Episode Transcript
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Speaker 1 (00:02):
Welcome to Impact Masters podcast, in
collaboration with Africa'sTalking Retold podcast, where
every conversation sparks newinsights.
Join us as we delve into thestories of extraordinary
individuals who are shaping ourworld movers and shakers in tech
, policymakers, entrepreneurs,entertainers and all those whose
(00:24):
stories are worth telling.
Get ready to be inspired,challenged and transformed.
Welcome, and let's embark onthis journey of discovery
together.
Impact Masters Podcasts.
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(00:49):
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Here's your host, michael.
Speaker 2 (01:09):
Kamathi.
Perfect, perfect, perfect.
Welcome to Impact Masters.
In collaboration with theAfrica Stalking Retour Podcast,
brought to you by MichaelKamathi, you by Michael Kimathi.
(01:31):
Yeah, so this is powered byAfrica Stalking, and Africa
Stalking is poweringcommunication across Africa with
simplified access to telcoinfrastructure, empowering
developers to use powerful SMS,ssd voice, airtime and chats,
plus insight APIs to bring thesolutions to life.
As we build and sustainscalable businesses, impact
(01:56):
Masters is changing status quo,so today we have an interesting
guest.
The man himself, titus, callshimself.
Titus TN Dungundeto.
Yeah, that's a billionaireentrepreneur, investor and
venture capitalist.
He's an open minded to allventures and he considers
(02:20):
himself as a privilegedbillionaire entrepreneur who
engages startups, founders andco-founders who strive to
disrupt their respectiveindustries.
Ndeto, a founder and student oftheoretical physics,
econometrics and philosophy, whodraws upon knowledge and
(02:41):
principles of reason.
He has applied these to financebusiness and manufacturing.
He is also delighted to hearabout everyone's journey,
progress and success, as well asin experiences that have shaped
their perspective, and this isthe reason why we are hosting
him here today.
You know we bring movers andshakers in tech,
(03:02):
entrepreneurship and any othersector that is moving Africa
forward.
So welcome today.
You know we bring movers andshakers in tech,
entrepreneurship and any othersector that is moving Africa
forward.
So welcome today.
My name is Michael Kemadi, yourhosts.
I'm an entrepreneur Also.
Currently I help builddeveloper communities across
Africa.
It's a thing that I've beendoing for the past decade plus
(03:23):
years, and I've met so manyinteresting people across Africa
.
I've influenced tech ecosystemsacross different regions in
Africa and my need is to seepeople building solutions that
change the lives and trajectoryof Africa, an economic
powerhouse that it is, utilizingthe resources, brilliance,
(03:45):
capacity and the energy thatAfrica fronts in the world.
So today we have this chief inthe house, and he's one chief
I've been looking for for sometime now.
He has a wealth of knowledgeand his name is Titus Ndeto.
So, titus, without further ado,I would like to know about you
(04:09):
besides what I've said about you, let me start by the thanks.
Speaker 5 (04:14):
I rarely introduce myself, it seems like a brag,
but now, at least now peopleknow why.
But for me, for my journey, Istarted venturing into finance
way back in 2018.
(04:35):
Back then I was still in highschool.
I was very, very passionateabout theoretical physics.
That's pure math and purephysics and I never knew there
was another type of world calledentrepreneurship or finance or
(05:01):
venture capital.
I never knew any of thesethings.
Now, a friend of mine wasemployed and wanted to quit, but
didn't know what exactly orwhere exactly to start.
He reached out to me because inmy social group, I'm the math
(05:25):
guy.
Apparently everyone thinks Iknow what to do.
Speaker 2 (05:28):
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 Ndetostart?
Speaker 5 (05:40):
Actually way back in primary school.
I never performed well inmathematics or physics.
Speaker 2 (05:49):
Never.
Speaker 5 (05:50):
I was like the tail end.
But I got into high school andnow the spark came automatically
.
I actually don't know it.
It's okay.
Speaker 2 (06:02):
You just started understanding math.
Speaker 5 (06:05):
In depth.
Speaker 2 (06:06):
Okay.
Speaker 5 (06:07):
I started recognizing patterns, I started visualizing
equations, okay, and got very,very, very interested now in
physics.
Speaker 2 (06:15):
So which primary school did you go to?
Speaker 5 (06:18):
It's called Mary Maculait.
Speaker 2 (06:20):
It's a private school .
Where is?
Speaker 5 (06:21):
it Bahati.
Speaker 2 (06:24):
In Eastlands, eastlands, ah, in Eastlands.
Speaker 5 (06:25):
Eastlands, yeah, nairobi, eastlands, eastland
born.
Speaker 2 (06:28):
Okay, okay, and high school.
Speaker 5 (06:31):
High school I partially went to a public
school it's called Kaishanjiruand then I, where is Kaishanjiru
?
Kaishanjiru is.
I don't know Like literallyit's in Kaishanjiru, Muranga.
Speaker 2 (06:48):
Oh Muranga.
Speaker 5 (06:49):
Muranga and then now Kaishanjiru.
Speaker 2 (06:52):
Now a place called Kaishanjiru.
Speaker 5 (06:54):
Okay, now the name of the school is from the location
.
Speaker 2 (06:58):
Okay, okay, that makes sense.
And any vivid memory aboutprimary school Did.
And any vivid memory aboutprimary school Did you struggle
with those subjects or just math?
Speaker 5 (07:08):
No, I struggled with math, I was very very, very
interested in geography, that'ssocial studies.
Speaker 2 (07:13):
Social studies.
Speaker 5 (07:15):
Yeah, because that's my best performing subject back
in primary school I struggledwith languages, mathematics and
science very very very badly.
Speaker 2 (07:27):
So social studies you mean.
Speaker 5 (07:30):
Politics, geography rocks.
Okay, that was your favoritething, Exactly.
Speaker 2 (07:36):
Oh nice.
Speaker 5 (07:37):
Now structures.
Let's say things withstructures.
When you are studying geography, you have rocks to study
Metamorphosis.
Speaker 2 (07:47):
Something you can see Exactly.
Speaker 5 (07:49):
I was a very, very visual learner but, I never
realized until later on in myhigh school, exactly so, high
school.
Speaker 2 (07:59):
At what point is it?
From?
One term, one term, three, whenyou now realize oh, math is
good, I can do math actually itwas in form two from two from
two time two.
Speaker 5 (08:13):
Uh, I got uh, we were doing sads.
Yeah, I think it's sad yeah Iactually understood studsADS
from an example, Okay.
And then to me that was like avery, very big deal, because I
don't understand much likeliterature and I just looked at
(08:35):
the example, followed itsstructure and everything got
into my head.
Speaker 2 (08:40):
And what is SADS if you break it down to someone who
is not familiar with it?
Speaker 5 (08:46):
head.
And what is sad if you break itdown to someone who is not
familiar with it.
Sad is mathematics of powerindices, now let's say two, to
power three times uh two topower x plus one equals to four.
Speaker 2 (09:03):
Okay, now solve for x .
Oh so you're the guy who reallyunderstood the defined x
exactly.
Speaker 5 (09:10):
Algebra was your thing now, actually an
interesting part was algebra wasa very, very, very big part in
my life yeah that's uh.
When I realized algebra is thelanguage of mathematics.
When you're doing advancedlevel mathematics, you don't use
numbers, you use variables.
(09:32):
That's algebra.
Now, when the switch came to me, my point of realization was I
was picking maths.
Like I can read maths withoutany calculations.
I'll do it in my head Like,literally, I was reading an
(09:54):
entire sentence from symbols.
And remember this is 844, publichigh school.
They are not doing that entiretype of math.
I got onto YouTube public highschool they are not doing like
that entire type of math.
Yeah, I got into youtube.
Uh, varitasium, that was thechannel this post high school.
Still still in high school,still in high school I I got
(10:17):
into varitasium, three blue, onebrown.
I got got interested in quantumelectrodynamics.
Also I got interested inrelativistic equations and the
interesting part was Iunderstood all this still in
(10:38):
Form 2.
And then I'm like and it's 8for 4.
There's a huge difference.
844,.
You're just doing numbers, youstudy, revise, pass exams go
home have fun, come back studyrepeat.
There was nothing thatinteresting but 3Blue1Brown it
(11:05):
gave me a lot what is that?
It's a YouTube channel.
I was mentioning.
All those were YouTube channels.
Speaker 2 (11:10):
I thought it was a math problem for math, math
problem, the math problem.
Speaker 5 (11:18):
That was a dilemma back then and it still is.
It's called Collatz Conjecture.
Let me not explain it because Iwill 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
(11:38):
equations that has not beensolved okay, of the past
millennia.
Okay, century equations for thepast century decade equation oh
yeah it's, it's, it's an old,it's almost something.
It it's completely uh, notalmost.
It's relatively very, very,very complex, not difficult,
(11:59):
much is really difficult much iscomplex, difficult much is
complex.
Now for the Kotler's conjecture.
I can almost make it comparedto it's called Fermat's last
theorem.
Speaker 2 (12:14):
Guys, get your notebooks and pen, because it's
going to get crazy around here.
I hear different terminologiesbeing thrown around.
We need to refer to this in thecoming few sessions I like even
a little.
Speaker 5 (12:33):
I switched my life like a leaf.
All my friends were astonished.
They never expected I'd turnout how I've turned out.
Speaker 2 (12:44):
So first term from one you get an a in math so, uh,
it was c, c or c plus.
Speaker 5 (12:54):
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 (13:06):
In math, yeah, in math.
And at this particular point,you are familiar with quantum
physics, you are familiar withall the millennia.
Speaker 5 (13:13):
Nah, not yet.
Not yet, no term 2.
Speaker 2 (13:16):
Term 2 in form 2?
.
Speaker 5 (13:17):
Yeah, term 2, form 2, I got Now form 2, term 3, I got
an A Literally straight, Astraight please paint a picture
like what is that?
Speaker 2 (13:27):
did you like sit down and, and, and?
Or did you go through a bookand you're like, wow, this makes
sense all of a sudden there wasprofessor michio kaku.
Speaker 5 (13:38):
He's, he's a doctor not a professor doctor, not a
professor.
Now he was doing this bookwhich got me really, really
curious on science.
It was Physics for theImpossible.
Is it that book?
(13:58):
I don't remember, but basicallyhe listed classical mechanics.
That is where physicists, butbasically he listed classical
mechanics.
That is where physicists havereached.
Newton did this, paul Dirac didthis, wanner Heisenberg did
this, einstein then did this,and then Feynman is also a
(14:23):
prominent physicist.
He's called Feynman.
Feynman is also a prominentphysicist.
He's called Feynman.
Feynman did this, and then nowwe are here.
Speaker 2 (14:33):
So is he doing this in class?
Is it a YouTube video?
Speaker 5 (14:36):
Is it a book?
Speaker 2 (14:37):
It's a book, you are reading it and you see the
chronological account ofdifferent mathematicians Exactly
.
Speaker 5 (14:44):
Now, where we have reached mathematically to the
academic front, it's like ahistory book for equations,
because he was, he's like, he'sa big guy in academia.
Because he was listing out anequation with symbols Okay.
(15:09):
Because math and physics we useGreek symbols a lot.
Speaker 2 (15:14):
Yes.
Speaker 5 (15:14):
Now, I didn't know the symbols.
Speaker 2 (15:19):
So that was a bit confusing for you for a long
time.
Speaker 5 (15:22):
Very, very long time.
Now's just decided now to sitdown and now read the entire
Greek.
Speaker 2 (15:28):
And understand why are they using it and what they
mean.
So did you now reading Greek?
Were you reading it from thesymbol perspective or just to
understand how to speak andwrite Greek?
Speaker 5 (15:39):
Symbol.
Reading Greek was neverinteresting because also later
on, they started using Latin.
Now, if you wanted to learn howto speak Greek, you'll also
learn how to use.
Latin yeah, you get it.
Now it's just all mathematicalGreek symbols.
(16:00):
I had a sit down with myselfand then I looked them up a lot.
Youtube is a university.
I've done a lot of things onYouTube on my research.
When I was getting interestedin advanced level mathematics, I
did a lot of things on YouTubeand then now Google Scholar came
(16:23):
along.
Now I was going to.
YouTube, lot of things onYouTube.
And then now Google Scholarcame along.
Now I was going to YouTubeFirst I get the paper on Google
Scholar.
Google Scholar is literallylike a database for scientists.
Speaker 2 (16:41):
White papers are published there.
Some books are published there.
Exactly Some books arepublished there.
Speaker 5 (16:45):
Or are discovered.
Yeah.
Yeah, and then now, once I getthe paper, I don't understand
anything.
Speaker 2 (16:53):
I stop you, go and research.
Speaker 5 (16:55):
Exactly the entire thing, yeah, and then I come
back Okay, because I was notusing a curriculum.
Okay, like literally.
Speaker 2 (17:01):
You're just curious.
Speaker 5 (17:03):
Curious Curiosity, like literally nothing else.
I was just curious.
Let's say I'd go read the firstparagraph, only the abstract.
The abstract will take me liketwo, three days to complete.
Yeah, because grammar shida,choice of words, alignment of
words, shida Like need.
Speaker 2 (17:25):
So grammar was a problem to you or the
mathematicians?
Speaker 5 (17:29):
The grammar they use, like, let's say an example
don't do that.
Okay, a mathematician will tellyou 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 learnedoff the don't do that.
(17:51):
That's it.
Like.
This is what I learned, or likelegal jargon.
A lawyer can tell you two wordswith a paragraph.
You get it.
Speaker 2 (18:02):
Lawyers in the house.
Speaker 5 (18:07):
No hits.
No hits, by the way, I'm just,it's an analogy.
Speaker 2 (18:10):
No, you made your point, so I'm just trying to
emphasize on the point.
Yeah, same same.
Speaker 5 (18:21):
Now, also mathematicians use a lot of
jargon when it comes to doingproofs.
Okay, because?
Speaker 2 (18:28):
But do you think that also is highly contributed with
the background of thatparticular mathematician, as
opposed to using the?
Because, you see, if maybe youlearned Greek, like there's a
background of Greek and Latin,even English is made from, you
know, combination of so manylanguages, does it influence how
(18:50):
?
Even you?
You know, like you see, rightnow, if you are explaining
something, you'll add a bit ofSwahili here, some Shang.
It's just not because you wantto be complicated, it's because
you want to make a point and foryou it's just obvious, like if
I say this, people willunderstand more.
Speaker 5 (19:09):
I get what you're saying.
To some level.
Your background affects yourspeech Always.
To some level.
Because also there was a time Iwas very, very interested in
neurobiology.
Now studying psychiatry for thebrain.
Why were Now studyingpsychiatry for the brain?
Speaker 2 (19:25):
Okay, why were you studying psychiatry for the
brain and at what point?
Still in Form 2?
Speaker 5 (19:34):
No, that was in Form 2.
Like completely, I'd switchedoff.
Speaker 2 (19:37):
So you're just curious, learning anything and
everything that is interesting.
Speaker 5 (19:42):
I was not even doing my assignment.
Like, literally, I'd go toschool with a book the size of a
dictionary, learning anythingand everything that is
interesting.
I was not even doing myassignment.
Like literally I'd go to schoolwith a book the size of a
dictionary.
Archimedes' principleArchimedes is yeah, something
similar.
Encyclopedia Archimedes'principle.
It's not that difficult.
Let's say something like rocketscience, because for rocket
(20:12):
science, the main reason whyit's that big, it's because we
there's a lot of factorsaffecting rocket science when
you're doing when you're doingspeeds uh above mark three, mark
four hey that's that's.
Speaker 2 (20:26):
That's that's you're speeds above Mach 3, mach 4.
You're defying nature in someway, exactly.
Speaker 5 (20:29):
Anything that defies nature has a lot of mathematics
going around.
Now back to your question.
For mathematicians, it'sactually because I am one.
What I think is not thebackground, because I am fluent
in Shakespeare English, it'sbecause of what you're trying to
(20:55):
explain.
Okay, maybe, like, let me likenit to a dev.
Speaker 2 (21:01):
Okay.
Speaker 5 (21:02):
Talking to an agriculture enthusiast.
Two completely different words.
But they both come togetherbecause of tech.
You do Now we try explainingHTML, the difference between
HTML and CSS, to the farmer, andthen you're like, like, I
(21:27):
cannot use my language, becauseif I use my language, there is
nothing.
You'll get there now.
Same to mathematicians.
There's a level of speechmathematicians used between
mathematicians andmathematicians yeah
mathematicians and physicists,and then mathematicians and
engineers yeah and then mysummer, then mathematicians and
engineers, and thenmathematicians and non-academic
people like, also like biology.
(21:50):
Uh, neurobiologists usedcompletely different terminology
than mathematicians okay also,structure of thought is
completely different when, whenyou look at it in a thought
perspective, how they aligntheir words, it's completely
(22:10):
different.
