makeup. Then I'm looking at you, but why do you take a girlfriend? With yapping but you'll talk about that. So what does a fully diluted post-money option pool mean in the context of a VC term?
Speaker 5:sheet Fully diluted option pool, post-money, post-money. Let's break those words, because that's a sentence. Let's start with post money. There's two things there's pre money and there's post money valuation. If you have a pre money valuation, that's, let's say, let's do a one-on-one.
Speaker 2:I'm the VC, you're the founder, or I'm the founder, you're the VC.
Speaker 5:Whichever Now'm the VC, you're the founder, or I'm the founder, you're the VC. Whichever works. Now let's say you have a company. You are looking for a financial person to do your valuation. Now for financial. You ask what's your premium valuation? You come to me, I give you the math. I say your pre-money valuation is 1.25 million Average.
Speaker 2:Pre-money, that means I've not given money as a VC I've come in, I'm interested. So I ask where are you right now?
Speaker 5:Exactly as we speak.
Speaker 2:Yes, you say 1.25 million versus USD.
Speaker 5:USD, yeah, that's where startups range.
Speaker 2:Yeah, 9.50. To 1.25. To 1.25.
Speaker 5:Yeah, maybe when you have like. Maybe let's say APC. Yes, apc is Advanced Purchase, see in the advanced purchase commitment. Let's say you have a novel product and then you have people interested who are on the wait list to buy your product.
Speaker 2:Especially in hardware.
Speaker 5:Now, you see, you have already some commitment. You have commitment. What you're lacking is money to fulfill commitment. Now you can give me money to fulfill this commitment and then now we'll talk about investing, but you as an investor. If they've gotten these people, they can get more.
Speaker 2:They're serious people.
Speaker 5:Now you stick around. You say what's your pre-money valuation? You're not the financial person, You're a financial person. Come to me what's my financial, what's my pre-money valuation? He said, for now say 2.5. Why.
Speaker 2:That's a financial person advising you. So they are telling you to balloon where you are Exactly so that you get even more.
Speaker 5:Exactly. And then now you ask why are we doing?
Speaker 5:this. Why? Why, I don't know. We will back it with APC, the contract that we have Once they become purchasing client. Risk is equal. Lord, remember, in finance there is two things risk, time, value of money A dollar now is worth more than a dollar tomorrow. Risk, return the more you risk, the more you return. Now, in this current situation, you have APCs. Now you're asking me why? Why are we backing them against APCs? And then I'm telling you, look, there is risk and return. The investor is risking this much for this much. But remember, these APCs are de-risking the company. Now the investor, even if he pays money, will be risking less, but for more, I hear you, but won't they give you more?
Speaker 2:than what you are making, do they tend to give you less For valuation.
Speaker 5:It depends that totally depends on your negotiation skills. They can give you more depending on how you negotiate. Because now I've backed my argument with an actual fact and I've told the investor you are getting bigger piece of my company for less, for less risk. Now, alternatively, you do with another startup, you'll for the same risk. You'll not be sure of return. Now, here I'm guaranteeing 20 to 40 percent. Your money is back. That's leverage. Okay, now, once you the investor, here is now interested.
Speaker 5:Leverage Okay Now, once the investor is now interested. You know these things right.
Speaker 2:When they have a panel of negotiators Exactly and a math guy like Titus, yeah, yeah who is willing to do all the math to make sure that they get a big piece of the company, exactly.
Speaker 5:Now what they come to argue is what clause do you have, remember? You cannot share any confidential information. Memoranda, it's called cim a bulk of companies, documents that are confidential instead of confidential information or confidential documents. Information. Confidential document in a coyote memoranda. Now the customer list strategy.
Speaker 2:You cannot share or you have to share. You cannot share With who?
Speaker 5:You cannot share with the investor.
Speaker 2:Okay.
Speaker 5:If there is no letter of intent. Letter of intent comes later on, but it comes on later on in higher stages.
Speaker 2:Yes.
Speaker 5:Of funding.
Speaker 2:Remember Higher stages means that the discussion is close for you to receive the fund or there is stages of funding. Remember higher stages means that the discussion is closed for you to receive the fund.
Speaker 5:There are stages of funding. There is precede Precede. You're looking for money to create a company to validate the idea. You have an idea, you have a prototype. You're looking for, let's say, to 50k to 500k for validation.
Speaker 2:USD or KTX USD.
Speaker 5:Everything I'm saying is USD. So you're looking for, let's say, 250k to 500k for validation, then you've gotten it.
Speaker 2:You're going now and at this point you don't give any equity.
Speaker 5:At this point you give roughly, depending on how good your negotiation is and how you've funded the funding round funding cycle. You give roughly 7.5% to 15%. Depends on you and also your budget, your internal company stuff. Now you've gotten higher. Now, let's say you are looking for seed, seed round. Seed round is you have a product, you have a market, you want to service the market. Now you're looking for money to sell more of what you have. You get it. And then now you go to let's say Now you're looking for money to sell more of what you have, you get it. Yeah. And then now you go to, let's say, series A, the next round, series A, you are looking for money to scale. Remember there's a difference between growth and scale. Scale is increasing clients without increasing CAC. Cac is Customer Acquisition Cost. You are increasing.
Speaker 5:Let's say, getting an imaginary number Getting a client costs 80,.
Speaker 2:Let's say $20.
Speaker 5:That the amount of marketing, the amount of meeting logistics of the salesperson and the amount of salesperson he distributes equally for the entire month and it costs $20. Now your customer acquisition cost it's at $20. Now for you to scale. You need to increase number of clients. Customer acquisition cost it's at $20. Now for you to scale you need to increase number of clients without increasing.
Speaker 2:The number of cac.
Speaker 5:Cac Happen to Shideiko More clients.
Speaker 2:More expenditure.
Speaker 5:More expenditure.
Speaker 2:Yeah, so that is not always accounted when people are talking about how they will grow the business. That's also another problem.
Speaker 3:In that number of like these. We need these. X is not always accounted. When people are talking about how they will grow, the business.
Speaker 2:It's not in that number of like we need this X because of this expenditure Exactly? Why is it not accounted for if it's well known?
Speaker 5:Now you know how to put it into the conversation.
Speaker 2:The way you ship it.
Speaker 5:Exactly Everything in funding, everything in investor negotiations. That's why there was a time I was very, very poor at negotiations. You. Totally. I was very, very. You know you have to start somewhere and you'll not start at point A. You'll start somewhere at 0, 1, 2, 3. You're getting, but what I realized is depending on how you structure your deal, that's everything. Yeah.
Speaker 5:You can get funded of over the counter. It's called over the counter. Over the counter I have portfolio companies who have been funded over the counter. They call me Investor may say maybe CD Tell the counter. Over the counter I have portfolio companies who have been funded. Over the counter they call me investor may say, maybe cd tell them, maybe cd.
Speaker 2:I can say maybe cd. Tell them, maybe cd. So is this on a call? Is it on a call?
Speaker 5:like literally on a call yeah, I'm a what's up, what's up text. Okay, I'll call you like investor may say my abcd. We have him ABCD Investor and I change tone. I say hi, he says ABCD. You reply ABCD Because at negotiations, remember, you cannot make a good deal with a bad person.
Speaker 2:So a bad person will always remain a bad person.
Speaker 5:Don't try to sugarcoat it, I'm blind, so they remain a bad person. Don't try to sugarcoat it, I'm blind, so they're also bad investors.
Speaker 2:100%. And bad VCs 100% Is that what Africans have been getting, or African companies? Not even Africa, because I know of companies that have closed.
Speaker 5:Yeah, For funding. Evil is everywhere. Let's say that Evil is everywhere. Let's say that Evil is in healthcare. Evil is in government. Evil also is in investment.
Speaker 2:And all of those guys are looking for funding.
Speaker 5:Exactly.
Speaker 2:In one way or the other.
Speaker 5:One way or the other. And now there is another firm. It's called Kostla Ventures I listen a lot to Kostla, Now the founder. And now there is another firm. It's called Kossler Ventures I listen a lot to Kossler, now the founder. It's a very, very big PE fund. The PE fund is private equity. Private equity is investing in mature businesses, taking it to the next level. Let's say you're making 10 to 50 million AAR. Aar is annual recurring revenue. You are doing 50 to 100 AAR and you're thinking how can I convert this to like 300, 500, like other big companies? Now that's where you involve the PE fund. The PE fund will come in with the funding. They will come in with the strategies. They'll come in with the resources and the talent to actually get your business to the next level.
Speaker 2:Wait a minute. What do you think? Because I've also seen a couple of companies where there is funds and then the people who actually give the money they bring also the executives they bring all these people. Is that good or bad?