Speaker 2 (22:11):
Absolutely so.
At this point I thought theteacher is supposed to break
this down for you.
They didn't do a good job onthat, or?
Speaker 5 (22:20):
We don't understand each other.
Why?
Because I was young, so that'sa faction of my youth.
I usually started because maybeI've not done an assignment.
And then now the teacher sayswhy have you not done an
assignment?
Because I know, so it's uselessfor me to do an assignment.
Speaker 2 (22:42):
Oh, you used to be that kid.
Speaker 5 (22:44):
I was that kid, so you don't do an assignment.
Oh, you used to be that kid, Iwas that kid.
Speaker 2 (22:46):
So you don't do an assignment because you know the
assignment.
Speaker 5 (22:48):
For what?
Why do I need to do anassignment?
Your curriculum tells you totest me.
I am telling you I am alreadybetter than your curriculum.
You are testing me for what?
How?
Speaker 2 (23:05):
did that end up.
You know it's very interestingto do that one.
Speaker 5 (23:11):
A few punishments, some few suspensions, because it
was repeated, mothers werepresent.
Parents had to be involvedBecause I was not listening to
teachers and on the grounds of Iunderstand mathematics better
(23:32):
than them.
I also bruised their ego,because back then that was, I
was 16, 16 or 17 now, and thenyou're like a full-grown man
with a family and then you'relike a full grown man with a
family.
Then there's a kid here tellsyou, with your 40 hours of
mathematics experience, canteach you mathematics.
Speaker 2 (23:52):
But did you do it actually, or it's just a matter
of exchange of words?
Speaker 5 (23:56):
No exchange, because if I did it physically, wow, it
would have been chaotic.
Speaker 2 (24:02):
No, I mean I had a friend of mine that I keep
referring to.
He used to solve math in hishead, 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 inthe flow, you would not.
Speaker 5 (24:20):
Yeah, he'll sing aloud, so for him.
Speaker 2 (24:22):
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, everythingflows.
And actually most of theteachers consulted him with love
.
Did you consider that as anoption?
Speaker 5 (24:41):
I was young.
Speaker 2 (24:43):
He was young too.
Speaker 5 (24:45):
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 (25:05):
So you didn't know how to express the knowledge.
Speaker 5 (25:07):
Yeah, exactly, and plus, a big problem was I was
blunt.
I didn't know how to break badnews to people, anything
negative.
Speaker 2 (25:18):
Yeah.
So let me now ask you do youthink maybe how people learn in
school should change A lot, andhow would it be better should?
Speaker 5 (25:27):
people do homeschooling.
Speaker 2 (25:29):
Should people not even homeschooling?
Speaker 5 (25:30):
like the biggest problem, even with it for
curriculum, is an interestedteacher teaching an uninterested
child.
Now, like even now, child.
Now, like even now, let's sayin uni, can you like even in
your social group, ask, like, doa random survey how many people
(25:55):
actually passed exams becausethey learned?
Or they passed because of theireducation or they did something
illegal.
That's why there's a highunprofessionalism rate.
Speaker 2 (26:09):
So people do not really pass exams because they
are learned.
There are other factors.
Speaker 5 (26:15):
A lot, but now no one is ready for that.
Speaker 2 (26:18):
The percentage that passes, because they learned.
Where would you put it?
Speaker 5 (26:23):
At maybe, let's say, 2% 2%.
Maybe 1.5.
Speaker 2 (26:27):
1.5%, not even 2%.
Speaker 5 (26:29):
Nah, 2% is a lot, because the people who a lot of
people my age back then, when wewere doing campus even you, you
had ambitions, you had youwanted to learn this and that
you get to campus You've beentold to do something that's not
(26:51):
completely related.
And then now the lecture.
You ask you know campus?
Most people think they canquestion why do, why do we do?
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 thelecturer, you finish your exams
(27:13):
and leave.
Speaker 2 (27:16):
I'm not paid enough to explain this.
I didn't say that.
Speaker 5 (27:22):
Because, yeah, the topic we're talking about what?
Speaker 2 (27:25):
is the excuse, because some of the guys who
taught me are from Yale, othersare from Stanford ah, no you
know, went to you know big bigIvy League schools and the
approach was different a bit.
Speaker 5 (27:37):
Completely, yeah, completely the problem with
Kenya is corruption is very,very, very painful for you to
pass a driving test you have tocharge some money you have to,
it is mandatory but that haschanged for us now for a while
(27:57):
let's hope so it has improved.
Speaker 2 (28:00):
You know one thing also, and I need to say the way
it is corruption is everywhere.
It's not just.
Africa or Kenya, but in Africait's put in a way that it
doesn't really even work.
You know, because also I feellike tipping is a form of
depending on if you tip beforeor after is a form of
(28:21):
streamlining things for you,because if you've gone to the US
, actually tipping is a form ofstreamlining things for you,
because if you've gone to the US, actually tipping is a culture.
If you don't tip, you'reconsidered rude.
So here in Kenya buying someonechai, which is considered
corruption.
If it's put well, it could betipping, like you know, maybe
(28:42):
this guy doesn't earn enough.
But now the problem is.
Let me give you the problemwhere I see it.
If you don't bribe someone,they might put you in a very
difficult situation, to anextent that it might cost you
even a life.
Speaker 5 (28:55):
Let's use the term forced tipping.
Speaker 2 (28:58):
Oh forced tipping.
Speaker 5 (28:59):
Yeah, you're forcing me to tip you or I'll use my
power against you.
Speaker 2 (29:07):
Now, that's pure corruption, pure.
Speaker 5 (29:10):
Because now if you check, let's say, government
offices, passport At least it'schanged, but even government
itself admitted you can go twoyears straight without tipping.
Without no first tipping, twoyears straight you don't get
your passport.
(29:31):
Let's say you are traveling toIndia as a medical tourist Two
years you're dead.
Speaker 2 (29:39):
I mean, yeah, there's a discussion there that some
services you could have thenormal process, that if it takes
three weeks, it takes threeweeks, 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 bevery pure.
(30:00):
I know, if I want to get mypassport in one day or whatever
service it is, it's officially,it is taxed, it's a revenue
generating process and it'squite out there.
Speaker 5 (30:13):
If it's public, so long as it's public, I feel like
that will address some of theseshenanigans.
The problem is internally atthe government offices.
They will hike.
Speaker 2 (30:25):
That tipping Exactly All right, all right.
So, titus, you are a person whois really interested in the
money markets investment,venture capitalists, startup
founders, ceos and you have alot of curated knowledge around.
(30:46):
This helped with yourmathematics background and
liking.
I think that's the next thingthat we should discuss in this
conversation, but ideally, Iwanted to know, particularly
after Form 2, were you able toprogress to Form 3, form 4?
How did you perform your KCC?
Speaker 5 (31:07):
Actually, I never did my KCC.
I got to a private school.
Getting to a private school, Iswitched 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.
(31:29):
Mm.
Mathematics.
My dad wanted me to do amedical course.
Mm Tried it.
Mm.
And it turned out well.
Yeah.
Because I I actually realized,other than curiosity, you need
strength.
Speaker 2 (31:44):
To do medicine.
Speaker 5 (31:45):
Yeah when.
Speaker 2 (31:47):
Where were you doing this medicine?
Speaker 5 (31:49):
I was doing KMTC.
Speaker 2 (31:51):
Do you do medicine or clinical office or whatever?
Speaker 5 (31:54):
Not medicine Orthopedics.
Speaker 2 (31:58):
Orthopedic.
Speaker 5 (31:58):
Yeah, I was doing, I don't remember something related
to bone.
Okay, now the problem is, Ihave to work with dead people.
Speaker 2 (32:09):
What are you doing with dead people?
Speaker 5 (32:11):
And I am an academic.
I also asked myself the samequestion you teach me here.
Why are you taking me to themorgue?
I'm going to do a Zoom class.
Speaker 2 (32:20):
Okay.
Speaker 5 (32:21):
You need to have direct contact with the
situation.
I am okay.
Speaker 2 (32:28):
Are you afraid of dead people?
I'm not afraid.
Speaker 5 (32:30):
I just don't like them seeing them on a Monday
morning.
No, wait a minute.
Speaker 2 (32:36):
You know this is becoming interesting.
What I understand is all medicsmay be the lower medics, like
nurses, and you know the pedicand clinical officers.
Uh, to the doctors and phd,most of them learn through dead
peoples that they can transactthem and what you know.
Just see the real that.
(32:58):
I mean go deeper in that person, right.
If it's the pain, you're toldit's your altar, you're showing
the outer it comes from.
Yeah, in that person, right.
If it's the vein, you're toldit's the aorta, you're shown the
aorta where it comes from.
Yeah, where it's from thisperson died because of heart
attack.
The heart is opened up.
You're shown where this clothappened.
You know for practicality yes,exactly.
(33:18):
And in high school I rememberwe used to dissect frogs right.
Frogs, yeah, or rats, yes,exactly.
So why would you have a problemwith that way of learning?
Speaker 5 (33:29):
No, the problem is I just don't prefer looking at
dead people Monday morning.
Speaker 2 (33:35):
But Tuesday morning you can look at them.
Speaker 5 (33:37):
Let's say evening.
Speaker 2 (33:38):
In the evening.
What is the logic around this?
Speaker 5 (33:43):
I didn't have First.
There was a time that Irealized I could not do medicine
, anything related to medicine,because that's still.
I wanted to pivot from bone toneurosurgery, but do they do?
Speaker 2 (33:59):
neurosurgeon.
Speaker 5 (34:00):
Nah, I don't know yet .
Speaker 2 (34:02):
Of course they don't.
That's a specialization.
You have to do medicine forfive years and then you
specialize in neurosurgery.
Speaker 5 (34:09):
Yeah, as you've said, dentists, doctors, nurses they
still learn the entire humanbody.
Speaker 2 (34:17):
For sure, but you see , you wanted to specialize.
Speaker 5 (34:20):
Yeah, no.
Speaker 2 (34:22):
No.
Speaker 5 (34:23):
Yeah.
Speaker 2 (34:23):
Obviously that's a specialization.
Speaker 5 (34:25):
I wanted to pivot, but now that's not pivot.
Speaker 2 (34:29):
That's specialization .
Pivot is where you stop doingthis.
You can come back.
Speaker 5 (34:34):
I wanted to specialize, but now it didn't
make that sense, because youcannot pivot that.
You cannot specialize from thatfar angle.
You are learning everythingfrom born and then now you want
to study.
Speaker 2 (34:50):
Neurosurgery.
So wait a minute, there'ssomething you have said there
that is very interesting.
So nurses also haveneurosurgeons.
Speaker 5 (34:58):
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 sevenFifth, fifth, mostly it's fifth.
Now you decide where you wantto specialize.
(35:24):
It's dentistry, neurosurgery,cardiology, oncology, depending
on now, someone who is learning.
But me, the person I met wassomeone who came with very, very
bruised, let's say, to apractitioner.
It will be interesting, aninteresting case, yeah.
Speaker 2 (35:48):
Dead body.
Speaker 5 (35:49):
No, not dead.
Almost the guy was snoring butwas unconscious.
Now you have now where is thesnore coming from?
And then now the doctors know,the nurse know, they know where
it's coming.
Now you're asked.
(36:09):
This is a great learningopportunity.
Speaker 2 (36:12):
I'm interested in the answer that you gave.
Speaker 5 (36:14):
I wouldn't give that answer, but it was completely
different.
It's not even a medical answerbut they were saying now come
closer.
This is a great learningopportunity.
Interesting cases like thisdon't arise.
And then, I'm like we shouldnot expect interesting cases.
(36:36):
And then now I'm looking at theguy.
The guy is bleeding, snoring,unconscious.
It's a big accident and I'mlike, by the way, medicine is
not necessary.
I am young, I have parents, Ican learn something else.
Actually, I did it because ofmy dad.
Speaker 2 (36:58):
Ok, not that you're interested in it.
Speaker 5 (37:01):
I was, but if it was medicine, I wanted to get into
clinical practice.
Clinical practice is getting tothe academic part of it.
You're doing, maybe, compscience.
You're doing a doctoral in compscience.
Now maybe you start doingsomething to do with philosophy.
You shift from actual practicecoding now, like now, doing the
(37:26):
philosophy of compliance same tomedicine, you shift to now
being the erotic exactly now youare coming up with equation,
not new equations, some do, Idon't.
You know, there's a beef in ourcommunity, uh, let's not get
into that beef.
But let's say some biologistscome up with equations, some
(37:49):
come up with cure, a new cure.
But now, when you're coming upwith a new cure, you see you're
not treating someone and youcannot 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 thatwas my goal before I went.
Speaker 2 (38:11):
So did you do that?
Speaker 5 (38:14):
I will do it.
Speaker 2 (38:15):
Or it's something that is in the process.
Speaker 5 (38:18):
Yeah, I got into finance.
Speaker 2 (38:21):
Okay, how did you get there?
Because that's actually themain topic.
Speaker 5 (38:26):
Yeah, the main topic of today.
Speaker 2 (38:31):
So did you leave that school altogether?
I didn't leave.
Speaker 5 (38:34):
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 gotinterested into how the market
(39:05):
moves.
Now, when you say you've placedan order, what does that mean
now, like when you've placed anorder and then the market goes
up.
How does it go up now?
Like the opposite of it, it hasgone down.
How exactly has it gone down?
What is market sentiment?
(39:29):
What is fundamental analysis,because also in economics you do
a lot of sentiment analysis andfundamental analysis.
Now I was interested.
There's a guy, it's called Abdi.
Now Abdi was doing Econ backthen.
(39:53):
And then telling me if you getinto Econ, I'm sure you'll
innovate something.
Because back in high school Iwas very, very innovative.
I had a friend we're stillsolid.
He's called Amfrey.
We were trying to build apyramid, literally, from the
(40:14):
resources that the schoolprovided.
We were trying to build anactual pyramid, or try to create
a model that will resemble theintricacies of pyramids of Egypt
.
Yeah, they are very, very, verychallenging Because no one up to
date we still don't know howexactly.
(40:37):
Because you look at the size ofthe stones, you look at the
level of technology back thenand 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 sizeof pyramids, those things make
(41:01):
humans look like ants.
Speaker 2 (41:04):
Now, from a couple of theories around that that have
been prompted by so manytheorists and mathematicians,
but ideally it can be done andit was done.
Speaker 5 (41:20):
Exactly, Exactly.
That's also my.
I live by that how it was doneno one has established that.
But it was done.
Speaker 2 (41:30):
But the evidence is there, so it was done Exactly.
Speaker 5 (41:33):
Because if you look at when you're doing numerology,
study of numbers, there's a lotof correlations.
When you're studying thepyramids, there's a lot.
It's the center of something.
(41:55):
It's the center of I don'tremember, I don't speak, what I
don't know, Like what I cannotascertain.
Now for us, what we are tryingto do with Humphrey.
We were trying to create a modelthat will equally distribute
force to the entire structureBecause we assume inside the
(42:20):
pyramid there is no pillar orpillars holding the walls.
It's literally a triangular wayof arranging stones Big, big
stones.
But if you look at weightdistribution, it's equal how?
(42:41):
Where Egyptians?
Because up when the conspiracytheory comes, it was built by
ancient aliens, it was built byStuart, immunology, that stuff,
but I actually don't believe it,it's just that white people.
Speaker 2 (42:59):
What do you believe?
Speaker 5 (43:00):
for that.
White people don't believeblack people have that type of
IQ.
Kwanzaa, if you've been to thestates you might have
experienced it.
There's a type of superiorityit's called white privilege.
Speaker 2 (43:16):
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 (43:24):
That's a huge statement right there.
Speaker 2 (43:25):
Yeah, but let's move away from that, because Shift
shift, yeah, sounds like you'resaying what you believe and
others believe something else,yeah, yeah, yeah.
It becomes a fight of beliefwhich no one wins.
Speaker 5 (43:35):
No one, yeah, yeah.
Speaker 2 (43:37):
Can you briefly explain what a VC termsheet is
and its importance in theinvestment process is?
And?
Speaker 5 (43:43):
its importance in the investment process.
A VC term sheet is an unbindingagreement, the same way you can
talk with your friend overdinner, over drinks, over coffee
.
Talk about I want, I have thisbusiness we want this much for
(44:06):
this much, and this might beyour exit strategy.
Now the other party becomesinterested how exactly does
someone fund you?
And now, let's say you've beenfunded, what will govern the
(44:31):
funding?
What will govern thatrelationship?
Now the VC term sheet.
Let's say not VC, there's aterm sheet.
Term sheet is literally anunbinding agreement of
discussing how much who hascontrol over what.
(44:54):
When voting rights, you'respeaking of liquidation
preference.
You're speaking of Some mightnot 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,
(45:17):
very detailed.
Now for the term sheet, itsimportance.
It will give a preliminary ofthe relationship, how, you
personally, we are speaking.
Speaker 2 (45:33):
As a founder or a CEO .
Speaker 5 (45:35):
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'smore of when I am giving you
money, I will put a clause thatwill say I, I will not give you,
(46:01):
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.
So, if I've given you, let's say, $10, you'll put a clause, as
there are two people the fundowner and the fund receiver.
(46:22):
Fund owner is now the VC.
The investor.
Fund receiver is now thefounder CEO.
Speaker 2 (46:32):
Or the company, or the company.
Speaker 5 (46:35):
Now fund owner will put a protective liquidation.
It depends how you use it.
It can be used as a protectiveprovision, but industry standard
it's not being used currentlyokay, because a lot of fund
owners started using it as a wayto hurt financially these young
(47:01):
now these big companies orstartups, startups that have
made like literally good amountgood returns, because a
liquidation preference will sayI'm giving you $10, I will not
accept anything less than $10.
(47:23):
When and if I'm selling my, ifI'm selling my shares, I'm
selling it to any investor, I'mselling it to the market, I'm
selling it back to you, I willonly take 1x.
If it's 2x, I'll take $20.
Speaker 2 (47:42):
Now, if you now and most of the time it's not 1x
time it's not 1x.
Speaker 5 (47:45):
Mostly it's not 1x.
People don't realize it.
Speaker 2 (47:48):
So what is the average?
Is it 2x, 3x, 4x Average?
Speaker 5 (47:51):
should be 1x.
Average should be 1x.
Speaker 2 (47:53):
Should be, but what is it?
Speaker 5 (47:55):
Because mostly what I've seen they're doing 2, 2.5.
Because imagine you've beenfunded, let's say $1.3 million,
you are returning 2.6.
Yeah.
What will you be left with?
(48:16):
No, I mean it's a debatablekind of yeah, it's very, very
Because at the end, of the day,before I give you money.
Speaker 2 (48:23):
There's what you promised me Exactly.
I'll get maybe in X years,right?
Speaker 5 (48:24):
Yeah, yeah, yeah, because at the end of the day,
before I give you money there'swhat you promise me exactly I'll
get, maybe in x years, right?
Speaker 2 (48:28):
yeah yeah, do you think maybe founders over
promise, uh, sometime they are abit angry and they will just
want money.
They overlook some of thesethings.
What goes wrong?
Because also, maybe I'mthinking from both end the
investors yeah they are businesspeople.
You want to put in money andmake money more money, right
(48:49):
they want to make more money?
yes.
Are they too also greedy, right?
Yeah, would they maybe bereasonable and say, okay,
especially where the developingmarkets maybe take 1.5?
If in the developed market theyare taking 2.5, they should
maybe, in developing market,consider to lower that
expectation so that it doesn'thurt the founder Also, for the
(49:12):
founder, are they over promising?
And then by the time they areliquidating or maybe they raise
the next round, they find, whoa,this money, I'm raising it, but
almost all of it I'm giving itback to the first investor or
seed investor or you know seriesA, you know.
So please expound where, wheredoes it go wrong and how can you
do this the right way, evenwith a VC term sheet?
Speaker 5 (49:37):
First of all, like when you're funding a startup,
it's a lot of guesswork, likeliterally.
I won't lie because I've been.
I've done a lot of financialmodels.
Valuation yeah, it's evaluationfor startups yeah, there is
different ways to value astartup, yeah, so you can use
(49:59):
the vc method, you can usetrading comps, you can use DCF
I'll expound later on those butthe problem, the core problem,
is your financial slide, not you, because most of these founders
(50:19):
so in Kenya are usuallynon-financial and even if they
are financial, they are nottechnical.
So we have one problem the teamis not matched.
There is no founder market fit.
Founder market fit is thecompany you're investing in as
(50:44):
an investor.
You're asking yourself do theyhave the type of talent to
manage corporate stuff, tomanage financial stuff, to
manage product development, tomanage marketing stuff, business
development, legal stuff,exactly?
But now, you see, at this earlyage, people don't have finances
(51:06):
to bring all these people onboard.
Now maybe the perfectcombination for now will be one
financial, one tech person, onefinancial person.
Now let's say the problem isthe founder is non-financial and
(51:29):
a tech person.
The founder will rely onestimates from Excel.
Excel, like forecasting.
Maybe you've made maybe somesales, three, four months.
(51:49):
You've made some sales and nowyou think that will be the rest
of your life.
Speaker 2 (51:56):
How are you able to tell if the future doesn't look
like that?
Speaker 5 (52:00):
Now there's a couple of ways you can do sensitivity
analysis.
You can do whatever.
Speaker 2 (52:06):
But now you're not financial, so how do you do that
?
Speaker 5 (52:08):
Now that's the problem.
Now you're not financial, nowyou trust your gut.
Your gut is telling you.
Speaker 2 (52:13):
But how do you do it the right way?
Do you hire PwC?
Do you hire KPMG?
Speaker 5 (52:18):
You can All this.
All this you can if you'renon-financial and you don't have
the resources.
I'm assuming you don't have theresources, of course.
That's why you're raising theresources.
Speaker 2 (52:30):
That is the obvious thing.
How are you raising funds ifyou have the funds?
Speaker 5 (52:35):
So now let's say you don't have funds.
You know why have you taken theliberty to teach yourself this
stuff?
Speaker 2 (52:45):
So now you have to learn about economics.
Speaker 5 (52:48):
If you are not ready to learn about economics, don't
start a company.
Speaker 2 (52:52):
Oh, that's a big statement.
Speaker 5 (52:55):
I usually tell portfolio companies I work with
a couple of portfolio companiesI usually tell I can get you a
job, go do 9-5.
Startups have a lot of stress.
Speaker 2 (53:11):
I cannot advise you to start, but there's another
way to look at it, because fromthe when the world was created,
you can't learn everything.
Why don't you hire an expert inthis?
There are people who have doneeconomics.
There are people who have doneup to PhD.
Yeah.
And they know ins and outs ofthese things.
(53:32):
Yeah, especially financialthings.
Why not hire those guysstraight up, or even give them
some equity to be part of theteam.
Speaker 5 (53:42):
Yeah, but now, yeah, that's very, very.
That's a good way to bypass aproblem.
You've only bypassed, you'venot, you've not solved, you've
not solved why.
Speaker 2 (53:54):
Are these guys going to screw you up?
No, not even screw Not evenscrew you.
Speaker 5 (53:58):
you are their leader now, sindhu, you are their
leader.
These guys are.
You've gotten the perfect team.
You've gotten the financialpeople and you've gotten people
on tech development, yeah,marketing and all these teams.
You've arranged, so youunderstand nothing about finance
, about these teams.
Exactly.
Let's say you understand maybetwo of them.
(54:19):
You understand marketing.
You understand productdevelopment.
You don't understand marketing.
You understand productdevelopment.
You don't understand legal andfinancial.
Now, the biggest problem is itwill cloud your judgment.
You might have cash, but you'renot liquid.
Speaker 2 (54:44):
But your financials will say you're liquid, but
actually what is having cash andwhat is liquid?
Speaker 5 (54:51):
Being liquid is being able to purchase anytime,
meeting your debt obligations asthey are due.
So say now to mean immediately.
Speaker 2 (55:01):
And when you have cash and not liquid, what does
that mean?
Speaker 5 (55:04):
You have maybe cash that you can't spend.
Exactly, you have very, very,very good.
It's called account receivables.
Account receivables is moneycoming in, like Netflix.
Let's say, yeah, netflix ForUber, upon Uber, you pay on the
spot.
Or if it's, let's say yeah.
Netflix, netflix, uber, uber,uber.
(55:26):
You pay on the spot, or if it's, let's say, uber corporate,
Something.
Speaker 2 (55:32):
So they have to pay at the end of the month or maybe
mid month.
Speaker 5 (55:35):
But you have to pay everyone every week.
Exactly.
Speaker 2 (55:37):
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 paynow this corporate and then
wait for the corporate, exactly.
Speaker 5 (55:48):
You're not liquid.
Remember, you're not liquid.
You're depending like it's thiswater.
Let's use an example that willcreate a visual image.
You are waiting on a tree likea fruit let's say avocado.
You are.
You are waiting on tree like afruit, let's say avocado.
(56:09):
You are waiting for an avocadoto 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 (56:22):
I get you you are getting.
Speaker 5 (56:23):
Yes, there are petty stuff when it comes to
financials.
Okay, now this comes when.
Now you start doing that, butwhen you're in school, you learn
them at an advanced level.
That's why I prefer learning asyou go.
When you get the perfect team.
Let's say you have the techperson, you have, you're an
(56:48):
un-tech, you're an un-tech, andyou have financial persons.
This, let's say technicaljargon.
Let's say development, becausedevelopment is something that's
considerably highly abused.
(57:08):
I saw you did once a website forone month, and then now you're
telling me you'll do the samesomething that looks the same to
my eyes, in three months.
You are screwing me, you wantmore money, but now you remember
, this looks the same, but oneis a web app, one is a website.
Speaker 2 (57:31):
So you are saying it's very important for any
founder to understand two things, Especially if you're in tech
understand tech, understandfinance.
How will you make money for itIf you're in?
Agri-tech.
You need to understandagriculture, technology and
finance Exactly.
Speaker 5 (57:48):
If you're starting any company, you know there are
the passions, the burningemotions.
You have ABCD, abcd.
Yeah, that's very, very, verygood.
But remember, even if you bringme on board, I am not eating
your passion, my wife, I need to.
Speaker 2 (58:08):
You need to pay rent, you need to pay school fee, you
need to take your girlfriendout.
Speaker 5 (58:14):
First of all, women are expensive.
And then you're telling me thatyou have passion.
My girlfriend is yapping there,needs makeup.
But why do you take agirlfriend with yapping but
needs?
Speaker 2 (58:24):
makeup.
Then I'm looking at you, butwhy do you take a girlfriend?
With yapping but you'll talkabout that.
So what does a fully dilutedpost-money option pool mean in
the context of a VC term?
Speaker 5 (58:35):
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 premoney and there's post money
valuation.
If you have a pre moneyvaluation, that's, let's say,
(58:58):
let's do a one-on-one.
Speaker 2 (59:01):
I'm the VC, you're the founder, or I'm the founder,
you're the VC.
Speaker 5 (59:06):
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 acompany.
You are looking for a financialperson to do your valuation.
Now for financial.
You ask what's your premiumvaluation?
You come to me, I give you themath.
(59:29):
I say your pre-money valuationis 1.25 million Average.
Speaker 2 (59:35):
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 rightnow?
Speaker 5 (59:44):
Exactly as we speak.
Speaker 2 (59:45):
Yes, you say 1.25 million versus USD.
Speaker 5 (59:48):
USD, yeah, that's where startups range.
Speaker 2 (59:50):
Yeah, 9.50.
To 1.25.
To 1.25.
Speaker 5 (59:55):
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 novelproduct and then you have people
interested who are on the waitlist to buy your product.
Speaker 2 (01:00:10):
Especially in hardware.
Speaker 5 (01:00:13):
Now, you see, you have already some commitment.
You have commitment.
What you're lacking is money tofulfill commitment.
Now you can give me money tofulfill 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 (01:00:32):
They're serious people.
Speaker 5 (01:00:34):
Now you stick around.
You say what's your pre-moneyvaluation?
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 (01:00:53):
That's a financial person advising you.
So they are telling you toballoon where you are Exactly so
that you get even more.
Speaker 5 (01:01:01):
Exactly.
And then now you ask why are wedoing?
this.
Why?
Why, I don't know.
We will back it with APC, thecontract that we have Once they
become purchasing client.
Risk is equal.
Lord, remember, in financethere is two things risk, time,
(01:01:23):
value of money A dollar now isworth 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 againstAPCs?
(01:01:43):
And then I'm telling you, look,there is risk and return.
The investor is risking thismuch for this much.
But remember, these APCs arede-risking the company.
Now the investor, even if hepays money, will be risking less
(01:02:05):
, but for more, I hear you, butwon't they give you more?
Speaker 2 (01:02:14):
than what you are making, do they tend to give you
less For valuation.
Speaker 5 (01:02:19):
It depends that totally depends on your
negotiation skills.
They can give you moredepending on how you negotiate.
Because now I've backed myargument with an actual fact and
I've told the investor you aregetting bigger piece of my
(01:02:40):
company for less, for less risk.
Now, alternatively, you do withanother startup, you'll for the
same risk.
You'll not be sure of return.
Now, here I'm guaranteeing 20to 40 percent.
Your money is back.
That's leverage.
Okay, now, once you theinvestor, here is now interested
(01:03:02):
.
Leverage Okay Now, once theinvestor is now interested.
You know these things right.
Speaker 2 (01:03:08):
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 theyget a big piece of the company,
exactly.
Speaker 5 (01:03:19):
Now what they come to argue is what clause do you
have, remember?
You cannot share anyconfidential information.
Memoranda, it's called cim abulk of companies, documents
that are confidential instead ofconfidential information or
(01:03:41):
confidential documents.
Information.
Confidential document in acoyote memoranda.
Now the customer list strategy.
Speaker 2 (01:03:47):
You cannot share or you have to share.
You cannot share With who?
Speaker 5 (01:03:50):
You cannot share with the investor.
Speaker 2 (01:03:51):
Okay.
Speaker 5 (01:03:51):
If there is no letter of intent.
Letter of intent comes later on, but it comes on later on in
higher stages.
Speaker 2 (01:03:59):
Yes.
Speaker 5 (01:04:00):
Of funding.
Speaker 2 (01:04:00):
Remember Higher stages means that the discussion
is close for you to receive thefund or there is stages of
funding.
Remember higher stages meansthat the discussion is closed
for you to receive the fund.
Speaker 5 (01:04:07):
There are stages of funding.
There is precede Precede.
You're looking for money tocreate a company to validate the
idea.
You have an idea, you have aprototype.
You're looking for, let's say,to 50k to 500k for validation.
Speaker 2 (01:04:27):
USD or KTX USD.
Speaker 5 (01:04:28):
Everything I'm saying is USD.
So you're looking for, let'ssay, 250k to 500k for validation
, then you've gotten it.
Speaker 2 (01:04:38):
You're going now and at this point you don't give any
equity.
Speaker 5 (01:04:42):
At this point you give roughly, depending on how
good your negotiation is and howyou've funded the funding round
funding cycle.
You give roughly 7.5% to 15%.
Depends on you and also yourbudget, your internal company
(01:05:04):
stuff.
Now you've gotten higher.
Now, let's say you are lookingfor seed, seed round.
Seed round is you have aproduct, you have a market, you
want to service the market.
Now you're looking for money tosell more of what you have.
You get it.
(01:05:26):
And then now you go to let'ssay Now you're looking for money
to sell more of what you have,you get it.
Yeah.
And then now you go to, let'ssay, series A, the next round,
series A, you are looking formoney to scale.
Remember there's a differencebetween growth and scale.
Scale is increasing clientswithout increasing CAC.
Cac is Customer AcquisitionCost.
(01:05:51):
You are increasing.
Let's say, getting an imaginarynumber Getting a client costs
80,.
Speaker 2 (01:06:03):
Let's say $20.
Speaker 5 (01:06:04):
That the amount of marketing, the amount of meeting
logistics of the salespersonand the amount of salesperson he
distributes equally for theentire month and it costs $20.
Now your customer acquisitioncost it's at $20.
Now for you to scale.
(01:06:24):
You need to increase number ofclients.
Customer acquisition cost it'sat $20.
Now for you to scale you needto increase number of clients
without increasing.
Speaker 2 (01:06:31):
The number of cac.
Speaker 5 (01:06:32):
Cac Happen to Shideiko More clients.
Speaker 2 (01:06:36):
More expenditure.
Speaker 5 (01:06:37):
More expenditure.
Speaker 2 (01:06:38):
Yeah, so that is not always accounted when people are
talking about how they willgrow the business.
That's also another problem.
Speaker 3 (01:06:44):
In that number of like these.
We need these.
X is not always accounted.
When people are talking abouthow they will grow, the business
.
Speaker 2 (01:06:45):
It's not in that number of like we need this X
because of this expenditureExactly?
Why is it not accounted for ifit's well known?
Speaker 5 (01:06:56):
Now you know how to put it into the conversation.
Speaker 2 (01:07:02):
The way you ship it.
Speaker 5 (01:07:03):
Exactly Everything in funding, everything in investor
negotiations.
That's why there was a time Iwas very, very poor at
negotiations.
You.
Totally.
I was very, very.
You know you have to startsomewhere and you'll not start
at point A.
You'll start somewhere at 0, 1,2, 3.
(01:07:24):
You're getting, but what Irealized is depending on how you
structure your deal, that'severything.
Yeah.
You can get funded of over thecounter.
It's called over the counter.
Over the counter I haveportfolio companies who have
been funded over the counter.