Speaker 5:Depends With what the people coming in PE funds can bring in. Executives. Let's say when PE funds invest in your company, starting need 20 to 50 million USD. Executive when let's say when PE funds invest in your company, starting need 20 to 50 million USD and upwards. Yeah. And that's not acquisition it's just funding.
Speaker 5:Yeah, it's funding, that's not acquisition Depends. Also, there are PE funds, like the biggest PE fund, kkr. Hey, that guy is no joke. That guy once had a bid for like 1.4 billion back then in the 90s. So that's roughly 15 to 16 billion.
Speaker 2:Trying to invest in a company Acquisition. Okay, acquisition.
Speaker 5:And that was more of a hostile takeover. Pe funds when they come, they bring in their people. Depends on what is their agenda, and if you were able to get their agenda earlier on, a PE fund can bring in their people to kill the company Incumbent management, not the company Incumbent management To take over. To take over Politically, to take over. When they take over, they fire people, change operations, shift the revenue, like literally everything. They change a lot of things You're getting.
Speaker 5:Once they've done that, they make sure the company is at its climax. They sell.
Speaker 2:Very nice. So we talked about post-money option pool. So what is you know this fully diluted post-money option pool? An option pool? Let's start with the option pool. So what is a you know this fully diluted post money option?
Speaker 5:pool, an option pool. Let's start with the option. Option pool is a way to motivate the starting team by allocating a certain percentage to them. Like 100%.
Speaker 2:So it's equity, equity.
Speaker 5:But it's not direct equity, it's an option of.
Speaker 2:So you can sell later or Hold.
Speaker 5:But, I will not give you an expiry period.
Speaker 2:So, as long as you're the company, or even if you leave and you have met all the conditions. They are called vesting. Yeah.
Speaker 5:They have to vest. I'll give you 250,000 shares Options not shares Options. I'll give you 250,000 options for four years. After four years, you will you as the owner, you will decide. Do I sell, maybe double the investment? I'm a hold and wait for more investment. True, now that's an option, a fully diluted option pool.
Speaker 2:Everyone has vested, you're getting yeah everyone now is including the founder no the founder has equity, okay, option pool.
Speaker 5:It's literally instead of me giving you mark, I'm giving you an almost near alternative to mark. Okay, because in finance, principles remain the same. Okay, we just change maybe one thing. It becomes totally different. Yeah.
Speaker 5:Options and equity are not the same. But option is literally a contract to give the owner the option to either hold or sell the underlying asset. Underlying asset is the equity of the company You're getting. Let me give you a more clear example. In finance there are derivatives. From the word derivatives, you are deriving a product, a financial product, from the underlying asset. If it's option, if it's equity, you are giving an option of equity. Underlying is equity. You can give an option for different things Commodities. You can give an option for different things.
Speaker 5:Commodities you can give, so commodities gold, oil, rice.
Speaker 2:Depends Nice, so how does this impact startup valuation?
Speaker 5:For fully diluted. They will have to Depends. They can come in and they need to allocate more shares. You're getting it when you're allocating more shares. That means also your money will be affected you as the investor, Because that does not exist for investment.
Speaker 2:It's a pool that is set aside.
Speaker 5:Yeah, that's not my business. I am coming in to give you more money.
Speaker 2:For what exists.
Speaker 5:What exists and then tomorrow I get more money, but now you will use my money to allocate more to your founding team. That's why a lot of VCs and investors want the option pool before they invest. I don't know if you can see that. But there are some cheeky founders who will always say it's done, but they've not finalized the paperwork. But you've finalized the paperwork on funding let me drink water. That happens a lot it happens when a lot of corporate litigation don't reach court people, a lot of people in finance want to settle out of court Arbitration mediation negotiation.
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Speaker 2:And if you listen to us, you want to support us. Let us know. If you want us to host you a guest who is a moving shaker in the tech ecosystem, also let us know. We'll make that possible. Today we are hosting Titus Ndeto Ndongo. Yeah, I don't know which is which, but he has so many names. But also he has a wealth of knowledge and he's sharing with us around startup raising money, his life in high school and primary school. He's a curious gentleman and you can hear even in his story. If you've not listened to the previous recording, just go there. Start from the word go and you get all this and understand who he is as a person, as well as the wealth of knowledge that he has. So we're talking about the valuation.
Speaker 2:You know, post, pre and, as well as you know, option pool, some of these that actually, when a startup is coming up actually tech you don't really focus more on what that means. They just want to build a product, especially for techies. You know there's a code run. Does it have zero bugs? Am I able to send a text? Am I able to to solve a delivery or erp solution for different businesses? And then when they raise funds, they realize, oh, we give the whole company to someone and the intention is all clear.
Speaker 2:Or maybe my employees are not motivated well enough. I need an expert who needs to be paid. So it's quite a mushy water to trend in. But some of this knowledge you're sharing actually gives some details into how do I prepare myself financially and even if I'm consulting a financial person, I'm able to actually articulate this person who will come in to give me this world of knowledge. Uh, there's been also rumors where, you know, finance people collude for the highest bidder to take over the company. There's also what you talked about AR, or the guys who bring the people, kkr, kkr who bring in the people. They take over the company. So there's a lot that goes on.
Speaker 5:Before we continue, kkr, do not bring in bad people. They don't run tax online.
Speaker 2:I did not say they bring bad people, but they bring people with intention, clear intention, and most of those intentions are always favorable to the founder.
Speaker 5:Yeah, exactly that's a good way of putting it, it's favorable to them.
Speaker 2:Either they're planning to take over or acquire the company or grow that company to an extent that it creates value and sell it.
Speaker 5:Both for the founder and themselves.
Speaker 2:Yes, exactly and actually it's good for everyone. It's just that it hurts the intention of the company. There are companies that have now started to just make billions of dollars. Maybe they make billions of dollars, but this billions of dollars is quite distributed to create wealth in different communities across the world and not to be concentrated on one point. But of course the investor wants to make billions. Maybe that's the intention they want to make more money to invest in more companies and for them, actually they're looking at it from the point of yeah, if I have more billions, I invest in another 50 companies.
Speaker 2:I've impacted the same community you're trying to impact and you take shorter time. So there's always that disconnect. But of course, at this point you are looking at how do we? You know, knowledge is power, how do we bring this into light and how these processes interlude with each other, and so and so forth. So these are series of uh conversations and we want to cover a lot of things around these, because everyone is complaining, everyone is frustrated, but no one actually sits down and asks wow, where do we start talking about these things and this? Is the place.
Speaker 2:Welcome back. So right now, titus, I want us to venture more into pre-money versus post-money valuation. As you said, most founders are not finance gurus to figure this out. So what is the difference between the pre-money and post-money valuation?
Speaker 5:Pre-money and post-money the biggest difference is if the investor has put in money or not. Let's get back to our example. You have the company, I'm your finance guy. You ask me investor, I'm in NBR this much. What is the pre valuation? How would I answer? I tell them, I ask, I tell you, go and tell them one to try.
Speaker 5:one point to five yeah yeah, and then Rudy, now what will be a post money valuation? And then one beer. That depends on the oxygen, on what am I saying Now for post money? It depends largely on the money coming in. If it's 1 million, post money will be 1 million plus 1.25 million. So it will be 2.25 million, If it's 10 million it will be 11.25 million, depending on the investment be 11.25 million, depending on the investment.
Speaker 2:So pre-money is assets, money you're making, the value that you're creating, the promise, the pre-orders, all that brought together. It might be liquid or not liquid.
Speaker 5:But that's the valuation pre.
Speaker 2:It's the pre-money that exists before the investment. Post-money valuation is plus. Now the investment. Now what is crucial for founders to understand the inclusion of the option pool in these valuations.
Speaker 5:For option pools. Inclusion is not on the founder's side, but mostly it's the main point of the option pool for the startup founder will be a way of financially motivating the early employees that took the risk with them Because maybe they weren't being paid that good, they were taking long hours for short pay. Some used their own money, stuff like that. But now the option pool, once it's set aside, it will hurt the equity budget. Equity budget is the budget you are spending on getting funding. Is the budget you are spending on getting funding. If you're looking for funding at seed level, your equity budget should be roughly 10 to 15. 10 to 15 percent For roughly seed 75,000 to how much? 75 to 100k at sea level. That's a good amount starting from there.
Speaker 5:Now when you do the option pool before the funds, you will get 7.5 million. It will be there. But now when you do after a piece of that, 7.5 million will be affected Because you will set aside the option pool at post-money valuation but the investor is investing at pre-money valuation. But the investor is investing at pre-money valuation. You're getting Now you'll take a piece of the funds, the percentage the investor had to give to the employees. Now most investors are not that generous when it comes to equity, because equity they are, let's say they are ways. They are ways Most founders think equity is control. Depending on this structure, Of the organization.
Speaker 5:That's not always the case. You can have majority stake.
Speaker 2:And you're not in control.
Speaker 5:Exactly.
Speaker 2:Depending on the percentage or what determines that.
Speaker 5:Close.
Speaker 2:What is close?
Speaker 5:What do you put in the contract? What did you put in the company by lose?
Speaker 2:now, that's where the legal comes into play, or?
Speaker 5:yeah, it's called technical, technical, a legal technicality.
Speaker 2:Okay so do you need to go and study law as a founder or do you need to hire a good lawyer?
Speaker 5:You need to understand it. Just read enough. Read business law. What I'm avoiding is once you've hired a good lawyer, you still do not understand legal technicalities.
Speaker 2:But you trust they will guard your interests.
Speaker 5:Yeah, till when.
Speaker 2:Until you stop paying them.
Speaker 5:Or when the funding round is roughly 100 million. That's how much in Kenyan shillings, that's more than 12 billion. Yeah, 13 billion, it's 130. Yeah. Now you are paying me 7 million per month. This guy is wanting to give me a billion. Bro, I love you, but you won't understand.
Speaker 2:So it goes to the side of the investor.
Speaker 5:Yeah, these guys come with floats. They come loaded, heavily, heavily loaded.
Speaker 2:So like how much does that guy pay? You Will double, triple it.
Speaker 5:Even 10x. You want this contract to favor us 10x.
Speaker 2:Ah how often does that happen.
Speaker 5:Depends on interested parties. The company has to have something that will entice attract that type of group.
Speaker 2:Yeah.
Speaker 5:Unona. Yeah, let's say, maybe you're creating the next Google. Oh. But you, as the founder, you don't know the revenue model, the business aspect of it. You know that model, the business aspect of it. You know that's the problem most tech founders? Uh, don't understand. Not all most tech founders don't understand the money part of their company.
Speaker 5:Remember, you cannot entrust these positions to everyone always because now, now, like the financial technicality being cash at bank, not cash at bank, being high on account receivables but low on liquidity Account receivables need the money you're being paid at the end of the month. Let's say you have 10 million of it. You have a contract now. You cannot fulfill it, because everything is on your OPEX.
Speaker 2:Can you take a loan?
Speaker 5:You can take a loan against accounts receivable.
Speaker 2:But, it will be expensive At all interest.
Speaker 5:In loans we use work Weighted average cost of capital. How much, how expensive is your? Loan at. That is everything. You can take a loan at 2-3%. That's okay. Now if you're given the retail at 14% of 100 million, that's quite a lot.
Speaker 2:Yeah, so how does including 15% option pool in the pre-money valuation affect the equity stake of the founders? Or what is the right percentage to really include for option pool.
Speaker 5:The average option pool is at 10 20 okay, so 15 is yeah median yeah now, uh, for 10 to 20. Uh, let's say, for 20 you are in love with your employees because Because now you have at least a lot of flexibility. But for 15, you are not that in love with employees Because, remember you, as the founder at series A, you should be owning 40%. That's the average. Okay, because a lot of guys call me to clean up their cap table. Cap table is a capitalization table. Who owns what when.
Speaker 2:So what if at Series A you own 30%? Is that really bad?
Speaker 5:Almost it's nearing bad, because the dilution level there it's roughly pretty good, because you might own less than less than 15.
Speaker 2:But here we are considering maybe we have one founder. What if we have two or three founders? How possible is it for one founder to own 40%, or is it a combination of all?
Speaker 5:If you're solid, if you're good friends, if you have the good work ethic, you can I've said, if you can own us joint.
Speaker 2:All founders should be able to have 40%.
Speaker 5:All founders. Yeah, that will be easier and it will loosen the belt. You get it Because remember, everything is at 100%. You have 40%.
Speaker 2:Already, you took away 15 15 plus 40 yeah 55, 55 you have, so the company still has yeah, you have now roughly 45 yeah you have one investor yeah at 10, 35.
Speaker 5:You have maybe what else, let's say 35 remaining.
Speaker 2:Precede maybe 7.5 gone 7.5 gone.
Speaker 5:That's also. That's how much 20, how much, call it 10. Call it 10. Now, when you at Series A, you are being funded roughly 5 to 20 million for most likely 15%. So that will mean you'll have to eat your investors. Am I will have to eat your people. Am I will have to eat yourself?
Speaker 2:Mostly yourself.
Speaker 5:Mostly yourself. What are you remaining?
Speaker 2:with or any angry you know person who is feeling like you know. I want to cash out. I want to cash out.
Speaker 5:I want to cash out.
Speaker 2:Yeah, that's the best person, so everyone has to lose at some point.
Speaker 5:Now, that's the problem. At some point in companies you have to take sacrifices. That's the issue. Yeah.
Speaker 5:Now, the sacrifice should not be that big to kill you. Don't take a sacrifice that you cannot handle. You're getting. Now let's say at series A, they've come in, they've given 20% for 10 million. Now everything now starts to like a small amount makes considerable change to leak. A small amount Makes considerable change. A small percentage. Now Assume you own. Let's say what If you had 10? Let's say you own 7%, this amount, you own 7% of your company.
Speaker 2:How easy of you to lose it. It's very easy because there's no control there. Other people have control over you, that's the issue. That's 93% worth of control. That's a big very, very big Even you don't consider, you just you're just an employee yeah, you're an employee, yeah, I don't so you mean that could even happen at series b, if you are?
Speaker 5:if you're not careful, because I usually advise my portfolio companies yeah clean up kwanzaa your cup table. Buy out as much people as possible. What does?
Speaker 2:that mean.
Speaker 5:Buy out is you have a lot of dead investors. You had an investor who paid 200,000. That's 2K USD.
Speaker 2:You buy it back.
Speaker 5:You pay 5,000. You have another investor.
Speaker 2:But they have to accept it though, and you're assuming that people will take their 5k for 200,000 not necessarily.
Speaker 5:They don't have to accept so what do you do?
Speaker 2:do you hamstring them?
Speaker 5:there are ways, please indulge me there are ways of forcing a buyout what ways? I don't want to seem like an evil person, but maybe for you to force a buyout with an investor is to offer a premium. Offer a premium is if they invested 2,000 USD, give them 10,000. For them to refuse, they'll have to substantially decline the offer with reason.
Speaker 2:So here you're suggesting that if someone gave x, you can double it, double it or, you know, triple it, just to make it enticing now you'll have, but the intention is to buy it exactly not because you love him, mama, it was.
Speaker 5:The intention is to lose dead weight you'll have a lot of dead investors. Your mom, yeah, your mom invested. Yeah, your bro invested. What value are they bring? Company? Because also, that's a thing I insist- Look for an investor in the same area as you.
Speaker 2:Because they will bring even knowledge, connections, network.
Speaker 5:If even anyone is bringing industry participants on the table that's huge, huge value. Huge value Kwanzaa, when you are young, huge value.
Speaker 2:How young can you be young?
Speaker 5:Young. Let's say you are making less than 10 million, that's 100,000.
Speaker 2:Oh, you are talking young money-wise, not the age Money-wise, yeah, not age.
Speaker 5:I know for age. I don't mind about age at all. Yeah. If you have the people behind you. Yes.
Speaker 2:That's what matters. Oh, interesting, so you talked about negotiation, that a founder should have to be able to get more from the investor. So what strategies can founders use to negotiate higher pre-money valuation? That doesn't include the option pool, because now option pool is one that attracts the option pool, because now the option pool is the one that attracts the dead weight.
Speaker 5:Yeah, the dead weight Lambda. Maybe you do make the negotiation inclusive, instead of making the investor feel you're giving, I'm giving money and then I'm stepping aside. Also, like, ask the investor rarely will they accept. Ask the investor to take up an advisory role, because the investor you're targeting also has different companies.
Speaker 2:So that should be one of the offering. If you don't take this, we lower down that option.
Speaker 5:It depends. It depends Because taking up an advisory role depends on the investor, because, let's say, you have an investor who's? Let's say, you're in MedTech and you have an investor in MedTech that should be a huge value. You should? Let's say, you're in MedTech and you have an investor in MedTech.
Speaker 2:That should be a A huge value yeah.
Speaker 5:You should. That should be a bargaining chip, because they'll bring in people. It will be easier for you to get into those doors via him than via yourself. Yeah. Plus. Now you're in MedTech credibility.