They call me Investor may saymaybe CD Tell the counter.
(01:07:45):
Over the counter I haveportfolio companies who have
been funded.
Over the counter they call meinvestor may say, maybe cd tell
them, maybe cd.
Speaker 2 (01:07:53):
I can say maybe cd.
Tell them, maybe cd.
So is this on a call?
Is it on a call?
Speaker 5 (01:07:55):
like literally on a call yeah, I'm a what's up,
what's up text.
Okay, I'll call you likeinvestor may say my abcd.
We have him ABCD Investor and Ichange tone.
I say hi, he says ABCD.
You reply ABCD Because atnegotiations, remember, you
(01:08:17):
cannot make a good deal with abad person.
Speaker 2 (01:08:20):
So a bad person will always remain a bad person.
Speaker 5 (01:08:22):
Don't try to sugarcoat it, I'm blind, so they
remain a bad person.
Don't try to sugarcoat it, I'mblind, so they're also bad
investors.
Speaker 2 (01:08:28):
100%.
And bad VCs 100% Is that whatAfricans have been getting, or
African companies?
Not even Africa, because I knowof companies that have closed.
Speaker 5 (01:08:38):
Yeah, For funding.
Evil is everywhere.
Let's say that Evil iseverywhere.
Let's say that Evil is inhealthcare.
Evil is in government.
Evil also is in investment.
Speaker 2 (01:08:54):
And all of those guys are looking for funding.
Speaker 5 (01:08:57):
Exactly.
Speaker 2 (01:08:57):
In one way or the other.
Speaker 5 (01:08:59):
One way or the other.
And now there is another firm.
It's called Kostla Ventures Ilisten a lot to Kostla, Now the
founder.
And now there is another firm.
It's called Kossler Ventures Ilisten 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 inmature businesses, taking it to
(01:09:23):
the next level.
Let's say you're making 10 to50 million AAR.
Aar is annual recurring revenue.
You are doing 50 to 100 AAR andyou're thinking how can I
convert this to like 300, 500,like other big companies?
Now that's where you involvethe PE fund.
(01:09:44):
The PE fund will come in withthe funding.
They will come in with thestrategies.
They'll come in with theresources and the talent to
actually get your business tothe next level.
Speaker 2 (01:09:58):
Wait a minute.
What do you think?
Because I've also seen a coupleof companies where there is
funds and then the people whoactually give the money they
bring also the executives theybring all these people.
Is that good or bad?
Speaker 5 (01:10:13):
Depends With what the people coming in PE funds can
bring in.
Executives.
Let's say when PE funds investin your company, starting need
20 to 50 million USD.
Executive when let's say whenPE funds invest in your company,
starting need 20 to 50 millionUSD and upwards.
Yeah.
And that's not acquisition it'sjust funding.
(01:10:35):
Yeah, it's funding, that's notacquisition Depends.
Also, there are PE funds, likethe biggest PE fund, kkr.
Hey, that guy is no joke.
That guy once had a bid forlike 1.4 billion back then in
(01:10:56):
the 90s.
So that's roughly 15 to 16billion.
Speaker 2 (01:11:00):
Trying to invest in a company Acquisition.
Okay, acquisition.
Speaker 5 (01:11:05):
And that was more of a hostile takeover.
Pe funds when they come, theybring in their people.
Depends on what is their agenda, and if you were able to get
their agenda earlier on, a PEfund can bring in their people
(01:11:25):
to kill the company Incumbentmanagement, not the company
Incumbent management To takeover.
To take over Politically, totake over.
When they take over, they firepeople, change operations, shift
the revenue, like literallyeverything.
They change a lot of thingsYou're getting.
(01:11:47):
Once they've done that, theymake sure the company is at its
climax.
They sell.
Speaker 2 (01:11:56):
Very nice.
So we talked about post-moneyoption pool.
So what is you know this fullydiluted post-money option pool?
An option pool?
Let's start with the optionpool.
So what is a you know thisfully diluted post money option?
Speaker 5 (01:12:06):
pool, an option pool.
Let's start with the option.
Option pool is a way tomotivate the starting team by
allocating a certain percentageto them.
Like 100%.
Speaker 2 (01:12:24):
So it's equity, equity.
Speaker 5 (01:12:27):
But it's not direct equity, it's an option of.
Speaker 2 (01:12:31):
So you can sell later or Hold.
Speaker 5 (01:12:34):
But, I will not give you an expiry period.
Speaker 2 (01:12:39):
So, as long as you're the company, or even if you
leave and you have met all theconditions.
They are called vesting.
Yeah.
Speaker 5 (01:12:49):
They have to vest.
I'll give you 250,000 sharesOptions not shares Options.
I'll give you 250,000 optionsfor four years.
After four years, you will youas the owner, you will decide.
Do I sell, maybe double theinvestment?
(01:13:12):
I'm a hold and wait for moreinvestment.
True, now that's an option, afully diluted option pool.
Speaker 2 (01:13:23):
Everyone has vested, you're getting yeah everyone now
is including the founder no thefounder has equity, okay,
option pool.
Speaker 5 (01:13:33):
It's literally instead of me giving you mark,
I'm giving you an almost nearalternative to mark.
Okay, because in finance,principles remain the same.
Okay, we just change maybe onething.
It becomes totally different.
Yeah.
Options and equity are not thesame.
But option is literally acontract to give the owner the
(01:14:04):
option to either hold or sellthe underlying asset.
Underlying asset is the equityof the company You're getting.
Let me give you a more clearexample.
In finance there arederivatives.
From the word derivatives, youare deriving a product, a
(01:14:28):
financial product, from theunderlying asset.
If it's option, if it's equity,you are giving an option of
equity.
Underlying is equity.
You can give an option fordifferent things Commodities.
You can give an option fordifferent things.
Commodities you can give, socommodities gold, oil, rice.
Speaker 2 (01:14:51):
Depends Nice, so how does this impact startup
valuation?
Speaker 5 (01:14:58):
For fully diluted.
They will have to Depends.
They can come in and they needto allocate more shares.
You're getting it when you'reallocating more shares.
That means also your money willbe affected you as the investor
(01:15:20):
, Because that does not existfor investment.
Speaker 2 (01:15:24):
It's a pool that is set aside.
Speaker 5 (01:15:27):
Yeah, that's not my business.
I am coming in to give you moremoney.
Speaker 2 (01:15:34):
For what exists.
Speaker 5 (01:15:35):
What exists and then tomorrow I get more money, but
now you will use my money toallocate more to your founding
team.
That's why a lot of VCs andinvestors want the option pool
before they invest.
I don't know if you can seethat.
(01:15:58):
But there are some cheekyfounders who will always say
it's done, but they've notfinalized the paperwork.
But you've finalized thepaperwork on funding let me
drink water.
That happens a lot it happenswhen a lot of corporate
(01:16:20):
litigation don't reach courtpeople, a lot of people in
finance want to settle out ofcourt Arbitration mediation
negotiation.
Speaker 2 (01:16:31):
Okay, so let's give a shout out to our sponsors, who
have made this podcast possible.
Speaker 1 (01:16:45):
Quick pause, folks.
We're stepping into a briefinterlude, but stay tuned,
because after the break we divedeeper into the incredible
journey of our guests.
Meanwhile, we'd like to send amassive shout out to our
sponsors for empowering thisexchange of ideas and innovation
.
We'll be right back on ImpactMasters Subscribe, follow and
innovation.
(01:17:05):
We'll be right back on ImpactMasters Subscribe, follow and
share.
Check us out atwwwimpactmastersio.
See you after the break.
Speaker 2 (01:17:17):
Welcome back.
Welcome back.
This is quite interestingconversation.
Shout out to Africa Stalkingand you can find Africa Stalking
at africastalkingcom forpowering this conversation.
Africa Stalking provides telcoAPIs on voice, sms, ussd,
(01:17:39):
insight Charts API fordevelopers to build scalable
businesses across the world.
Africa Stalking is available in23 markets and the solution
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And one of the key aspects ofAfrica Stalking is empowering
(01:18:00):
developers across Africa.
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Impact Masters is changing thestatus quo through Impact
Masters podcasts, which is foundin all the podcast channels in
the world, including iHeartRadio.
And if you listen to us, youwant to support us.
Let us know.
(01:18:20):
If you want us to host you aguest who is a moving shaker in
the tech ecosystem, also let usknow.
We'll make that possible.
Today we are hosting TitusNdeto Ndongo.
Yeah, I don't know which iswhich, but he has so many names.
But also he has a wealth ofknowledge and he's sharing with
(01:18:43):
us around startup raising money,his life in high school and
primary school.
He's a curious gentleman andyou can hear even in his story.
If you've not listened to theprevious recording, just go
there.
Start from the word go and youget all this and understand who
(01:19:04):
he is as a person, as well asthe wealth of knowledge that he
has.
So we're talking about thevaluation.
You know, post, pre and, as wellas you know, option pool, some
of these that actually, when astartup is coming up actually
tech you don't really focus moreon what that means.
(01:19:25):
They just want to build aproduct, 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 adelivery or erp solution for
different businesses?
And then when they raise funds,they realize, oh, we give the
whole company to someone and theintention is all clear.
(01:19:45):
Or maybe my employees are notmotivated well enough.
I need an expert who needs tobe paid.
So it's quite a mushy water totrend in.
But some of this knowledgeyou're sharing actually gives
some details into how do Iprepare myself financially and
even if I'm consulting afinancial person, I'm able to
(01:20:07):
actually articulate this personwho will come in to give me this
world of knowledge.
Uh, there's been also rumorswhere, you know, finance people
collude for the highest bidderto take over the company.
There's also what you talkedabout AR, or the guys who bring
the people, kkr, kkr who bringin the people.
(01:20:29):
They take over the company.
So there's a lot that goes on.
Speaker 5 (01:20:33):
Before we continue, kkr, do not bring in bad people.
They don't run tax online.
Speaker 2 (01:20:42):
I did not say they bring bad people, but they bring
people with intention, clearintention, and most of those
intentions are always favorableto the founder.
Speaker 5 (01:20:50):
Yeah, exactly that's a good way of putting it, it's
favorable to them.
Speaker 2 (01:20:54):
Either they're planning to take over or acquire
the company or grow thatcompany to an extent that it
creates value and sell it.
Speaker 5 (01:21:01):
Both for the founder and themselves.
Speaker 2 (01:21:03):
Yes, exactly and actually it's good for everyone.
It's just that it hurts theintention of the company.
There are companies that havenow started to just make
billions of dollars.
Maybe they make billions ofdollars, but this billions of
dollars is quite distributed tocreate wealth in different
communities across the world andnot to be concentrated on one
(01:21:24):
point.
But of course the investorwants to make billions.
Maybe that's the intention theywant to make more money to
invest in more companies and forthem, actually they're looking
at it from the point of yeah, ifI have more billions, I invest
in another 50 companies.
I've impacted the same communityyou're trying to impact and you
take shorter time.
So there's always thatdisconnect.
(01:21:46):
But of course, at this pointyou are looking at how do we?
You know, knowledge is power,how do we bring this into light
and how these processesinterlude with each other, and
so and so forth.
So these are series of uhconversations and we want to
cover a lot of things aroundthese, because everyone is
(01:22:07):
complaining, everyone isfrustrated, but no one actually
sits down and asks wow, where dowe start talking about these
things and this?
Is the place.
Welcome back.
So right now, titus, I want usto venture more into pre-money
versus post-money valuation.
As you said, most founders arenot finance gurus to figure this
(01:22:31):
out.
So what is the differencebetween the pre-money and
post-money valuation?
Speaker 5 (01:22:36):
Pre-money and post-money the biggest
difference is if the investorhas put in money or not.
Let's get back to our example.
You have the company, I'm yourfinance guy.
You ask me investor, I'm in NBRthis much.
(01:22:59):
What is the pre valuation?
How would I answer?
I tell them, I ask, I tell you,go and tell them one to try.
one point to five yeah yeah, andthen Rudy, now what will be a
post money valuation?
And then one beer.
That depends on the oxygen, onwhat am I saying Now for post
(01:23:24):
money?
It depends largely on the moneycoming in.
If it's 1 million, post moneywill be 1 million plus 1.25
million.
So it will be 2.25 million, Ifit's 10 million it will be 11.25
million, depending on theinvestment be 11.25 million,
depending on the investment.
Speaker 2 (01:23:43):
So pre-money is assets, money you're making, the
value that you're creating, thepromise, the pre-orders, all
that brought together.
It might be liquid or notliquid.
Speaker 5 (01:23:57):
But that's the valuation pre.
Speaker 2 (01:24:00):
It's the pre-money that exists before the
investment.
Post-money valuation is plus.
Now the investment.
Now what is crucial forfounders to understand the
inclusion of the option pool inthese valuations.
Speaker 5 (01:24:19):
For option pools.
Inclusion is not on thefounder's side, but mostly it's
the main point of the optionpool for the startup founder
(01:24:46):
will be a way of financiallymotivating the early employees
that took the risk with themBecause maybe they weren't being
paid that good, they weretaking long hours for short pay.
Some used their own money,stuff like that.
But now the option pool, onceit's set aside, it will hurt the
(01:25:15):
equity budget.
Equity budget is the budget youare spending on getting funding
.
Is the budget you are spendingon getting funding.
If you're looking for fundingat seed level, your equity
budget should be roughly 10 to15.
10 to 15 percent For roughlyseed 75,000 to how much?
(01:25:43):
75 to 100k at sea level.
That's a good amount startingfrom there.
Now when you do the option poolbefore the funds, you will get
(01:26:03):
7.5 million.
It will be there.
But now when you do after apiece of that, 7.5 million will
be affected Because you will setaside the option pool at
post-money valuation but theinvestor is investing at
(01:26:24):
pre-money valuation.
But the investor is investingat pre-money valuation.
You're getting Now you'll takea piece of the funds, the
percentage the investor had togive to the employees.
Now most investors are not thatgenerous when it comes to
(01:26:44):
equity, because equity they are,let's say they are ways.
They are ways Most foundersthink equity is control.
Depending on this structure, Ofthe organization.
(01:27:06):
That's not always the case.
You can have majority stake.
Speaker 2 (01:27:11):
And you're not in control.
Speaker 5 (01:27:13):
Exactly.
Speaker 2 (01:27:14):
Depending on the percentage or what determines
that.
Speaker 5 (01:27:17):
Close.
Speaker 2 (01:27:19):
What is close?
Speaker 5 (01:27:20):
What do you put in the contract?
What did you put in the companyby lose?
Speaker 2 (01:27:27):
now, that's where the legal comes into play, or?
Speaker 5 (01:27:29):
yeah, it's called technical, technical, a legal
technicality.
Speaker 2 (01:27:37):
Okay so do you need to go and study law as a founder
or do you need to hire a goodlawyer?
Speaker 5 (01:27:43):
You need to understand it.
Just read enough.
Read business law.
What I'm avoiding is onceyou've hired a good lawyer, you
still do not understand legaltechnicalities.
Speaker 2 (01:27:57):
But you trust they will guard your interests.
Speaker 5 (01:28:01):
Yeah, till when.
Speaker 2 (01:28:04):
Until you stop paying them.
Speaker 5 (01:28:07):
Or when the funding round is roughly 100 million.
That's how much in Kenyanshillings, that's more than 12
billion.
Yeah, 13 billion, it's 130.
Yeah.
Now you are paying me 7 millionper month.
This guy is wanting to give mea billion.
(01:28:28):
Bro, I love you, but you won'tunderstand.
Speaker 2 (01:28:35):
So it goes to the side of the investor.
Speaker 5 (01:28:37):
Yeah, these guys come with floats.
They come loaded, heavily,heavily loaded.
Speaker 2 (01:28:43):
So like how much does that guy pay?
You Will double, triple it.
Speaker 5 (01:28:47):
Even 10x.
You want this contract to favorus 10x.
Speaker 2 (01:28:52):
Ah how often does that happen.
Speaker 5 (01:28:56):
Depends on interested parties.
The company has to havesomething that will entice
attract that type of group.
Speaker 2 (01:29:07):
Yeah.
Speaker 5 (01:29:08):
Unona.
Yeah, let's say, maybe you'recreating the next Google.
Oh.
But you, as the founder, youdon't know the revenue model,
the business aspect of it.
You know that model, thebusiness aspect of it.
You know that's the problemmost tech founders?
Uh, don't understand.
Not all most tech foundersdon't understand the money part
(01:29:31):
of their company.
Remember, you cannot entrustthese positions to everyone
always because now, now, likethe financial technicality being
cash at bank, not cash at bank,being high on account
receivables but low on liquidityAccount receivables need the
(01:29:54):
money you're being paid at theend of the month.
Let's say you have 10 millionof it.
You have a contract now.
You cannot fulfill it, becauseeverything is on your OPEX.