Speaker 2:Ah, okay, if this guy has invested in this exactly must be very important exactly that's just take the advisory role.
Speaker 5:advisory role, you know, there are roles covered, no matter how small it is, it does not change.
Speaker 2:Do you get paid to be on the board? Obviously.
Speaker 5:Because you are not coming to the meetings for free.
Speaker 2:So you mean there is sitting allowance? Yeah, sitting allowance, good food.
Speaker 5:Obviously boards must have good food. Any board meeting.
Speaker 2:Some giveaways. Those must be expected, but there is no salary, really Mostly.
Speaker 5:Some giveaways. Those are what you expect. But there's no salary. Really, mostly Really. Yeah, there is If the advisory role it's very, very interactive. Let's say you have an advisory role on legal. Okay, you know, you know a lot, okay.
Speaker 2:It depends with the time consumed in the role.
Speaker 5:Yeah, okay, so any other negotiation?
Speaker 2:skill. It depends on the time consumed in the role. Any other negotiation skill that you can share.
Speaker 5:Know who you are negotiating against.
Speaker 2:Do background search?
Speaker 5:Do not fear investors because they are giving you money. Most people are desperate.
Speaker 2:Okay With money.
Speaker 5:Ah, they will say speak. They will speak in a very, very, very ambitious voice. I do not care, I put in iron there. Let the guy sit at the table and then the investor proposes to call off the deal of a petty thing. The deal value is roughly 15 million USD 15 million is petty. Nah. Investors usually call off the deal over petty reasons.
Speaker 2:Okay, not the 15 million, Not the 15 million.
Speaker 5:You know this investor doesn't want to give you this.
Speaker 2:They want to give lower, lower.
Speaker 5:So now they are looking for reasons.
Speaker 2:Like which petty issues that investors are bringing on the table. Team, you're too tall, too short.
Speaker 5:No, that's very, very petty.
Speaker 2:No, you said the petty things, so I was thinking the pettiest of the petty.
Speaker 5:For petty, I'm meaning petty thing, so I was thinking the pettyest of the best. Fupueti are meaning financially petty. Okay, let's say you don't have an accountant. Okay. And then they start arguing you will not manage money Properly. The other rounds, who did it?
Speaker 2:Okay, what if maybe this is your series A?
Speaker 5:Series A is usually mostly series A in the price round. A price round is like there are more than three different people. You have an investor there. The investor will come with a team. You will come with your team. Let's say you're meeting two people, but in actual sense there are 15 people in the boardroom. He's giving you, let's say, you're meeting two people, okay, but in actual sense there are 15 people in the boardroom. Yes, he's giving you, let's say, 100 million shillings. Ah, yeah, yeah, yeah, you'll have to pay for it. Yeah.
Speaker 5:You will have to Because they will check everything, even your friends. Investors are very, very shrewd. For you to become an investor, most likely.
Speaker 2:So do they even hire FBI, cia, private investigators? Pay people around you to turn them.
Speaker 5:You know. Let me give a case study in the European market European market, a lot of people follow, not a lot. People must follow the rules. Now, a good background check will yield everything Crime records, school records, health records, offenses, court records and do you disclose it openly or do they do the investigation, or do they require to disclose? They will ask like legally Okay, they have to ask. Provide this yeah.
Speaker 2:That's why most people don't go to raise in Europe, I see.
Speaker 5:For Europe. Europe is a tough market. They will give. How can I? Yeah. But they will do their background checks, they will legally. They legally have to ask.
Speaker 2:Okay, we'll discuss this somewhere else, but that begs me to ask how did London surpass Silicon Valley? Is it because of Brexit? Now they don't have to abide by the European Union rules.
Speaker 5:To some point, I might say, the very, very, very laws you're putting in place to protect you are also a danger to you, because if you look at, let's say, food laws in European market, they are only buying only organic.
Speaker 2:Purely.
Speaker 5:Purely yeah. So now what happens? If you don't, Will your country starve to death?
Speaker 2:I have no idea. You grow organic.
Speaker 5:Till. When.
Speaker 2:Until you have surplus.
Speaker 5:Now. That's why most likely there might be a deficit always on balance of trade. They're importing more than exporting because of their laws they've put in place so in Europe you can only consume or sell them organic food nah, depends, depends on the region. You know, europe is very, very big. Europe is very, very big. Europe is a conglomeration of countries. Let's say a place like Quinteria, netherlands. Netherlands rarely take foods with fertilizer.
Speaker 5:Literally even when you're importing, when you're exporting to them within Netherlands, they can they can grow it and take it because they have control they have control over there what they plant the chemicals yeah now let's say what about Kenya?
Speaker 2:I'm curious Kenya imports? Kenya any guidelines there let's hope they are. You have not heard of any Stringent Stringent guidelines.
Speaker 5:I have not.
Speaker 2:Do you think they would be good for us? Very.
Speaker 5:Because now look at China. China was once the fake country. Everything fake China. Look at the lows they have.
Speaker 2:So you start gradually.
Speaker 5:You just open up but with time you tighten the ropes, Because for China what they did. I have a friend who exports to China.
Speaker 2:What does he export?
Speaker 5:Fresh produce, that's vegetables. I don't know vegetables fruits apples, avocado different types mangoes what else Sweet corn? No, it depends.
Speaker 2:And this is very interesting because in the couple of coming series we'll talk about, because it's kind of investment where you grow products, you add some value by packaging or washing and finding a good market and you export out value-added goods as a way of business, because, you know, most people think now, with the tech boom, everything is tech, which is not the case, because people will always eat.
Speaker 2:People will always party people always party. People always use clothes. You know there are so many other markets that are not tapped and we're exporting or importing most of those things, even within Africa.
Speaker 5:Yeah, even within Africa.
Speaker 2:So we'll get there and talk about all these opportunities that exist.
Speaker 5:On exports.
Speaker 2:Yeah, there are lots, even within Africa, actually.
Speaker 5:Yeah, even within Africa. Actually yeah, because that guy I was doing his numbers he sells $7.95 per fruit.
Speaker 2:That's a huge margin.
Speaker 5:That's 10x the margin.
Speaker 2:Even when you remove or subtract the logistics.
Speaker 5:Because the margin rarely is less than 15x.
Speaker 2:Oh nice.
Speaker 5:Really, maybe you're doing bad management, because a lot of guys this begs me to ask how did Twigger fail?
Speaker 2:Okay, I don't know if it failed, but why is it struggling to really make the difference? But this is not your discussion for today.
Speaker 5:Let me, let me, let me.
Speaker 2:I like this discussion. You're a private waiter, you know. This chief has analyzed all the companies that actually have failed. Yeah, at least in Kenya or in Africa, for you not to repeat it and actually has analyzed how the process was. That's why I like this. But let's go into the details and then we'll go to specifics later on for Tinga.
Speaker 5:There was interested parties. Interested parties, people who want to eat the company foreigners, investors, founders, let's not mention up, but you just know they were interested parties. People who want to like let's not mention up, but you just know they are interested parties. Okay, people who want to like eat the company. The company should benefit you. As an individual as an individual, indeed, you as also an employee, also a stakeholder, even if it's indirect employment.
Speaker 2:But they could have created the value and then eventually they will still eat if they want to eat, yeah but we in kenya okay in kenya.
Speaker 5:You will raise using western philosophy and theories. They are not applicable in kenya. Have you ordered? Trigger you personally. But that trigger you personally, but you tend to have your own.
Speaker 2:Let me correct that analogy. I buy it. I know them for bananas, right Green bananas. If there was a clear way, like the way you order at Carrefour or Naiva's, and then I could say okay, bring me two bananas. Maybe if I buy it in Kisii it's like 200. Maybe you sell me the whole thing. I don't know how it's called Bunch, Not even bunch. The bunch are attached to that.
Speaker 5:Oh the whole thing.
Speaker 2:You know, in Kisii when we travel we get it by 200 shillings. We'll get a good banana. Yeah. So if they do it like 400 and I can order it with an app and maybe pay 50 bucks for transport. Yeah, I'll be their first customers, but maybe it didn't look like I'm the target customers.
Speaker 5:No Before. Even I lose that same analogy. You've said at 450 for transport. Where are you getting this for half the price? Kisi. Kenyans are very, very unique people. Their habits put you in business. I'm going to put you out of business.
Speaker 2:Okay.
Speaker 5:Generally.
Speaker 2:Africans.
Speaker 5:Yeah, that's right, but let's be specific about Kenyans. Let's be people, about Kenyans, People I have interacted with. I'm sure there are guys, even you, in your social group they prefer buying bananas when they travel Because you know the problem with Kenya. Need businesses. Need businesses. They are not solving a problem, they are filling a need. Need businesses don't usually sell for long. They sell, but not for long. How many fake Jack Daniels are there in Kenya? I don't know.
Speaker 5:So let's say a lot. I don't know. So let's say a lot, Because there's, I had a case of it. They say a lot there are people manufacturing fake JD. There are people manufacturing fake Mac Mac accessories.
Speaker 2:MacBook, you mean.
Speaker 5:Accessories, not the Mac. You know the Mac. For you to fake it, you'll have to Use a lot of cash, because there's a lot.
Speaker 2:You mean like the mouse, the wires, the chargers and everything.
Speaker 5:Yeah, you get it. Also, like I've ever bought A fake cable, the type C one. Yes, a fake cable, yeah, yeah, but let's say Louis Vuitton, louis Vuitton. Louis Vuitton publicly announced they have not hit the Kenyan market. Your friends have LV clothes.
Speaker 2:But there are guys who go to Dubai and buy some of these clothes.
Speaker 5:Guys, there are very few of them here, Exactly, but on the market few of them. Yeah, Exactly, but qua market? None I got you there, I got you there.
Speaker 2:We'll talk more about that in another session. Same thing. No, I knew if we go to that route it will just take us off the rails. So any other strategy for a founder when they're negotiating.
Speaker 5:Speech be articulate. Be also financial savvy. No terms before you get into the meeting. No terms.
Speaker 5:Because investors like they're people also. People like to shorten stuff. They're not shortening it because they want to screw you off Like cack the investor might not like, want to prefer customer acquisition costs like 10 times. Just say cack. Maybe what else Negotiation be articulated? Do not answer questions you don't know or you're not sure of. It will bite you in the back. Two, three years, four years later you will have established you know investor relationships are like marriages. One party does something wrong. Use it in the future.
Speaker 5:Now that's the problem. You're getting into a marriage with this man, this woman, whatever they identify as, and then I'm keen. I don't want backlash.
Speaker 2:I see you're very inclusive yeah, you have to.
Speaker 5:Now you have these guys coming into the company and you switch talks with them with lies. The lies usually run out. They start asking Now, since we are together, you just tell me what was your evaluation. Were together. You just tell me what was your evaluation. You, because you think you are very, very good, solid people. You say that's a legal issue. You lied. You have admitted to the opposing party opposing council. You have admitted you lied. Let's say, you do petty, petty stuff like switching clients.
Speaker 5:Okay, exaggerating APC. Apc a lot nowadays, because for pilots, when you do a pilot, let's say of software, mostly it's free, but you're expecting the one you're targeting the pilot, they convert to the client of software, mostly it's free, but you're expecting the one you're targeting the pilot, they convert to the client. Now you can have the APC, your advanced purchase commitment.
Speaker 2:Can you repeat what APC stands for again?
Speaker 5:Advanced purchase commitment. Okay, Now it's just basically commitment.
Speaker 2:With bonus or you're just trying out the market.
Speaker 5:No, you are not trying For a client, for you to sign an APC with a client, the client has to know what I am signing.
Speaker 2:So they either pay some percentage or they pay in full or discounted Discounted.
Speaker 5:The point I am signing the APC is you will discount this software for this long by this much. Now, when I'm converting, if you are doing it at 100, I'm doing it at 50. I took a risk. You're getting the same. Now that's the purpose of APC. Now you can have, because APC is low market, low market crack. You can just, when you are here, have because APC is low market, low market crack. You can just when you are here, let's say you have maybe a software an ERP.
Speaker 5:Talk to some few guys here at the co-working space, Test it out your interests. Now you know you've spent considerably less on crack and you have at least a working model to show people. This. I've done this, I've purchased this, I've committed. These are APC. Now, that's very, very, very valuable information, but you cannot tell an investor. I have an idea. It has to be some MVP or yeah, has to, because you, as the investor or a prototype or yeah, it has to be a prototype.
Speaker 5:But now, since it's the Kenyan Market funding also getting for getting funding it's becoming tougher and tougher because of the failing companies. Uh, they say you have to have revenue. They they increase the bar you're getting. Now you have revenue, you have the prototype. You want to develop the MVP clearly perfectly and also convert the MVP to the full-on product. Also, you want to use part of that money to launch the stuff you're getting.
Speaker 2:This means hiring, exactly.
Speaker 5:Hiring.
Speaker 2:Acquiring customers.
Speaker 5:Marketing ad revenue office space.
Speaker 2:If you didn't have an accountant, you hire one.
Speaker 5:Yeah, you hire one, you get a good financial guy up there.
Speaker 2:You're using Futsubishi. Now you want to get yourself an Range.
Speaker 5:Rover. Yeah, yeah, also an Range Rover. Yeah, you're getting now the problem. Even with my experience in funding, uh, funding is not the issue. The issue is 10x in the return that's where most people fail it's not easy. People come come off with the market will. Will purchase the market will market will when.
Speaker 5:How long have you been doing this? It's only like three months sales. That's not reliable. For reliable standard deviation you have to have a standard deviation comes to play when you're doing the sales focused, using background from the patterns your three-month sales and then now when you are q3, q4 yeah you ask yourself how much? By how much have I deviated? From the mean. Yeah.
Speaker 5:Now that's where standard deviation comes into play. If you said you're expecting 10 million by Q4, by what percentage have you achieved that? Okay, now if it's like lower, you adjust your expectations. Now you see like, the market does not respond to your adjustments. Now you see, the market does not respond to your adjustments.
Speaker 2:So what are these trade-offs that you expect when negotiating a higher valuation?
Speaker 5:For trade-offs. Obviously you'll have to negotiate connections, because me, I prefer investors with connections, An investor who will give me money and then goes there, and then I multiply my income, you get it. Yes. There's the financial and financial set off, obviously. Uh, you'll have to give up equity, you'll have to give up a portion of control, you'll have to give up maybe a lot of your work-life balance, because, remember, this money comes in for it to become double, not for your Range Rover.
Speaker 2:And it will not just work itself. You have to put in some work, exactly.
Speaker 5:Now it comes in, maybe it also will require skills. It will require strategists. It'll require someone who is very, very, very good at exploring different markets sub is dev you're getting all this cost. You're getting, yeah, now the non-financial then and financial in your work life balance what about where the negotiations take longer Time? Also, time is a resource. Yeah. You know the shortest that you can get funded by a VC, it's three months.
Speaker 2:Because they have to do the due diligence.
Speaker 5:Filing, yeah, filing, because the biggest issue is not even the due diligence filing, yeah, filing, because the biggest issue in Akwaga not even the DD market research is your company actually making money?
Speaker 2:You have cooked the figures.
Speaker 5:Exactly Because I'm giving you my money, my hard-earned money, for what you know, I can't risk some things with you. Yeah, we're solid, we're friends, we're best friends. But I've given you money. You've done the marketing. Has the company actually made money? Will the company actually make money? Yes. Will the company actually make? Will product market fit? Yes.
Speaker 5:Because how can your VC earn a quagga? Roughly reluctant Will the company actually make? Will product market fit? Yes, because this is where VC is roughly reluctant. This money I'm giving is not mine either. I raised it. Investor wants a certain percentage. Irr.
Speaker 5:IRR is Internal Rate of Return. Okay, Internal rate is like how much percentage are you giving on top of the percentage that you've gotten? Let's say 10%. Let me start from the top. When you're doing a funding round in VC venture capital, venture capital, there are two peoples. There are general partner, limited partner. Limited partner is the investor, the one who brings in the money. But they don't have day-to-day running of the business.
Speaker 5:They do not interfere with day-to-day running of the business. They do not interfere with day-to-day. Yes, general partner raises from lp. Okay, lp, akikam akikam kwasin who is lp?
Speaker 2:limited partner okay, minimize the abbreviation, because in raising that's how you get confused by the investor. Before you know it, 90% of the company is gone. No, no, no.
Speaker 5:There are two people. There is limited partner, general partner in venture capital. Now background they are VC, qua. Limited partner he's the guy with the VC For a limited partner. He's the guy with the money. General partner he's the guy with the deal flow. He's the guy who knows where you will take your money. For example, a limited partner is a wealthy sovereign fund. A sovereign fund is Like Norway, dubai Family.
Speaker 5:Norway is the country. There is the royal family in Norway, same here, denmark. They have a lot of money. What do they do with it? They get in contact with now general partners. See, I have ABCD companies. If you can invest in them, I can guarantee this percentage. Now the limited partner gets interested. Now limited partner can be family offices. Family offices are like his family.
Speaker 2:Okay, they cannot afford.