Speaker 2 (01:30:06):
Can you take a loan?
Speaker 5 (01:30:07):
You can take a loan against accounts receivable.
Speaker 2 (01:30:12):
But, it will be expensive At all interest.
Speaker 5 (01:30:16):
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.
(01:30:37):
Now if you're given the retailat 14% of 100 million, that's
quite a lot.
Speaker 2 (01:30:47):
Yeah, so how does including 15% option pool in the
pre-money valuation affect theequity stake of the founders?
Or what is the right percentageto really include for option
pool.
Speaker 5 (01:31:00):
The average option pool is at 10 20 okay, so 15 is
yeah median yeah now, uh, for 10to 20.
Uh, let's say, for 20 you arein love with your employees
because Because now you have atleast a lot of flexibility.
(01:31:24):
But for 15, you are not that inlove with employees Because,
remember you, as the founder atseries A, you should be owning
40%.
That's the average.
Okay, because a lot of guyscall me to clean up their cap
(01:31:45):
table.
Cap table is a capitalizationtable.
Who owns what when.
Speaker 2 (01:31:49):
So what if at Series A you own 30%?
Is that really bad?
Speaker 5 (01:31:53):
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 (01:32:04):
But here we are considering maybe we have one
founder.
What if we have two or threefounders?
How possible is it for onefounder to own 40%, or is it a
combination of all?
Speaker 5 (01:32:17):
If you're solid, if you're good friends, if you have
the good work ethic, you canI've said, if you can own us
joint.
Speaker 2 (01:32:29):
All founders should be able to have 40%.
Speaker 5 (01:32:32):
All founders.
Yeah, that will be easier andit will loosen the belt.
You get it Because remember,everything is at 100%.
You have 40%.
Speaker 2 (01:32:42):
Already, you took away 15 15 plus 40 yeah 55, 55
you have, so the company stillhas yeah, you have now roughly
45 yeah you have one investoryeah at 10, 35.
Speaker 5 (01:32:57):
You have maybe what else, let's say 35 remaining.
Speaker 2 (01:33:02):
Precede maybe 7.5 gone 7.5 gone.
Speaker 5 (01:33:05):
That's also.
That's how much 20, how much,call it 10.
Call it 10.
Now, when you at Series A, youare being funded roughly 5 to 20
million for most likely 15%.
(01:33:28):
So that will mean you'll haveto eat your investors.
Am I will have to eat yourpeople.
Am I will have to eat yourself?
Speaker 2 (01:33:35):
Mostly yourself.
Speaker 5 (01:33:36):
Mostly yourself.
What are you remaining?
Speaker 2 (01:33:38):
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 (01:33:43):
I want to cash out.
Speaker 2 (01:33:44):
Yeah, that's the best person, so everyone has to lose
at some point.
Speaker 5 (01:33:48):
Now, that's the problem.
At some point in companies youhave to take sacrifices.
That's the issue.
Yeah.
Now, the sacrifice should not bethat big to kill you.
Don't take a sacrifice that youcannot handle.
You're getting.
Now let's say at series A,they've come in, they've given
(01:34:15):
20% for 10 million.
Now everything now starts tolike a small amount makes
considerable change to leak.
A small amount Makesconsiderable change.
A small percentage.
Now Assume you own.
Let's say what If you had 10?
(01:34:37):
Let's say you own 7%, thisamount, you own 7% of your
company.
Speaker 2 (01:34:44):
How easy of you to lose it.
It's very easy because there'sno control there.
Other people have control overyou, that's the issue.
That's 93% worth of control.
That's a big very, very bigEven you don't consider, you
(01:35:04):
just you're just an employeeyeah, you're an employee, yeah,
I don't so you mean that couldeven happen at series b, if you
are?
Speaker 5 (01:35:12):
if you're not careful , because I usually advise my
portfolio companies yeah cleanup kwanzaa your cup table.
Buy out as much people aspossible.
What does?
Speaker 2 (01:35:25):
that mean.
Speaker 5 (01:35:26):
Buy out is you have a lot of dead investors.
You had an investor who paid200,000.
That's 2K USD.
Speaker 2 (01:35:34):
You buy it back.
Speaker 5 (01:35:36):
You pay 5,000.
You have another investor.
Speaker 2 (01:35:41):
But they have to accept it though, and you're
assuming that people will taketheir 5k for 200,000 not
necessarily.
Speaker 5 (01:35:49):
They don't have to accept so what do you do?
Speaker 2 (01:35:51):
do you hamstring them ?
Speaker 5 (01:35:54):
there are ways, please indulge me there are ways
of forcing a buyout what ways?
I don't want to seem like anevil person, but maybe for you
to force a buyout with aninvestor is to offer a premium.
Offer a premium is if theyinvested 2,000 USD, give them
(01:36:24):
10,000.
For them to refuse, they'llhave to substantially decline
the offer with reason.
Speaker 2 (01:36:35):
So here you're suggesting that if someone gave
x, you can double it, double itor, you know, triple it, just to
make it enticing now you'llhave, but the intention is to
buy it exactly not because youlove him, mama, it was.
Speaker 5 (01:36:52):
The intention is to lose dead weight you'll have a
lot of dead investors.
Your mom, yeah, your mominvested.
Yeah, your bro invested.
What value are they bring?
Company?
Because also, that's a thing Iinsist- Look for an investor in
the same area as you.
Speaker 2 (01:37:11):
Because they will bring even knowledge,
connections, network.
Speaker 5 (01:37:16):
If even anyone is bringing industry participants
on the table that's huge, hugevalue.
Huge value Kwanzaa, when youare young, huge value.
Speaker 2 (01:37:26):
How young can you be young?
Speaker 5 (01:37:28):
Young.
Let's say you are making lessthan 10 million, that's 100,000.
Speaker 2 (01:37:33):
Oh, you are talking young money-wise, not the age
Money-wise, yeah, not age.
Speaker 5 (01:37:38):
I know for age.
I don't mind about age at all.
Yeah.
If you have the people behindyou.
Yes.
Speaker 2 (01:37:45):
That's what matters.
Oh, interesting, so you talkedabout negotiation, that a
founder should have to be ableto get more from the investor.
So what strategies can foundersuse to negotiate higher
pre-money valuation?
That doesn't include the optionpool, because now option pool
is one that attracts the optionpool, because now the option
pool is the one that attractsthe dead weight.
Speaker 5 (01:38:08):
Yeah, the dead weight Lambda.
Maybe you do make thenegotiation inclusive, instead
of making the investor feelyou're giving, I'm giving money
and then I'm stepping aside.
Also, like, ask the investorrarely will they accept.
(01:38:32):
Ask the investor to take up anadvisory role, because the
investor you're targeting alsohas different companies.
Speaker 2 (01:38:42):
So that should be one of the offering.
If you don't take this, welower down that option.
Speaker 5 (01:38:47):
It depends.
It depends Because taking up anadvisory role depends on the
investor, because, let's say,you have an investor who's?
Let's say, you're in MedTechand you have an investor in
MedTech that should be a hugevalue.
You should?
Let's say, you're in MedTechand you have an investor in
MedTech.
Speaker 2 (01:39:05):
That should be a A huge value yeah.
Speaker 5 (01:39:07):
You should.
That should be a bargainingchip, because they'll bring in
people.
It will be easier for you toget into those doors via him
than via yourself.
Yeah.
Plus.
Now you're in MedTechcredibility.
Speaker 2 (01:39:27):
Ah, okay, if this guy has invested in this exactly
must be very important exactlythat's just take the advisory
role.
Speaker 5 (01:39:36):
advisory role, you know, there are roles covered,
no matter how small it is, itdoes not change.
Speaker 2 (01:39:42):
Do you get paid to be on the board?
Obviously.
Speaker 5 (01:39:48):
Because you are not coming to the meetings for free.
Speaker 2 (01:39:52):
So you mean there is sitting allowance?
Yeah, sitting allowance, goodfood.
Speaker 5 (01:39:57):
Obviously boards must have good food.
Any board meeting.
Speaker 2 (01:40:00):
Some giveaways.
Those must be expected, butthere is no salary, really
Mostly.
Speaker 5 (01:40:05):
Some giveaways.
Those are what you expect.
But there's no salary.
Really, mostly Really.
Yeah, there is If the advisoryrole it's very, very interactive
.
Let's say you have an advisoryrole on legal.
Okay, you know, you know a lot,okay.
Speaker 2 (01:40:20):
It depends with the time consumed in the role.
Speaker 5 (01:40:24):
Yeah, okay, so any other negotiation?
Speaker 2 (01:40:25):
skill.
It depends on the time consumedin the role.
Any other negotiation skillthat you can share.
Speaker 5 (01:40:32):
Know who you are negotiating against.
Speaker 2 (01:40:35):
Do background search?
Speaker 5 (01:40:39):
Do not fear investors because they are giving you
money.
Most people are desperate.
Speaker 2 (01:40:46):
Okay With money.
Speaker 5 (01:40:47):
Ah, they will say speak.
They will speak in a very, very, very ambitious voice.
I do not care, I put in ironthere.
Let the guy sit at the tableand then the investor proposes
to call off the deal of a pettything.
(01:41:08):
The deal value is roughly 15million USD 15 million is petty.
Nah.
Investors usually call off thedeal over petty reasons.
Speaker 2 (01:41:19):
Okay, not the 15 million, Not the 15 million.
Speaker 5 (01:41:22):
You know this investor doesn't want to give
you this.
Speaker 2 (01:41:25):
They want to give lower, lower.
Speaker 5 (01:41:28):
So now they are looking for reasons.
Speaker 2 (01:41:31):
Like which petty issues that investors are
bringing on the table.
Team, you're too tall, tooshort.
Speaker 5 (01:41:37):
No, that's very, very petty.
Speaker 2 (01:41:40):
No, you said the petty things, so I was thinking
the pettiest of the petty.
Speaker 5 (01:41:44):
For petty, I'm meaning petty thing, so I was
thinking the pettyest of thebest.
Fupueti are meaning financiallypetty.
Okay, let's say you don't havean accountant.
Okay.
And then they start arguing youwill not manage money Properly.
The other rounds, who did it?
Speaker 2 (01:41:57):
Okay, what if maybe this is your series A?
Speaker 5 (01:42:02):
Series A is usually mostly series A in the price
round.
A price round is like there aremore than three different
people.
You have an investor there.
The investor will come with ateam.
You will come with your team.
Let's say you're meeting twopeople, but in actual sense
(01:42:23):
there are 15 people in theboardroom.
He's giving you, let's say,you're meeting two people, okay,
but in actual sense there are15 people in the boardroom.
Yes, he's giving you, let's say, 100 million shillings.
Ah, yeah, yeah, yeah, you'llhave to pay for it.
Yeah.
You will have to Because theywill check everything, even your
friends.
Investors are very, very shrewd.
For you to become an investor,most likely.
Speaker 2 (01:42:46):
So do they even hire FBI, cia, private investigators?
Pay people around you to turnthem.
Speaker 5 (01:42:58):
You know.
Let me give a case study in theEuropean market European market
, a lot of people follow, not alot.
People must follow the rules.
Now, a good background checkwill yield everything Crime
records, school records, healthrecords, offenses, court records
(01:43:19):
and do you disclose it openlyor 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 (01:43:33):
That's why most people don't go to raise in
Europe, I see.
Speaker 5 (01:43:36):
For Europe.
Europe is a tough market.
They will give.
How can I?
Yeah.
But they will do theirbackground checks, they will
legally.
They legally have to ask.
Speaker 2 (01:43:46):
Okay, we'll discuss this somewhere else, but that
begs me to ask how did Londonsurpass Silicon Valley?
Is it because of Brexit?
Now they don't have to abide bythe European Union rules.
Speaker 5 (01:44:00):
To some point, I might say, the very, very, very
laws you're putting in place toprotect you are also a danger to
you, because if you look at,let's say, food laws in European
market, they are only buyingonly organic.
Speaker 2 (01:44:24):
Purely.
Speaker 5 (01:44:25):
Purely yeah.
So now what happens?
If you don't, Will your countrystarve to death?
Speaker 2 (01:44:32):
I have no idea.
You grow organic.
Speaker 5 (01:44:35):
Till.
When.
Speaker 2 (01:44:38):
Until you have surplus.
Speaker 5 (01:44:41):
Now.
That's why most likely theremight be a deficit always on
balance of trade.
They're importing more thanexporting because of their laws
they've put in place so inEurope you can only consume or
sell them organic food nah,depends, depends on the region.
(01:45:02):
You know, europe is very, verybig.
Europe is very, very big.
Europe is a conglomeration ofcountries.
Let's say a place likeQuinteria, netherlands.
Netherlands rarely take foodswith fertilizer.
Literally even when you'reimporting, when you're exporting
(01:45:24):
to them within Netherlands,they can they can grow it and
take it because they havecontrol they have control over
there what they plant thechemicals yeah now let's say
what about Kenya?
Speaker 2 (01:45:36):
I'm curious Kenya imports?
Kenya any guidelines therelet's hope they are.
You have not heard of anyStringent Stringent guidelines.
Speaker 5 (01:45:50):
I have not.
Speaker 2 (01:45:52):
Do you think they would be good for us?
Very.
Speaker 5 (01:45:56):
Because now look at China.
China was once the fake country.
Everything fake China.
Look at the lows they have.
Speaker 2 (01:46:07):
So you start gradually.
Speaker 5 (01:46:11):
You just open up but with time you tighten the ropes,
Because for China what they did.
I have a friend who exports toChina.
Speaker 2 (01:46:19):
What does he export?
Speaker 5 (01:46:22):
Fresh produce, that's vegetables.
I don't know vegetables fruitsapples, avocado different types
mangoes what else Sweet corn?
No, it depends.
Speaker 2 (01:46:35):
And this is very interesting because in the
couple of coming series we'lltalk about, because it's kind of
investment where you growproducts, you add some value by
packaging or washing and findinga good market and you export
out value-added goods as a wayof business, because, you know,
most people think now, with thetech boom, everything is tech,
(01:46:59):
which is not the case, becausepeople will always eat.
People will always party peoplealways party.
People always use clothes.
You know there are so manyother markets that are not
tapped and we're exporting orimporting most of those things,
even within Africa.
Speaker 5 (01:47:12):
Yeah, even within Africa.
Speaker 2 (01:47:13):
So we'll get there and talk about all these
opportunities that exist.
Speaker 5 (01:47:17):
On exports.
Speaker 2 (01:47:17):
Yeah, there are lots, even within Africa, actually.
Speaker 5 (01:47:20):
Yeah, even within Africa.
Actually yeah, because that guyI was doing his numbers he
sells $7.95 per fruit.
Speaker 2 (01:47:34):
That's a huge margin.
Speaker 5 (01:47:36):
That's 10x the margin .
Speaker 2 (01:47:38):
Even when you remove or subtract the logistics.
Speaker 5 (01:47:43):
Because the margin rarely is less than 15x.
Speaker 2 (01:47:46):
Oh nice.
Speaker 5 (01:47:47):
Really, maybe you're doing bad management, because a
lot of guys this begs me to askhow did Twigger fail?
Speaker 2 (01:47:55):
Okay, I don't know if it failed, but why is it
struggling to really make thedifference?
But this is not your discussionfor today.
Speaker 5 (01:48:03):
Let me, let me, let me.
Speaker 2 (01:48:04):
I like this discussion.
You're a private waiter, youknow.
This chief has analyzed all thecompanies that actually have
failed.
Yeah, at least in Kenya or inAfrica, for you not to repeat it
and actually has analyzed howthe process was.
That's why I like this.
But let's go into the detailsand then we'll go to specifics
later on for Tinga.
Speaker 5 (01:48:26):
There was interested parties.
Interested parties, people whowant to eat the company
foreigners, investors, founders,let's not mention up, but you
just know they were interestedparties.
People who want to like let'snot mention up, but you just
know they are interested parties.
Okay, people who want to likeeat the company.
(01:48:47):
The company should benefit you.
As an individual as anindividual, indeed, you as also
an employee, also a stakeholder,even if it's indirect
employment.
Speaker 2 (01:48:58):
But they could have created the value and then
eventually they will still eatif they want to eat, yeah but we
in kenya okay in kenya.
Speaker 5 (01:49:09):
You will raise using western philosophy and theories.
They are not applicable inkenya.
Have you ordered?
Trigger you personally.
But that trigger you personally, but you tend to have your own.
Speaker 2 (01:49:24):
Let me correct that analogy.
I buy it.
I know them for bananas, rightGreen bananas.
If there was a clear way, likethe way you order at Carrefour
or Naiva's, and then I could sayokay, bring me two bananas.
Maybe if I buy it in Kisii it'slike 200.
(01:49:45):
Maybe you sell me the wholething.
I don't know how it's calledBunch, Not even bunch.
The bunch are attached to that.
Speaker 5 (01:49:53):
Oh the whole thing.