Speaker 5:They cannot afford Can be a limited partner. Okay Now family offices you can raise from established investors, investors, accredited investors. Accredited investors is the accreditation that is given to investors past $200,000 mark by NEC, your New York Stock Exchange. They give you the accredited investor accreditation once after you've subtracted the money generating assets, you're still left with 200k yes after liabilities, everything work was what I have for me two hundred thousand dollars two hundred thousand dollars, yeah, twenty million.
Speaker 2:So today if you have like a million and decide to invest eight hundred thousand, you can be a be accredited as an investor.
Speaker 5:So you've invested, I still have 200.
Speaker 2:I've invested 800,000.
Speaker 5:After assets To our living expenses.
Speaker 2:Now I can invest 500.
Speaker 5:If you can comfortably invest 500, remain with 500, you're good Now you'll be able to access.
Speaker 2:That must be there, yeah, that must be there.
Speaker 5:He sees savings, he needs disposable income, he needs fare 10 million, something like that. Now for your accredited investors they get risky investments. Risky investments higher, higher returns. That's why people go after their accreditation. Now sasa they can talk to now like kama. You've heard of Uyu Jimi Wanjigi saying the sovereign wealth loan. I'm a bond sovereign wealth bond.
Speaker 5:That is a family, the UK royal family, loaning the Kenyan government. Now, once you hear the sovereign wealth, there's a sovereign, a conglomeration of people giving out money in a different manner. Now there is the family. There are established investors as LP. Lp is limited partners. There are now people who have it and don't know where to. Also, limited partners can be corporate. Let's say equity, Equity. Have a ton of cash lying around. Inflation comes. Inflation hits them higher than investing. Than they've invested, you know what I mean.
Speaker 5:So now mostly it's corporate venture. Okay. It's called that Corporate venture backed capital. It's a corporate venture. Okay, it's called corporate venture-backed capital. It's called CVBC. Okay. Now, a company like Equity gives you, as the general partner, this amount to develop the company and sell back to it. Okay, because Equity cannot start a company.
Speaker 2:They are too busy for that, yeah. Obviously, and that's not their main business and that's not their main business.
Speaker 5:That's not their main business, like the way they are doing their high on diversification. You know they're in health, you're getting, they want to go into agriculture, but they don't have a sustainable business model that can be absorbed by the core business. Yeah.
Speaker 5:That's why they are still angling areas of collaboration with different general partners and different entrepreneurs to develop the company for them. After the company is developed, now they can absorb it entirely as their own. Now that's corporate venture backed capital. And then for general partner general partner has deal flow. You have good deals, you have good companies, you have good innovative companies that can 10x the return. Now that's the general partner. General partner is responsible for day-to-day fund management, offices, offices, utilities, normal expenditure, payroll. They manage that. But now there is the model 2 and 20. 2% out of the entire pool goes directly to management. Now to pay salary, abcd, all expenses, and then 20% as carry. There's something called carry. If you agree with now the limited partner, if you have, let's say, I give you 30 million USD to invest in 10 companies, yes, and then I'm expecting back roughly 35. Yeah.
Speaker 5:Now you pass 35 million dollar, mark that you will return 50.
Speaker 2:Okay.
Speaker 5:Now you're like aye, we talked 35. This is my money, okay. Now you're like aye, so we talked 35. All this is my money. And then the investors are like no. Then the limited partner is like no, what is that money? Ah, okay, so there's a dispute Now to solve. It is now where Kari comes in.
Speaker 2:What is Kari?
Speaker 5:Kari, is that money Okay you?
Speaker 2:know what is.
Speaker 5:Kari Kari, is that money you know you are targeting? You gave me a target of 35. I returned 50, so that's what is known as Kari Kari so how is it divided?
Speaker 2:legally or without dispute?
Speaker 5:now legally it's 20%, now the general partner remains 20% of all amounts above Without dispute.
Speaker 2:Now, legally it's 20%.
Speaker 5:Now the general partner Remains with 20% of all amounts above. The agreed Amount Okay, plus the 2% of the 2% of the, 2% of the, that's the sustained fund.
Speaker 2:So let me ask then because now we have gotten there. So if I have 30 million million and I'm taking 2%, and sometimes it takes longer to invest this 30 million, what happens then? Do I need to return even the 2%? What is the guideline there?
Speaker 5:Pools have a natural death. I am giving you 30 million for five years.
Speaker 2:So after 30 years, even if I'm not invested, that money disappears.
Speaker 5:It disappears. I'm expecting 35 after five years.
Speaker 2:If you invested or not. That's your problem. What do you agree? Ah, I see. So that's, why some investors or VCs are quite aggressive sometimes to invest.
Speaker 5:So now the death is occurring.
Speaker 2:And that's why now the strategy of acquisition, hostile takeover, all these things, yeah, because they need to get the percentage. Okay, and the returns? So even for them it's a survival tactic.
Speaker 5:Everyone is surviving in finance.
Speaker 2:Ah, okay, everyone, Including the banks.
Speaker 5:Even the banks, even government. Look at our government.
Speaker 2:The financial part of the government Left right and center.
Speaker 5:Like I cannot even explain how wrong is that? Because once you have an unpredictable business economy, You're in a mess.
Speaker 2:Actually, we'll talk about government investment because sometimes, as you said, it's not mostly that government give other governments money.
Speaker 5:Sometimes it's sovereign money individuals, companies, high net worth, when it were UNHW.
Speaker 2:Yeah, pension funds and all these things. So I think that's something else people might want to understand, because if you're in an environment where there is bad investment as a country, even driving as an entrepreneur is quite difficult.
Speaker 5:Yeah, like now it will be now pronounced the difficulty it ain't in Angazaka.
Speaker 2:Now let me ask this so what are the common? Okay, we talked about that, but with this pool, how should the founder allocate the option pool among key team members like the CEO? Ceo executive team now, that's difficult.
Speaker 5:I cannot let me see for that that. You will have to agree, maybe what I can do best, because that's a topic I don't discuss with my portfolio companies. I usually feel like it's overstepping, because now you know, you came out of noia to tell us how we'll divide our cash but there should be like a framework, just not to give everything, because we have seen people.
Speaker 2:You trust someone, maybe they come and run a company. You give them a certain percentage Afterwards. Now it's like they own it and they are no longer with the company, or priorities changed or you did not agree at some point. These happen.
Speaker 5:Yeah, things happen. But mostly what I do is I give a framework, I don't give a definite answer. For that. What I usually say is mostly let's get down to who is doing what. Who has the most responsibilities, realistically, who has? The most responsibilities. Realistically, who has the most responsibilities? Who goes to work? Who does a lot of work? Who does a little work? Who does a little work?
Speaker 2:So if someone is putting in more work, should get more equity.
Speaker 5:If you don't give them more equity they will be demotivated.
Speaker 2:They'll be demotivated, but also does it mean also work? Does it have to be day-to-day, or sometimes someone can bring the network, bring the connection. You know that's considered as high value.
Speaker 5:Yeah, that's considered as high value. Yeah, that's a good thing. But now also now, how will you quantify that?
Speaker 2:I mean, you should maybe set a target.
Speaker 5:Yeah, If you work with targets now that you know this one is doing a lot of reasonably, when you're at the early age of startups, everyone is doing everything, At least you and your marketing. We're focusing on marketing alone. There is no time to get admin. Have people paid? You start calling people. Your payment is if I do, there is a late fee you are getting. The CEO is not there. Will the meeting stop? You are getting at some point.
Speaker 2:Everyone is doing everything, but realistically there is one person.
Speaker 5:No, you're getting at some point. Everyone is doing everything. Everyone is doing everything. Yeah, but realistically, there's one person, two people, who have the entire thing. That's the thing with standards. Yeah, yeah yeah, one person can have the entire company.
Speaker 2:Akitoka, you are, you crumble.
Speaker 5:Cramble literally within days. Yeah, that's also why a lot of investors want founder market feed. Not everyone is depending on password.
Speaker 2:There's an issue under the bus analogy. So when you're considering some of these factors for allocation, we have said one of the most important thing is the responsibility, the role one is playing. Motivation should be considered so that those who are putting in more do not feel like you know, we are putting in more but we're getting less for it.
Speaker 5:First if it reaches here. If a member of the founding team states that explicitly he is ready, maybe he wants to live. He has already given up Because he has seen it. It's not fair For me. I'm not getting any value. What happens when you don't get value? Realistically, you just look for where you will get value normal human nature. What I usually advise is have more of a dynamic split, a split that will change over time. You might have the idea, but you don't know how to execute which is very, very important.