Speaker 2 (01:49:55):
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 Ican order it with an app and
maybe pay 50 bucks for transport.
Yeah, I'll be their firstcustomers, but maybe it didn't
look like I'm the targetcustomers.
Speaker 5 (01:50:13):
No Before.
Even I lose that same analogy.
You've said at 450 fortransport.
Where are you getting this forhalf the price?
Kisi.
Kenyans are very, very uniquepeople.
Their habits put you inbusiness.
(01:50:34):
I'm going to put you out ofbusiness.
Speaker 2 (01:50:37):
Okay.
Speaker 5 (01:50:39):
Generally.
Speaker 2 (01:50:39):
Africans.
Speaker 5 (01:50:41):
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, evenyou, in your social group they
prefer buying bananas when theytravel Because you know the
problem with Kenya.
(01:51:03):
Need businesses.
Need businesses.
They are not solving a problem,they are filling a need.
Need businesses don't usuallysell for long.
They sell, but not for long.
How many fake Jack Daniels arethere in Kenya?
I don't know.
So let's say a lot.
(01:51:23):
I don't know.
So let's say a lot, Becausethere's, I had a case of it.
They say a lot there are peoplemanufacturing fake JD.
There are people manufacturingfake Mac Mac accessories.
Speaker 2 (01:51:40):
MacBook, you mean.
Speaker 5 (01:51:41):
Accessories, not the Mac.
You know the Mac.
For you to fake it, you'll haveto Use a lot of cash, because
there's a lot.
Speaker 2 (01:51:49):
You mean like the mouse, the wires, the chargers
and everything.
Speaker 5 (01:51:52):
Yeah, you get it.
Also, like I've ever bought Afake cable, the type C one.
Yes, a fake cable, yeah, yeah,but let's say Louis Vuitton,
louis Vuitton.
Louis Vuitton publiclyannounced they have not hit the
Kenyan market.
Your friends have LV clothes.
Speaker 2 (01:52:14):
But there are guys who go to Dubai and buy some of
these clothes.
Speaker 5 (01:52:18):
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 youthere.
Speaker 2 (01:52:34):
We'll talk more about that in another session.
Same thing.
No, I knew if we go to thatroute it will just take us off
the rails.
So any other strategy for afounder when they're negotiating
.
Speaker 5 (01:52:50):
Speech be articulate.
Be also financial savvy.
No terms before you get intothe meeting.
No terms.
Because investors like they'repeople also.
People like to shorten stuff.
They're not shortening itbecause they want to screw you
(01:53:11):
off Like cack the investor mightnot like, want to prefer
customer acquisition costs like10 times.
Just say cack.
Maybe what else Negotiation bearticulated?
Do not answer questions youdon't know or you're not sure of
(01:53:34):
.
It will bite you in the back.
Two, three years, four yearslater you will have established
you know investor relationshipsare like marriages.
One party does something wrong.
Use it in the future.
(01:53:58):
Now that's the problem.
You're getting into a marriagewith this man, this woman,
whatever they identify as, andthen I'm keen.
I don't want backlash.
Speaker 2 (01:54:16):
I see you're very inclusive yeah, you have to.
Speaker 5 (01:54:20):
Now you have these guys coming into the company and
you switch talks with them withlies.
The lies usually run out.
They start asking Now, since weare together, you just tell me
(01:54:42):
what was your evaluation.
Were together.
You just tell me what was yourevaluation.
You, because you think you arevery, very good, solid people.
You say that's a legal issue.
You lied.
You have admitted to theopposing party opposing council.
You have admitted you lied.
Let's say, you do petty, pettystuff like switching clients.
(01:55:07):
Okay, exaggerating APC.
Apc a lot nowadays, because forpilots, when you do a pilot,
let's say of software, mostlyit's free, but you're expecting
the one you're targeting thepilot, they convert to the
client of software, mostly it'sfree, but you're expecting the
one you're targeting the pilot,they convert to the client.
(01:55:29):
Now you can have the APC, youradvanced purchase commitment.
Speaker 2 (01:55:32):
Can you repeat what APC stands for again?
Speaker 5 (01:55:34):
Advanced purchase commitment.
Okay, Now it's just basicallycommitment.
Speaker 2 (01:55:41):
With bonus or you're just trying out the market.
Speaker 5 (01:55:44):
No, you are not trying For a client, for you to
sign an APC with a client, theclient has to know what I am
signing.
Speaker 2 (01:55:52):
So they either pay some percentage or they pay in
full or discounted Discounted.
Speaker 5 (01:55:58):
The point I am signing the APC is you will
discount this software for thislong by this much.
Now, when I'm converting, ifyou 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 APCis low market, low market crack.
(01:56:22):
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.
Talk to some few guys here atthe co-working space, Test it
out your interests.
Now you know you've spentconsiderably less on crack and
(01:56:42):
you have at least a workingmodel to show people.
This.
I've done this, I've purchasedthis, I've committed.
These are APC.
Now, that's very, very, veryvaluable 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
(01:57:06):
investor or a prototype or yeah,it has to be a prototype.
But now, since it's the KenyanMarket funding also getting for
getting funding it's becomingtougher and tougher because of
the failing companies.
Uh, they say you have to haverevenue.
They they increase the baryou're getting.
Now you have revenue, you havethe prototype.
(01:57:29):
You want to develop the MVPclearly perfectly and also
convert the MVP to the full-onproduct.
Also, you want to use part ofthat money to launch the stuff
you're getting.
Speaker 2 (01:57:45):
This means hiring, exactly.
Speaker 5 (01:57:46):
Hiring.
Speaker 2 (01:57:47):
Acquiring customers.
Speaker 5 (01:57:49):
Marketing ad revenue office space.
Speaker 2 (01:57:53):
If you didn't have an accountant, you hire one.
Speaker 5 (01:57:54):
Yeah, you hire one, you get a good financial guy up
there.
Speaker 2 (01:57:57):
You're using Futsubishi.
Now you want to get yourself anRange.
Speaker 5 (01:58:02):
Rover.
Yeah, yeah, also an Range Rover.
Yeah, you're getting now theproblem.
Even with my experience infunding, uh, funding is not the
issue.
The issue is 10x in the returnthat's where most people fail
it's not easy.
People come come off with themarket will.
(01:58:27):
Will purchase the market willmarket will when.
How long have you been doingthis?
It's only like three monthssales.
That's not reliable.
For reliable standard deviationyou have to have a standard
deviation comes to play whenyou're doing the sales focused,
(01:58:49):
using background from thepatterns your three-month sales
and then now when you are q3, q4yeah you ask yourself how much?
By how much have I deviated?
From the mean.
Yeah.
Now that's where standarddeviation comes into play.
If you said you're expecting 10million by Q4, by what
(01:59:13):
percentage have you achievedthat?
Okay, now if it's like lower,you adjust your expectations.
Now you see like, the marketdoes not respond to your
adjustments.
Now you see, the market doesnot respond to your adjustments.
Speaker 2 (01:59:27):
So what are these trade-offs that you expect when
negotiating a higher valuation?
Speaker 5 (01:59:36):
For trade-offs.
Obviously you'll have tonegotiate connections, because
me, I prefer investors withconnections, An investor who
will give me money and then goesthere, and then I multiply my
(01:59:59):
income, you get it.
Yes.
There's the financial andfinancial set off, obviously.
Uh, you'll have to give upequity, you'll have to give up a
portion of control, you'll haveto give up maybe a lot of your
(02:00:21):
work-life balance, because,remember, this money comes in
for it to become double, not foryour Range Rover.
Speaker 2 (02:00:30):
And it will not just work itself.
You have to put in some work,exactly.
Speaker 5 (02:00:36):
Now it comes in, maybe it also will require
skills.
It will require strategists.
It'll require someone who isvery, very, very good at
exploring different markets subis dev you're getting all this
cost.
You're getting, yeah, now thenon-financial then and financial
(02:00:58):
in your work life balance whatabout where the negotiations
take longer Time?
Also, time is a resource.
Yeah.
You know the shortest that youcan get funded by a VC, it's
three months.
Speaker 2 (02:01:19):
Because they have to do the due diligence.
Speaker 5 (02:01:21):
Filing, yeah, filing, because the biggest issue is
not even the due diligencefiling, yeah, filing, because
the biggest issue in Akwaga noteven the DD market research is
your company actually makingmoney?
Speaker 2 (02:01:34):
You have cooked the figures.
Speaker 5 (02:01:35):
Exactly Because I'm giving you my money, my
hard-earned money, for what youknow, I can't risk some things
with you.
Yeah, we're solid, we'refriends, we're best friends.
But I've given you money.
You've done the marketing.
Has the company actually mademoney?
Will the company actually makemoney?
(02:01:58):
Yes.
Will the company actually make?
Will product market fit?
Yes.
Because how can your VC earn aquagga?
Roughly reluctant Will thecompany actually make?
Will product market fit?
Yes, because this is where VCis roughly reluctant.
This money I'm giving is notmine either.
I raised it.
Investor wants a certainpercentage.
Irr.
IRR is Internal Rate of Return.
(02:02:22):
Okay, Internal rate is like howmuch percentage are you giving
on top of the percentage thatyou've gotten?
Let's say 10%.
Let me start from the top.
When you're doing a fundinground in VC venture capital,
(02:02:49):
venture capital, there are twopeoples.
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-dayrunning of the business.
They do not interfere withday-to-day running of the
business.
They do not interfere withday-to-day.
Yes, general partner raisesfrom lp.
(02:03:09):
Okay, lp, akikam akikam kwasinwho is lp?
Speaker 2 (02:03:15):
limited partner okay, minimize the abbreviation,
because in raising that's howyou get confused by the investor
.
Before you know it, 90% of thecompany is gone.
No, no, no.
Speaker 5 (02:03:31):
There are two people.
There is limited partner,general partner in venture
capital.
Now background they are VC, qua.
Limited partner he's the guywith the VC For a limited
partner.
He's the guy with the money.
General partner he's the guywith the deal flow.
He's the guy who knows whereyou will take your money.
(02:03:54):
For example, a limited partneris a wealthy sovereign fund.
A sovereign fund is Like Norway, dubai Family.
Norway is the country.
There is the royal family inNorway, same here, denmark.
(02:04:16):
They have a lot of money.
What do they do with it?
They get in contact with nowgeneral partners.
See, I have ABCD companies.
If you can invest in them, Ican guarantee this percentage.
Now the limited partner getsinterested.
(02:04:37):
Now limited partner can befamily offices.
Family offices are like hisfamily.
Speaker 2 (02:04:45):
Okay, they cannot afford.
Speaker 5 (02:04:47):
They cannot afford Can be a limited partner.
Okay Now family offices you canraise from established
investors, investors, accreditedinvestors.
Accredited investors is theaccreditation that is given to
investors past $200,000 mark byNEC, your New York Stock
(02:05:13):
Exchange.
They give you the accreditedinvestor accreditation once
after you've subtracted themoney generating assets, you're
still left with 200k yes afterliabilities, everything work was
what I have for me two hundredthousand dollars two hundred
(02:05:34):
thousand dollars, yeah, twentymillion.
Speaker 2 (02:05:36):
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 (02:05:45):
So you've invested, I still have 200.
Speaker 2 (02:05:51):
I've invested 800,000 .
Speaker 5 (02:05:52):
After assets To our living expenses.
Speaker 2 (02:05:55):
Now I can invest 500.
Speaker 5 (02:05:58):
If you can comfortably invest 500, remain
with 500, you're good Now you'llbe able to access.
Speaker 2 (02:06:08):
That must be there, yeah, that must be there.
Speaker 5 (02:06:12):
He sees savings, he needs disposable income, he
needs fare 10 million, somethinglike that.
Now for your accreditedinvestors they get risky
investments.
Risky investments higher,higher returns.
(02:06:32):
That's why people go aftertheir accreditation.
Now sasa they can talk to nowlike kama.
You've heard of Uyu JimiWanjigi saying the sovereign
wealth loan.
I'm a bond sovereign wealthbond.
That is a family, the UK royalfamily, loaning the Kenyan
(02:06:56):
government.
Now, once you hear thesovereign wealth, there's a
sovereign, a conglomeration ofpeople giving out money in a
different manner.
Now there is the family.
There are established investorsas LP.
Lp is limited partners.
There are now people who haveit and don't know where to.
(02:07:20):
Also, limited partners can becorporate.
Let's say equity, Equity.
Have a ton of cash lying around.
Inflation comes.
Inflation hits them higher thaninvesting.
Than they've invested, you knowwhat I mean.
So now mostly it's corporateventure.
(02:07:42):
Okay.
It's called that Corporateventure backed capital.
It's a corporate venture.
Okay, it's called corporateventure-backed capital.
It's called CVBC.
Okay.
Now, a company like Equitygives you, as the general
partner, this amount to developthe company and sell back to it.
Okay, because Equity cannotstart a company.
Speaker 2 (02:08:01):
They are too busy for that, yeah.
Obviously, and that's not theirmain business and that's not
their main business.
Speaker 5 (02:08:06):
That's not their main business, like the way they are
doing their high ondiversification.
You know they're in health,you're getting, they want to go
into agriculture, but they don'thave a sustainable business
model that can be absorbed bythe core business.
Yeah.
That's why they are stillangling areas of collaboration
with different general partnersand different entrepreneurs to
(02:08:28):
develop the company for them.
After the company is developed,now they can absorb it entirely
as their own.
Now that's corporate venturebacked capital.
And then for general partnergeneral partner has deal flow.
You have good deals, you havegood companies, you have good
(02:08:52):
innovative companies that can10x the return.
Now that's the general partner.
General partner is responsiblefor day-to-day fund management,
offices, offices, utilities,normal expenditure, payroll.
They manage that.
But now there is the model 2and 20.
(02:09:15):
2% out of the entire pool goesdirectly to management.
Now to pay salary, abcd, allexpenses, and then 20% as carry.
There's something called carry.
If you agree with now thelimited partner, if you have,
(02:09:38):
let's say, I give you 30 millionUSD to invest in 10 companies,
yes, and then I'm expecting backroughly 35.
Yeah.
Now you pass 35 million dollar,mark that you will return 50.
Speaker 2 (02:10:01):
Okay.
Speaker 5 (02:10:03):
Now you're like aye, we talked 35.
This is my money, okay.
Now you're like aye, so wetalked 35.
All this is my money.
And then the investors are likeno.
Then the limited partner islike no, what is that money?
Ah, okay, so there's a disputeNow to solve.
It is now where Kari comes in.
Speaker 2 (02:10:19):
What is Kari?
Speaker 5 (02:10:20):
Kari, is that money Okay you?
Speaker 2 (02:10:22):
know what is.
Speaker 5 (02:10:23):
Kari Kari, is that money you know you are targeting
?
You gave me a target of 35.
I returned 50, so that's whatis known as Kari Kari so how is
it divided?
Speaker 2 (02:10:38):
legally or without dispute?
Speaker 5 (02:10:40):
now legally it's 20%, now the general partner remains
20% of all amounts aboveWithout dispute.
Speaker 2 (02:10:44):
Now, legally it's 20% .
Speaker 5 (02:10:44):
Now the general partner Remains with 20% of all
amounts above.
The agreed Amount Okay, plusthe 2% of the 2% of the, 2% of
the, that's the sustained fund.
Speaker 2 (02:10:58):
So let me ask then because now we have gotten there
.
So if I have 30 million millionand I'm taking 2%, and
sometimes it takes longer toinvest this 30 million, what
happens then?
Do I need to return even the 2%?
What is the guideline there?
Speaker 5 (02:11:15):
Pools have a natural death.
I am giving you 30 million forfive years.
Speaker 2 (02:11:20):
So after 30 years, even if I'm not invested, that
money disappears.
Speaker 5 (02:11:25):
It disappears.
I'm expecting 35 after fiveyears.
Speaker 2 (02:11:31):
If you invested or not.
That's your problem.
What do you agree?
Ah, I see.
So that's, why some investorsor VCs are quite aggressive
sometimes to invest.
Speaker 5 (02:11:45):
So now the death is occurring.
Speaker 2 (02:11:47):
And that's why now the strategy of acquisition,
hostile takeover, all thesethings, yeah, because they need
to get the percentage.
Okay, and the returns?
So even for them it's asurvival tactic.
Speaker 5 (02:12:00):
Everyone is surviving in finance.
Speaker 2 (02:12:02):
Ah, okay, everyone, Including the banks.
Speaker 5 (02:12:04):
Even the banks, even government.
Look at our government.
Speaker 2 (02:12:10):
The financial part of the government Left right and
center.
Speaker 5 (02:12:13):
Like I cannot even explain how wrong is that?
Because once you have anunpredictable business economy,
You're in a mess.
Speaker 2 (02:12:24):
Actually, we'll talk about government investment
because sometimes, as you said,it's not mostly that government
give other governments money.