Speaker 5:You have nothing without execution, but you don't know how to execute. Yes, which is very, very important, you have nothing without execution. Now, the person who is doing the execution obviously will want more. But it is yours. Give them more now. It will change later. Always remember these things are negotiations, they are not fixed.
Speaker 2:Can you negotiate down someone once you already give them?
Speaker 5:Technically, technically you can.
Speaker 2:Will not that look like you are blackmailing them, screwing them?
Speaker 5:It's finance.
Speaker 2:What does that mean? You play with numbers.
Speaker 5:Play with numbers. Everything is an exchange. You have control. So you mean in all this game.
Speaker 2:Someone has to.
Speaker 5:Welcome to corporate.
Speaker 2:Oh, that's corporate Corporate 101.
Speaker 5:Everything is a transaction. You have equity. You don't have dividends. Now you have control. I have money. Now we'll have to talk. You will give me more money. I'll give you more equity, more control.
Speaker 2:So it is always good for the investor and the receiver of the investment to be able to negotiate better deals at all times.
Speaker 5:When, let's say, when the deal is nearing its death. You need to let me see how do I put it. You need to like me see how do I put it. You need to, like now, start speaking real, like it's how you've invested interested. What exactly are you speaking? Yeah.
Speaker 5:Are you speaking? What are your expectations? Because you might make a very, very, very good pitch. Perfect. The investor comes in, you will. Everyone will run to your company. You're just a good talker. You're not a good executioner. The investor expects to turn the next return anything else is just stories because that's the vision you created yeah so in some way it's still your fault yeah now the investor comes. You don't even like basic balance sheet but does this even affect internal rangos?
Speaker 5:it does employees vested interest option. It does because. But does this even affect internal Rangos? Employees Vested?
Speaker 2:interests.
Speaker 5:It does, because Everyone always Expect. These are companies, everyone has interest, okay.
Speaker 2:The higher you realize that, the better. Anyway, you talked about cap table and option Pool, so what are some of the best practices founders manage their cap, table and option?
Speaker 5:Track it regularly. For cap table, for option pools, you need to have a solid contract. Okay, and also solid valuation. Do not give people trash equity, because you know it's trash and you know where the sweet spots are. People will know, not now, not later, let's say 10 years down the line. They will know, unless now you start firing people because of the mistakes you did, but for cap table. Be very, very, very conscious of the cap table. Be very, very very. It will mess you.
Speaker 2:And how do you make sure it doesn't mess?
Speaker 5:you Begin early With people. It's better to have a larger option pool with less dead investors than a small investment pool yeah with more dead investors for you to manage? Uh, the cap table. If someone is coming in, what do they bring other than finances? Yeah, that's the question. Yeah.
Speaker 5:For someone to convert as a dead investor is someone who had only money, nothing else. You have a dead investor. That's why a lot of angels are usually dead investors, most not all. If you've raised from an angel who was an entrepreneur, you have a very, very, very, very good investor. This will help you. Same investors are people. You might get an investor who is starting out. He is paranoid of everything.
Speaker 2:Including.
Speaker 5:Expenditure To make it worse. You are not in the same field. You are in the event space. The event is about startups. The startup is about events. They have come from marketing. They have come from medtech or something which has corporate. He has come from marketing.
Speaker 5:He has come from medtech or something which has corporate. He has come from corporate. People who are from corporate know budgets. Even before budgets are requested, they are very, very planned. Then they tell me at this event security has been lost we need to hire A new security. There is a lot of inconsistencies when you are doing events Than when you are working in corporate. I used to hear all these inconsistencies and I this guy is stealing from me. This guy is stealing from me. How come you paid these guys?
Speaker 2:You paid these guys down payment.
Speaker 5:They accepted what happened. What happened? You don't have time to explain Because events, people will come to see what. People have paid tickets to see maybe a celeb or maybe someone. The celeb is not there. You need to have a backup plan. The investor wants an explanation, wants a meeting.
Speaker 2:I wanted Davido, now I'm getting Calligraph Jones.
Speaker 5:I wanted.
Speaker 2:Calligraph Jones. Now I'm getting these other guys.
Speaker 5:Who you are, danny, I don't know. Simple boy Simple, boy Simple boy, I don't know what simple is.
Speaker 2:I don't know what simple is I'm getting the other lady Kanjo, lady Aye, you know. So it's always yeah, and actually it happens a lot because people get sick, people get, they can't refuse.
Speaker 5:Things happen, yeah, but now investors have left corporate. Yeah, they are so rigid. Things happen, yeah, but now investors have come from corporate.
Speaker 2:Yeah, they are so rigid Very very planned, yeah, and rigid, yeah.
Speaker 5:I had the experience, yeah. Events. Yeah. That's why I usually insist. Yeah.
Speaker 2:Raise from people who are in the same industry, or close to that industry, or close to that industry or close to that.
Speaker 5:Yeah, even if it's an indirect relation Raised from people who are in this almost same industry. They understand, they know when you have a problem, you're in MedTech, you have a founder, you have an investor from tech.
Speaker 5:How do you help? Most viable option is if the tech aspect of the company fails, you have a very, very good option. What happens when the medicine aspect crumbles? What happens? That's an issue. Now, when you're speaking to investors, always try it's not easy also, but always try to get someone who is in the same space as you. It will be easier for you in the long run Because, remember, they are investing time horizon. In 2-3 years You're locked in with some guys for 2, three years. Imagine you're talking. You've met an investor who is on a 12, the guys who talk a lot when one anxiety attacks. Now imagine being shouted at Now.
Speaker 5:Imagine being shouted at every day at 7 to 7.30 because of someone's mistake. For two straight years You'll start asking when is this company going to close? Aye, now the mental health aspect comes into play Kicks in?
Speaker 2:yeah.
Speaker 5:Now let's say that's why I insist If you cannot make a good deal with a bad person, simply, simply, you will fake the partnership yeah, you will fake it, but eventually you give it. I have founders, a lot of founders who fake? Relationships for the money, but now they are like we need to boot out this investor yeah, yeah and I'm like now it will be costly because you'll have to buy him out you have someone very expensive yeah, you have someone who who's liquid enough to buy him out like evil so what is your take about?
Speaker 2:because, also, when you raise funds and you hire people, some of them give them some option and then you raise, maybe series B. Right yeah, the people who you hire, they don't know how the process has been, but they're quite talented, they are quite motivated, they buy in the mission and vision of the company and they think now you have raised series B, maybe a hundred million, so they expect you to cash in. Right, how do you educate these people to really either persevere more or put in more work and ensure that you build the value of the company as you build the value of the investor and not feel like they're working for the investor?
Speaker 5:Yeah, there is a rule in finance corporate finance, also corporate management maximize the value. This is not human. Come in. We maximize the shareholder value, maximum shareholder value. Once we've done that, the rest is ours. The shareholders will take roughly 60, 70,. They don't care because the people they are talking with, they have flutes and they have budget expectations. There is a portion you might pass. They are comfortable You're getting not always. Also, don't take it as it's in entirety. You might get investors Not always. Also, don't take it as it's in entirety. You might get investors who are greedy. You make a hundred million, they want a hundred million.
Speaker 2:One off for every year.
Speaker 5:No, not one off. You've made good returns.
Speaker 2:This is dividends or.
Speaker 5:Now the payout depends. You can payout using dividends. Shareholder withdrawal.
Speaker 2:And that means you take back your shares.
Speaker 5:You take back the. Now you are allocating yourself income. Okay, you're getting. Shares remain the same, but everyone is given according to how much they own. Yeah, there is this cake. Now you own 20% of this cake.
Speaker 2:So if you make another cake from that cake, you should expect 20% of what you make Exactly. Ah, okay.
Speaker 5:Now the cake.
Speaker 2:So what if I want to eat the?
Speaker 5:Yeah, there's. So your cake still exists.
Speaker 2:Yeah, yeah, you made a new cake. Yeah, it did not exist, but this cake, I feel like I should eat it alone. Always Not as a shareholder, but no, not as an investor, but as a.
Speaker 5:The founder yeah, as an investor, but as a founder.
Speaker 2:It happens. I always because now what results from that, Because someone will eventually know ah, the cake was eaten. Someone decided to eat this cake.
Speaker 5:Mostly what I do is I start bringing in elements of transparency. Once everything is in the light people give. I start bringing in elements of transparency. Once everything is in light, people cave, people become more afraid. Now I know what you want to do, but you've not said. But, like it's common, you can know a thief by the actions, not and I make very, very, very long announcements Very, very a lot of technical jargon Covering up a loss. So this loss is 100%.
Speaker 2:Repeat what you have just said. You make what?
Speaker 5:There are ways.
Speaker 2:I won't lie. You discover there is something going wrong here.
Speaker 5:Yeah, there are ways. There are people who want to do it, Because there are people who allege. Also there are some interested parties at Twiga who wanted the kekalon.
Speaker 2:But it's alleged.
Speaker 5:Alleged. Yeah, I used the word alleged, let me give a disclaimer at this point.
Speaker 2:Alleged All the views.
Speaker 5:It's only allegations. I know nothing about it.
Speaker 2:Now. From our guests? They're not.
Speaker 5:Are personal.
Speaker 2:They are personal.
Speaker 5:Those are my personal views, views and opinions. Yes, nothing more. Yes.
Speaker 2:They are not coming direct from this podcast, or it was.
Speaker 5:Now, what was he saying?
Speaker 2:No, you're saying that transparency should be encouraged.
Speaker 5:Now, when you start doing issues like transparency, you start reminding the founder it's not transparent To notify the entire board yes, and then it's okay to cover up loss. It's not transparent. We need to notify the entire board. Yes, they have started to shift.
Speaker 5:And then it's okay to cover up loss. You need to cover up your losses. You need to cover up how will you regain that loss. And then the founder is not thinking that. He's thinking how will I cover this loss. He starts to tell very, very, very long statements with very very very a statements with very, very, very a lot of technical jargon like losses are 100%. Losses are 100%. You will lose, but how will you lose 100? Million entire.
Speaker 5:What will it be? What happened? It will cause a lot of interest. How will you lose all that money? How? Because now audits tax shareholders. What now will come at you? Because now that's the mistake they usually do. If you want to eat the cake alone. Eat a small bunch. Eat the rest for the others.
Speaker 2:No one goes angry.
Speaker 5:If someone goes angry, one person goes angry, they can disrupt the entire, like there's this case for Banyimadov. Banyimadov was like, considered a very, very, very, very shrewd investor.
Speaker 5:Now by the amount of what he did. It's called more of a Ponzi scheme. You come as an investor, you give me $2,000, I tell you I am investing. I fabricate the market. I'm a masker. I can lie with statistics, like literally in your face, and it will be evident. No, no, you know I'm lying, but the facts are up. No, no, mathematicians build facts. You know how to skew them or favor You're getting.
Speaker 5:Now he did that, had a very, very solid quantitative analyst. He had a very, very solid quantity, fabricated everything ABCD, abcd. Now he went to the public market and started picking investors at $10, $20. Remember he has $2,000. $10, $20. Remember, he has $2,000. $10, $20. Maturity $2,000, equal at the end of the year. Maturity at $10, $20, equal between the month. You give me a $10, at the end of the month I give you the $10 interest and I get $2,000. Repeat, repeat, repeat me a ten dollars. At the end of the end of the month I give you the ten dollars interest not to acquire two thousand dollars. Repeat, repeat, repeat, repeat. And then, uh, let's say a financial bubble happens, say I've lost 50 percent. So I tell you now, from your ten dollars I have five. Now, see, it's factually backed. Now that's a loss, but you still have something you're getting.
Speaker 2:It's not like you lost that money.
Speaker 5:Yeah, yeah, the main guy, the one who's running.
Speaker 2:So they only get $1,000. You're all ducks.
Speaker 5:So they only get A thousand bucks. Your ducks Welcome to finance. Everything is a transaction. Everything is a transaction.
Speaker 2:So, as we conclude this segment, any recommendation Reading books, you know, around investment. As we conclude this segment, any recommendation reading books around investment.
Speaker 5:For finding what I'd recommend. There's no one good book I'd find.
Speaker 2:Yeah, there are like 10 of them.
Speaker 5:For finding. What I'd recommend is go into Corporate Finance Institute. They have a channel that is online.
Speaker 5:Yeah, on YouTube. Okay, listen to these types of podcasts. Listen to financial podcasts, because the issue with founders is they know the product aspect but they don't know how to make money. Because the issue with founders is they know the product aspect but they don't know how to make money from the product. That's the issue. Listen to what we are talking about. Listen to corporate finance. Even if you hate math, you hate finance, but to some point, to some degree you'll have to do it, because how will you make money from it? That's the issue. Yeah.
Speaker 5:Go to Corporate Finance Institute. They have the YouTube channel. Yeah. Go to LBO Model Tutorial. Mm-hmm. Go to Patrick Boyle YouTube channel. Yeah.
Speaker 5:Krasmir Petrov YouTube channel. Krasmir Petrov YouTube channel. They will teach you a lot in a year than a 10-year program will, because you have the material. You're looking on the go. Just get into the lesson of your choice. This is where I am. I'm at valuation. Watch that valuation. Only that one video Tomorrow. At least you have something to argue. Look at Aswath Damodath yeah, aswath Damodath, yeah. Look at you YouTube, still on YouTube. He will teach you everything on corporate finance, corporate management, everything, literally everything. He's an assured investor. He will give you experiences of what to expect in the market you're getting now. At least do this one hour a day, you will be good.
Speaker 2:So you are saying from the University of YouTube there exists more content.
Speaker 5:No, any paperback, no any Kindle, more relevant content that you need as a founder, because for the books, the books there as a founder, because for the books, the books, there are a lot. Maybe he looks them up, I don't remember.
Speaker 2:No problem, once we meet again, we can always recommend a few books. There are people actually who video. Maybe is not their thing, unless they watch Impact Masters podcast or podcast.
Speaker 2:Yeah, yeah yeah, you know, and so on and so forth. So next time we meet we'll go deeper into different aspects and how to avoid pitfalls, team dynamics, greediness on both ends of an investor, founders and all that we also like to talk about. You know, should investments, should you build a house in Ushago? Should you put money in the stock exchange? What is this?
Speaker 2:Ula Baloo with the forex exchange and people are buying cars like they're in wash wash business, those kind of things. Is it really if you invest in forex, you'll make money? All those kind of things. Is it really, if you invest in Forex, you'll make money? All those kind of things? Because also, I've realized a majority, especially even black Americans, hispanic, kenyans, africans when they get money, the investment they make sometimes is not really wise, to be honest, and it's quite of high risk. Also, we don't want to invest in ourselves. We want to buy shiny stuff, we want to live large. It's a good thing and it's a bad thing because we end up not creating generational wealth and so on. So there's a discussion that we can have around that.
Speaker 5:Yeah, about wealth. It's called wealth creation, exactly. Yeah, we can always have conversations, yeah so thank you so much.
Speaker 2:Titus Ndeto, are you related to the Ndeto Ndeto?
Speaker 5:Nah, I'm not. No, I'm not, actually, I prefer Ndeto Ndongo.
Speaker 2:Ndeto Ndongo.
Speaker 5:Yeah, I'm an academic. I rarely use my English name.
Speaker 2:Ah, okay, yeah, okay, ndeto Ndongo yeah.
Speaker 5:Ndeto.
Speaker 2:Ndongoon Ndungu.
Speaker 5:Not related to Ndeton.
Speaker 2:You know the Ndeton I'm talking about? Yeah, I'm not. Are you sure you know? Before we sit down, I always also do my due diligence.
Speaker 5:Okay.
Speaker 2:Thank you so much, Ndeton Ndungu. And it was really quite a good, insightful conversation and here at Impact Masters and Retro Podcast you always like such conversation, telling our own story, impacting Africa, trying to share the knowledge and ensuring that you're moving in the right direction. Until next time, maybe you should tell guys please subscribe to the channel. Follow, there's a camera over there, that you're moving in the right direction. Until next time, maybe you should tell guys please subscribe to the channel follow.
Speaker 5:There's a camera over there, our director content engineer is directing me. Yeah, yeah, feel free, guys, what we'll be talking on for the next series of this chapter we'll be doing a lot of finance, a lot of valuation, a lot of finance, a lot of valuation, a lot of funding. Where to get this funding? Where to get, uh, guys like me to back you on? Where to get also, guys like at to have to conduct your solution, also for you to get ahead of your game on anything to do with finance, anything to do with valuation, anything to do with Shreed Investments? Have a listen, so drop that like, drop that follow, share content. It will help us a lot then it will help you. Thanks.
Speaker 2:Nice, that's quite interesting. And yeah, yeah, I mean that has been yeah.
Speaker 1:And that's a wrap On today's episode of Impact Masters. Thank you for tuning in and sharing this space of growth and empowerment With us. Remember every step you take has the potential to create an impact. Keep exploring, keep questioning, keep implementing and, most importantly, keep mastering your impact. Remember to check us out on all platforms by searching for Impact Masters. Subscribe, follow and share wwwimpactmastersio. See you in the next one. Follow and share wwwimpactmastersio. See you in the next one.
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