Speaker 5 (02:12:33):
Sometimes it's sovereign money individuals,
companies, high net worth, whenit were UNHW.
Speaker 2 (02:12:40):
Yeah, pension funds and all these things.
So I think that's somethingelse people might want to
understand, because if you're inan environment where there is
bad investment as a country,even driving as an entrepreneur
is quite difficult.
Speaker 5 (02:12:53):
Yeah, like now it will be now pronounced the
difficulty it ain't in Angazaka.
Speaker 2 (02:12:59):
Now let me ask this so what are the common?
Okay, we talked about that, butwith this pool, how should the
founder allocate the option poolamong key team members like the
CEO?
Ceo executive team now, that'sdifficult.
Speaker 5 (02:13:17):
I cannot let me see for that that.
You will have to agree, maybewhat I can do best, because
that's a topic I don't discusswith my portfolio companies.
I usually feel like it'soverstepping, because now you
know, you came out of noia totell us how we'll divide our
(02:13:40):
cash but there should be like aframework, just not to give
everything, because we have seenpeople.
Speaker 2 (02:13:46):
You trust someone, maybe they come and run a
company.
You give them a certainpercentage Afterwards.
Now it's like they own it andthey are no longer with the
company, or priorities changedor you did not agree at some
point.
These happen.
Speaker 5 (02:14:00):
Yeah, things happen.
But mostly what I do is I givea framework, I don't give a
definite answer.
For that.
What I usually say is mostlylet's get down to who is doing
what.
Who has the mostresponsibilities, realistically,
(02:14:23):
who has?
The most responsibilities.
Realistically, who has the mostresponsibilities?
Who goes to work?
Who does a lot of work?
Who does a little work?
Who does a little work?
Speaker 2 (02:14:36):
So if someone is putting in more work, should get
more equity.
Speaker 5 (02:14:41):
If you don't give them more equity they will be
demotivated.
Speaker 2 (02:14:45):
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 theconnection.
You know that's considered ashigh value.
Speaker 5 (02:14:57):
Yeah, that's considered as high value.
Yeah, that's a good thing.
But now also now, how will youquantify that?
Speaker 2 (02:15:07):
I mean, you should maybe set a target.
Speaker 5 (02:15:10):
Yeah, If you work with targets now that you know
this one is doing a lot ofreasonably, when you're at the
early age of startups, everyoneis doing everything, At least
you and your marketing.
We're focusing on marketingalone.
There is no time to get admin.
Have people paid?
You start calling people.
(02:15:30):
Your payment is if I do, thereis a late fee you are getting.
The CEO is not there.
Will the meeting stop?
You are getting at some point.
Speaker 2 (02:15:41):
Everyone is doing everything, but realistically
there is one person.
Speaker 5 (02:15:43):
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 canhave the entire company.
Speaker 2 (02:15:55):
Akitoka, you are, you crumble.
Speaker 5 (02:15:59):
Cramble literally within days.
Yeah, that's also why a lot ofinvestors want founder market
feed.
Not everyone is depending onpassword.
Speaker 2 (02:16:12):
There's an issue under the bus analogy.
So when you're considering someof these factors for allocation
, we have said one of the mostimportant thing is the
responsibility, the role one isplaying.
Motivation should be consideredso that those who are putting
in more do not feel like youknow, we are putting in more but
(02:16:35):
we're getting less for it.
Speaker 5 (02:16:37):
First if it reaches here.
If a member of the foundingteam states that explicitly he
is ready, maybe he wants to live.
He has already given up Becausehe has seen it.
It's not fair For me.
I'm not getting any value.
What happens when you don't getvalue?
(02:16:58):
Realistically, you just lookfor where you will get value
normal human nature.
What I usually advise is havemore of a dynamic split, a split
that will change over time.
You might have the idea, butyou don't know how to execute
(02:17:22):
which is very, very important.
You have nothing withoutexecution, but you don't know
how to execute.
Yes, which is very, veryimportant, you have nothing
without execution.
Now, the person who is doingthe execution obviously will
want more.
But it is yours.
Give them more now.
It will change later.
Always remember these thingsare negotiations, they are not
(02:17:44):
fixed.
Speaker 2 (02:17:47):
Can you negotiate down someone once you already
give them?
Speaker 5 (02:17:51):
Technically, technically you can.
Speaker 2 (02:17:55):
Will not that look like you are blackmailing them,
screwing them?
Speaker 5 (02:18:00):
It's finance.
Speaker 2 (02:18:02):
What does that mean?
You play with numbers.
Speaker 5 (02:18:06):
Play with numbers.
Everything is an exchange.
You have control.
So you mean in all this game.
Speaker 2 (02:18:13):
Someone has to.
Speaker 5 (02:18:17):
Welcome to corporate.
Speaker 2 (02:18:19):
Oh, that's corporate Corporate 101.
Speaker 5 (02:18:23):
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, morecontrol.
Speaker 2 (02:18:42):
So it is always good for the investor and the
receiver of the investment to beable to negotiate better deals
at all times.
Speaker 5 (02:18:54):
When, let's say, when the deal is nearing its death.
You need to let me see how do Iput it.
You need to like me see how doI put it.
You need to, like now, startspeaking real, like it's how
you've invested interested.
What exactly are you speaking?
(02:19:14):
Yeah.
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 yourcompany.
You're just a good talker.
(02:19:36):
You're not a good executioner.
The investor expects to turnthe next return anything else is
just stories because that's thevision you created yeah so in
some way it's still your faultyeah now the investor comes.
You don't even like basicbalance sheet but does this even
(02:20:00):
affect internal rangos?
it does employees vestedinterest option.
It does because.
But does this even affectinternal Rangos?
Employees Vested?
Speaker 2 (02:20:05):
interests.
Speaker 5 (02:20:07):
It does, because Everyone always Expect.
These are companies, everyonehas interest, okay.
Speaker 2 (02:20:17):
The higher you realize that, the better.
Anyway, you talked about captable and option Pool, so what
are some of the best practicesfounders manage their cap, table
and option?
Speaker 5 (02:20:34):
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 sweetspots are.
(02:20:56):
People will know, not now, notlater, let's say 10 years down
the line.
They will know, unless now youstart firing people because of
the mistakes you did, but forcap table.
Be very, very, very consciousof the cap table.
Be very, very very.
It will mess you.
Speaker 2 (02:21:16):
And how do you make sure it doesn't mess?
Speaker 5 (02:21:20):
you Begin early With people.
It's better to have a largeroption pool with less dead
investors than a smallinvestment pool yeah with more
dead investors for you to manage?
Uh, the cap table.
(02:21:40):
If someone is coming in, whatdo they bring other than
finances?
Yeah, that's the question.
Yeah.
For someone to convert as a deadinvestor is someone who had
only money, nothing else.
You have a dead investor.
That's why a lot of angels areusually dead investors, most not
(02:22:02):
all.
If you've raised from an angelwho was an entrepreneur, you
have a very, very, very, verygood investor.
This will help you.
Same investors are people.
You might get an investor whois starting out.
He is paranoid of everything.
Speaker 2 (02:22:25):
Including.
Speaker 5 (02:22:28):
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 orsomething which has corporate.
He has come from marketing.
He has come from medtech orsomething which has corporate.
He has come from corporate.
(02:22:48):
People who are from corporateknow budgets.
Even before budgets arerequested, they are very, very
planned.
Then they tell me at this eventsecurity has been lost we need
to hire A new security.
There is a lot ofinconsistencies when you are
(02:23:11):
doing events Than when you areworking in corporate.
I used to hear all theseinconsistencies and I this guy
is stealing from me.
This guy is stealing from me.
How come you paid these guys?
Speaker 2 (02:23:25):
You paid these guys down payment.
Speaker 5 (02:23:28):
They accepted what happened.
What happened?
You don't have time to explainBecause events, people will come
to see what.
People have paid tickets to seemaybe a celeb or maybe someone.
The celeb is not there.
You need to have a backup plan.
The investor wants anexplanation, wants a meeting.
Speaker 2 (02:23:50):
I wanted Davido, now I'm getting Calligraph Jones.
Speaker 5 (02:23:55):
I wanted.
Speaker 2 (02:23:55):
Calligraph Jones.
Now I'm getting these otherguys.
Speaker 5 (02:23:59):
Who you are, danny, I don't know.
Simple boy Simple, boy Simpleboy, I don't know what simple is
.
Speaker 2 (02:24:07):
I don't know what simple is I'm getting the other
lady Kanjo, lady Aye, you know.
So it's always yeah, andactually it happens a lot
because people get sick, peopleget, they can't refuse.
Speaker 5 (02:24:20):
Things happen, yeah, but now investors have left
corporate.
Yeah, they are so rigid.
Things happen, yeah, but nowinvestors have come from
corporate.
Speaker 2 (02:24:24):
Yeah, they are so rigid Very very planned, yeah,
and rigid, yeah.
Speaker 5 (02:24:31):
I had the experience, yeah.
Events.
Yeah.
That's why I usually insist.
Yeah.
Speaker 2 (02:24:38):
Raise from people who are in the same industry, or
close to that industry, or closeto that industry or close to
that.
Speaker 5 (02:24:45):
Yeah, even if it's an indirect relation Raised from
people who are in this almostsame industry.
They understand, they know whenyou have a problem, you're in
MedTech, you have a founder, youhave an investor from tech.
How do you help?
Most viable option is if thetech aspect of the company fails
(02:25:11):
, you have a very, very goodoption.
What happens when the medicineaspect crumbles?
What happens?
That's an issue.
Now, when you're speaking toinvestors, always try it's not
easy also, but always try to getsomeone who is in the same
space as you.
(02:25:32):
It will be easier for you inthe long run Because, remember,
they are investing time horizon.
In 2-3 years You're locked inwith some guys for 2, three
years.
Imagine you're talking.
You've met an investor who ison a 12, the guys who talk a lot
(02:25:55):
when one anxiety attacks.
Now imagine being shouted atNow.
Imagine being shouted at everyday at 7 to 7.30 because of
someone's mistake.
For two straight years You'llstart asking when is this
company going to close?
(02:26:15):
Aye, now the mental healthaspect comes into play Kicks in?
Speaker 2 (02:26:18):
yeah.
Speaker 5 (02:26:19):
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 willfake it, but eventually you give
it.
I have founders, a lot offounders who fake?
Relationships for the money,but now they are like we need to
(02:26:45):
boot out this investor yeah,yeah and I'm like now it will be
costly because you'll have tobuy him out you have someone
very expensive yeah, you havesomeone who who's liquid enough
to buy him out like evil so whatis your take about?
Speaker 2 (02:27:01):
because, also, when you raise funds and you hire
people, some of them give themsome option and then you raise,
maybe series B.
Right yeah, the people who youhire, they don't know how the
process has been, but they'requite talented, they are quite
motivated, they buy in themission and vision of the
company and they think now youhave raised series B, maybe a
(02:27:22):
hundred million, so they expectyou to cash in.
Right, how do you educate thesepeople to really either
persevere more or put in morework and ensure that you build
the value of the company as youbuild the value of the investor
and not feel like they'reworking for the investor?
Speaker 5 (02:27:41):
Yeah, there is a rule in finance corporate finance,
also corporate managementmaximize the value.
This is not human.
Come in.
We maximize the shareholdervalue, maximum shareholder value
.
Once we've done that, the restis ours.
(02:28:01):
The shareholders will takeroughly 60, 70,.
They don't care because thepeople they are talking with,
they have flutes and they havebudget expectations.
There is a portion you mightpass.
They are comfortable You'regetting not always.
Also, don't take it as it's inentirety.
(02:28:23):
You might get investors Notalways.
Also, don't take it as it's inentirety.
You might get investors who aregreedy.
You make a hundred million,they want a hundred million.
Speaker 2 (02:28:33):
One off for every year.
Speaker 5 (02:28:36):
No, not one off.
You've made good returns.
Speaker 2 (02:28:41):
This is dividends or.
Speaker 5 (02:28:43):
Now the payout depends.
You can payout using dividends.
Shareholder withdrawal.
Speaker 2 (02:28:51):
And that means you take back your shares.
Speaker 5 (02:28:55):
You take back the.
Now you are allocating yourselfincome.
Okay, you're getting.
Shares remain the same, buteveryone is given according to
how much they own.
Yeah, there is this cake.
Now you own 20% of this cake.
Speaker 2 (02:29:16):
So if you make another cake from that cake, you
should expect 20% of what youmake Exactly.
Ah, okay.
Speaker 5 (02:29:24):
Now the cake.
Speaker 2 (02:29:25):
So what if I want to eat the?
Speaker 5 (02:29:27):
Yeah, there's.
So your cake still exists.
Speaker 2 (02:29:29):
Yeah, yeah, you made a new cake.
Yeah, it did not exist, butthis 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 (02:29:41):
The founder yeah, as an investor, but as a founder.
Speaker 2 (02:29:44):
It happens.
I always because now whatresults from that, Because
someone will eventually know ah,the cake was eaten.
Someone decided to eat thiscake.
Speaker 5 (02:29:57):
Mostly what I do is I start bringing in elements of
transparency.
Once everything is in the lightpeople give.
I start bringing in elements oftransparency.
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 canknow a thief by the actions, not
(02:30:22):
and I make very, very, verylong announcements Very, very a
lot of technical jargon Coveringup a loss.
So this loss is 100%.
Speaker 2 (02:30:36):
Repeat what you have just said.
You make what?
Speaker 5 (02:30:41):
There are ways.
Speaker 2 (02:30:42):
I won't lie.
You discover there is somethinggoing wrong here.
Speaker 5 (02:30:45):
Yeah, there are ways.
There are people who want to doit, Because there are people
who allege.
Also there are some interestedparties at Twiga who wanted the
kekalon.
Speaker 2 (02:30:59):
But it's alleged.
Speaker 5 (02:31:00):
Alleged.
Yeah, I used the word alleged,let me give a disclaimer at this
point.
Speaker 2 (02:31:03):
Alleged All the views .
Speaker 5 (02:31:06):
It's only allegations .
I know nothing about it.
Speaker 2 (02:31:09):
Now.
From our guests?
They're not.
Speaker 5 (02:31:14):
Are personal.
Speaker 2 (02:31:14):
They are personal.
Speaker 5 (02:31:16):
Those are my personal views, views and opinions.
Yes, nothing more.
Yes.
Speaker 2 (02:31:21):
They are not coming direct from this podcast, or it
was.
Speaker 5 (02:31:26):
Now, what was he saying?
Speaker 2 (02:31:30):
No, you're saying that transparency should be
encouraged.
Speaker 5 (02:31:33):
Now, when you start doing issues like transparency,
you start reminding the founderit's not transparent To notify
the entire board yes, and thenit's okay to cover up loss.
It's not transparent.
We need to notify the entireboard.
Yes, they have started to shift.
And then it's okay to cover uploss.
You need to cover up yourlosses.
You need to cover up how willyou regain that loss.
And then the founder is notthinking that.
(02:31:55):
He's thinking how will I coverthis 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 youlose 100?
(02:32:16):
Million entire.
What will it be?
What happened?
It will cause a lot of interest.
How will you lose all thatmoney?
How?
Because now audits taxshareholders.
What now will come at you?
(02:32:37):
Because now that's the mistakethey usually do.
If you want to eat the cakealone.
Eat a small bunch.
Eat the rest for the others.
Speaker 2 (02:32:49):
No one goes angry.
Speaker 5 (02:32:50):
If someone goes angry , one person goes angry, they
can disrupt the entire, likethere's this case for Banyimadov
.
Banyimadov was like, considereda very, very, very, very shrewd
investor.
Now by the amount of what he did.
It's called more of a Ponzischeme.
You come as an investor, yougive me $2,000, I tell you I am
(02:33:17):
investing.
I fabricate the market.
I'm a masker.
I can lie with statistics, likeliterally in your face, and it
will be evident.
No, no, you know I'm lying, butthe facts are up.
No, no, mathematicians buildfacts.
You know how to skew them orfavor You're getting.
(02:33:39):
Now he did that, had a very,very solid quantitative analyst.
He had a very, very solidquantity, fabricated everything
ABCD, abcd.
Now he went to the publicmarket and started picking
(02:34:00):
investors at $10, $20.
Remember he has $2,000.
$10, $20.
Remember, he has $2,000.
$10, $20.
Maturity $2,000, equal at theend of the year.
Maturity at $10, $20, equalbetween the month.
You give me a $10, at the endof the month I give you the $10
(02:34:22):
interest and I get $2,000.
Repeat, repeat, repeat me a tendollars.
At the end of the end of themonth I give you the ten dollars
interest not to acquire twothousand dollars.
Repeat, repeat, repeat, repeat.
And then, uh, let's say afinancial bubble happens, say
I've lost 50 percent.
So I tell you now, from yourten dollars I have five.
Now, see, it's factually backed.
(02:34:44):
Now that's a loss, but youstill have something you're
getting.
Speaker 2 (02:34:48):
It's not like you lost that money.
Speaker 5 (02:34:50):
Yeah, yeah, the main guy, the one who's running.
Speaker 2 (02:35:00):
So they only get $1,000.
You're all ducks.
Speaker 5 (02:35:11):
So they only get A thousand bucks.
Your ducks Welcome to finance.
Everything is a transaction.
Everything is a transaction.
Speaker 2 (02:35:17):
So, as we conclude this segment, any recommendation
Reading books, you know, aroundinvestment.
As we conclude this segment,any recommendation reading books
around investment.
Speaker 5 (02:35:32):
For finding what I'd recommend.
There's no one good book I'dfind.
Speaker 2 (02:35:37):
Yeah, there are like 10 of them.
Speaker 5 (02:35:43):
For finding.
What I'd recommend is go intoCorporate Finance Institute.
They have a channel that isonline.
Yeah, on YouTube.
Okay, listen to these types ofpodcasts.
Listen to financial podcasts,because the issue with founders
(02:36:03):
is they know the product aspectbut they don't know how to make
money.
Because the issue with foundersis they know the product aspect
but they don't know how to makemoney from the product.
That's the issue.
Listen to what we are talkingabout.
Listen to corporate finance.
Even if you hate math, you hatefinance, but to some point, to
some degree you'll have to do it, because how will you make
(02:36:24):
money from it?
That's the issue.
Yeah.
Go to Corporate FinanceInstitute.
They have the YouTube channel.
Yeah.
Go to LBO Model Tutorial.
Mm-hmm.
Go to Patrick Boyle YouTubechannel.
Yeah.
(02:36:45):
Krasmir Petrov YouTube channel.
Krasmir Petrov YouTube channel.
They will teach you a lot in ayear than a 10-year program will
, because you have the material.
You're looking on the go.
Just get into the lesson ofyour choice.
This is where I am.
(02:37:06):
I'm at valuation.
Watch that valuation.
Only that one video Tomorrow.
At least you have something toargue.
Look at Aswath Damodath yeah,aswath Damodath, yeah.
Look at you YouTube, still onYouTube.
He will teach you everything oncorporate finance, corporate
management, everything,literally everything.
(02:37:28):
He's an assured investor.
He will give you experiences ofwhat to expect in the market
you're getting now.
At least do this one hour a day, you will be good.
Speaker 2 (02:37:47):
So you are saying from the University of YouTube
there exists more content.
Speaker 5 (02:37:52):
No, any paperback, no any Kindle, more relevant
content that you need as afounder, 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'tremember.
Speaker 2 (02:38:10):
No problem, once we meet again, we can always
recommend a few books.
There are people actually whovideo.
Maybe is not their thing,unless they watch Impact Masters
podcast or podcast.
Yeah, yeah yeah, you know, andso on and so forth.
So next time we meet we'll godeeper into different aspects
(02:38:32):
and how to avoid pitfalls, teamdynamics, greediness on both
ends of an investor, foundersand all that we also like to
talk about.
You know, should investments,should you build a house in
Ushago?
Should you put money in thestock exchange?
(02:38:53):
What is this?
Ula Baloo with the forexexchange and people are buying
cars like they're in wash washbusiness, those kind of things.
Is it really if you invest inforex, you'll make money?
All those kind of things.
Is it really, if you invest inForex, you'll make money?
All those kind of things?
Because also, I've realized amajority, especially even black
Americans, hispanic, kenyans,africans when they get money,
(02:39:16):
the investment they makesometimes is not really wise, to
be honest, and it's quite ofhigh risk.
Also, we don't want to investin ourselves.
We want to buy shiny stuff, wewant to live large.
It's a good thing and it's abad thing because we end up not
creating generational wealth andso on.
So there's a discussion that wecan have around that.
Speaker 5 (02:39:37):
Yeah, about wealth.
It's called wealth creation,exactly.
Yeah, we can always haveconversations, yeah so thank you
so much.
Speaker 2 (02:39:44):
Titus Ndeto, are you related to the Ndeto Ndeto?
Speaker 5 (02:39:48):
Nah, I'm not.
No, I'm not, actually, I preferNdeto Ndongo.
Speaker 2 (02:39:52):
Ndeto Ndongo.
Speaker 5 (02:39:53):
Yeah, I'm an academic .
I rarely use my English name.
Speaker 2 (02:39:56):
Ah, okay, yeah, okay, ndeto Ndongo yeah.
Speaker 5 (02:39:59):
Ndeto.
Speaker 2 (02:39:59):
Ndongoon Ndungu.
Speaker 5 (02:40:01):
Not related to Ndeton .
Speaker 2 (02:40:03):
You know the Ndeton I'm talking about?
Yeah, I'm not.
Are you sure you know?
Before we sit down, I alwaysalso do my due diligence.
Speaker 5 (02:40:16):
Okay.
Speaker 2 (02:40:23):
Thank you so much, Ndeton Ndungu.
And it was really quite a good,insightful conversation and
here at Impact Masters and RetroPodcast you always like such
conversation, telling our ownstory, impacting Africa, trying
to share the knowledge andensuring that you're moving in
the right direction.
Until next time, maybe youshould tell guys please
(02:40:44):
subscribe to the channel.
Follow, there's a camera overthere, that you're moving in the
right direction.
Until next time, maybe youshould tell guys please
subscribe to the channel follow.
Speaker 5 (02:40:53):
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 chapterwe'll be doing a lot of finance,
a lot of valuation, a lot offinance, a lot of valuation, a
lot of funding.
Where to get this funding?
Where to get, uh, guys like meto back you on?
Where to get also, guys like atto have to conduct your
(02:41:16):
solution, also for you to getahead of your game on anything
to do with finance, anything todo with valuation, anything to
do with Shreed Investments?
Have a listen, so drop thatlike, drop that follow, share
content.
It will help us a lot then itwill help you.
(02:41:38):
Thanks.
Speaker 2 (02:41:41):
Nice, that's quite interesting.
And yeah, yeah, I mean that hasbeen yeah.
Speaker 1 (02:41:53):
And that's a wrap On today's episode of Impact
Masters.
Thank you for tuning in andsharing this space of growth and
empowerment With us.
Remember every step you takehas the potential to create an
impact.
Keep exploring, keepquestioning, keep implementing
and, most importantly, keepmastering your impact.
Remember to check us out on allplatforms by searching for
(02:42:17):
Impact Masters.
Subscribe, follow and sharewwwimpactmastersio.
See you in the next one.
Follow and sharewwwimpactmastersio.
See you in the next one.
Welcome to Impact Masters podcast, in
collaboration with Africa'sTalking Retold podcast, where
every conversation sparks newinsights.
Join us as we delve into thestories of extraordinary
individuals who are shaping ourworld movers and shakers in tech
, policymakers, entrepreneurs,entertainers and all those whose
(00:24):
stories are worth telling.
Get ready to be inspired,challenged and transformed.
Welcome, and let's embark onthis journey of discovery
together.
Impact Masters Podcasts.
You can check us out on allsocial media platforms YouTube X
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You can also find us across allpodcast channels Apple Podcasts
(00:49):
, google Podcasts, spotify,iheartradio, amazon Music.
Simply search for ImpactMasters, then subscribe, follow
and share wwwimpactmastersio.
Here's your host, michael.
Speaker 2 (01:09):
Kamathi.
Perfect, perfect, perfect.
Welcome to Impact Masters.
In collaboration with theAfrica Stalking Retour Podcast,
brought to you by MichaelKamathi, you by Michael Kimathi.
(01:31):
Yeah, so this is powered byAfrica Stalking, and Africa
Stalking is poweringcommunication across Africa with
simplified access to telcoinfrastructure, empowering
developers to use powerful SMS,ssd voice, airtime and chats,
plus insight APIs to bring thesolutions to life.
As we build and sustainscalable businesses, impact
(01:56):
Masters is changing status quo,so today we have an interesting
guest.
The man himself, titus, callshimself.
Titus TN Dungundeto.
Yeah, that's a billionaireentrepreneur, investor and
venture capitalist.
He's an open minded to allventures and he considers
(02:20):
himself as a privilegedbillionaire entrepreneur who
engages startups, founders andco-founders who strive to
disrupt their respectiveindustries.
Ndeto, a founder and student oftheoretical physics,
econometrics and philosophy, whodraws upon knowledge and
(02:41):
principles of reason.
He has applied these to financebusiness and manufacturing.
He is also delighted to hearabout everyone's journey,
progress and success, as well asin experiences that have shaped
their perspective, and this isthe reason why we are hosting
him here today.
You know we bring movers andshakers in tech,
(03:02):
entrepreneurship and any othersector that is moving Africa
forward.
So welcome today.
You know we bring movers andshakers in tech,
entrepreneurship and any othersector that is moving Africa
forward.
So welcome today.
My name is Michael Kemadi, yourhosts.
I'm an entrepreneur Also.
Currently I help builddeveloper communities across
Africa.
It's a thing that I've beendoing for the past decade plus
(03:23):
years, and I've met so manyinteresting people across Africa
.
I've influenced tech ecosystemsacross different regions in
Africa and my need is to seepeople building solutions that
change the lives and trajectoryof Africa, an economic
powerhouse that it is, utilizingthe resources, brilliance,
(03:45):
capacity and the energy thatAfrica fronts in the world.
So today we have this chief inthe house, and he's one chief
I've been looking for for sometime now.
He has a wealth of knowledgeand his name is Titus Ndeto.
So, titus, without further ado,I would like to know about you
(04:09):
besides what I've said about you, let me start by the thanks.
Speaker 5 (04:14):
I rarely introduce myself, it seems like a brag,
but now, at least now peopleknow why.
But for me, for my journey, Istarted venturing into finance
way back in 2018.
(04:35):
Back then I was still in highschool.
I was very, very passionateabout theoretical physics.
That's pure math and purephysics and I never knew there
was another type of world calledentrepreneurship or finance or
(05:01):
venture capital.
I never knew any of thesethings.
Now, a friend of mine wasemployed and wanted to quit, but
didn't know what exactly orwhere exactly to start.
He reached out to me because inmy social group, I'm the math
(05:25):
guy.
Apparently everyone thinks Iknow what to do.
Speaker 2 (05:28):
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 Ndetostart?
Speaker 5 (05:40):
Actually way back in primary school.
I never performed well inmathematics or physics.
Speaker 2 (05:49):
Never.
Speaker 5 (05:50):
I was like the tail end.
But I got into high school andnow the spark came automatically
.
I actually don't know it.
It's okay.
Speaker 2 (06:02):
You just started understanding math.
Speaker 5 (06:05):
In depth.
Speaker 2 (06:06):
Okay.
Speaker 5 (06:07):
I started recognizing patterns, I started visualizing
equations, okay, and got very,very, very interested now in
physics.
Speaker 2 (06:15):
So which primary school did you go to?
Speaker 5 (06:18):
It's called Mary Maculait.
Speaker 2 (06:20):
It's a private school .
Where is?
Speaker 5 (06:21):
it Bahati.
Speaker 2 (06:24):
In Eastlands, eastlands, ah, in Eastlands.
Speaker 5 (06:25):
Eastlands, yeah, nairobi, eastlands, eastland
born.
Speaker 2 (06:28):
Okay, okay, and high school.
Speaker 5 (06:31):
High school I partially went to a public
school it's called Kaishanjiruand then I, where is Kaishanjiru
?
Kaishanjiru is.
I don't know Like literallyit's in Kaishanjiru, Muranga.
Speaker 2 (06:48):
Oh Muranga.
Speaker 5 (06:49):
Muranga and then now Kaishanjiru.
Speaker 2 (06:52):
Now a place called Kaishanjiru.
Speaker 5 (06:54):
Okay, now the name of the school is from the location
.
Speaker 2 (06:58):
Okay, okay, that makes sense.
And any vivid memory aboutprimary school Did.
And any vivid memory aboutprimary school Did you struggle
with those subjects or just math?
Speaker 5 (07:08):
No, I struggled with math, I was very very, very
interested in geography, that'ssocial studies.
Speaker 2 (07:13):
Social studies.
Speaker 5 (07:15):
Yeah, because that's my best performing subject back
in primary school I struggledwith languages, mathematics and
science very very very badly.
Speaker 2 (07:27):
So social studies you mean.
Speaker 5 (07:30):
Politics, geography rocks.
Okay, that was your favoritething, Exactly.
Speaker 2 (07:36):
Oh nice.
Speaker 5 (07:37):
Now structures.
Let's say things withstructures.
When you are studying geography, you have rocks to study
Metamorphosis.
Speaker 2 (07:47):
Something you can see Exactly.
Speaker 5 (07:49):
I was a very, very visual learner but, I never
realized until later on in myhigh school, exactly so, high
school.
Speaker 2 (07:59):
At what point is it?
From?
One term, one term, three, whenyou now realize oh, math is
good, I can do math actually itwas in form two from two from
two time two.
Speaker 5 (08:13):
Uh, I got uh, we were doing sads.
Yeah, I think it's sad yeah Iactually understood studsADS
from an example, Okay.
And then to me that was like avery, very big deal, because I
don't understand much likeliterature and I just looked at
(08:35):
the example, followed itsstructure and everything got
into my head.
Speaker 2 (08:40):
And what is SADS if you break it down to someone who
is not familiar with it?
Speaker 5 (08:46):
head.
And what is sad if you break itdown to someone who is not
familiar with it.
Sad is mathematics of powerindices, now let's say two, to
power three times uh two topower x plus one equals to four.
Speaker 2 (09:03):
Okay, now solve for x .
Oh so you're the guy who reallyunderstood the defined x
exactly.
Speaker 5 (09:10):
Algebra was your thing now, actually an
interesting part was algebra wasa very, very, very big part in
my life yeah that's uh.
When I realized algebra is thelanguage of mathematics.
When you're doing advancedlevel mathematics, you don't use
numbers, you use variables.
(09:32):
That's algebra.
Now, when the switch came to me, my point of realization was I
was picking maths.
Like I can read maths withoutany calculations.
I'll do it in my head Like,literally, I was reading an
(09:54):
entire sentence from symbols.
And remember this is 844, publichigh school.
They are not doing that entiretype of math.
I got onto YouTube public highschool they are not doing like
that entire type of math.
Yeah, I got into youtube.
Uh, varitasium, that was thechannel this post high school.
Still still in high school,still in high school I I got
(10:17):
into varitasium, three blue, onebrown.
I got got interested in quantumelectrodynamics.
Also I got interested inrelativistic equations and the
interesting part was Iunderstood all this still in
(10:38):
Form 2.
And then I'm like and it's 8for 4.
There's a huge difference.
844,.
You're just doing numbers, youstudy, revise, pass exams go
home have fun, come back studyrepeat.
There was nothing thatinteresting but 3Blue1Brown it
(11:05):
gave me a lot what is that?
It's a YouTube channel.
I was mentioning.
All those were YouTube channels.
Speaker 2 (11:10):
I thought it was a math problem for math, math
problem, the math problem.
Speaker 5 (11:18):
That was a dilemma back then and it still is.
It's called Collatz Conjecture.
Let me not explain it because Iwill 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
(11:38):
equations that has not beensolved okay, of the past
millennia.
Okay, century equations for thepast century decade equation oh
yeah it's, it's, it's an old,it's almost something.
It it's completely uh, notalmost.
It's relatively very, very,very complex, not difficult,
(11:59):
much is really difficult much iscomplex, difficult much is
complex.
Now for the Kotler's conjecture.
I can almost make it comparedto it's called Fermat's last
theorem.
Speaker 2 (12:14):
Guys, get your notebooks and pen, because it's
going to get crazy around here.
I hear different terminologiesbeing thrown around.
We need to refer to this in thecoming few sessions I like even
a little.
Speaker 5 (12:33):
I switched my life like a leaf.
All my friends were astonished.
They never expected I'd turnout how I've turned out.
Speaker 2 (12:44):
So first term from one you get an a in math so, uh,
it was c, c or c plus.
Speaker 5 (12:54):
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 (13:06):
In math, yeah, in math.
And at this particular point,you are familiar with quantum
physics, you are familiar withall the millennia.
Speaker 5 (13:13):
Nah, not yet.
Not yet, no term 2.
Speaker 2 (13:16):
Term 2 in form 2?
.
Speaker 5 (13:17):
Yeah, term 2, form 2, I got Now form 2, term 3, I got
an A Literally straight, Astraight please paint a picture
like what is that?
Speaker 2 (13:27):
did you like sit down and, and, and?
Or did you go through a bookand you're like, wow, this makes
sense all of a sudden there wasprofessor michio kaku.
Speaker 5 (13:38):
He's, he's a doctor not a professor doctor, not a
professor.
Now he was doing this bookwhich got me really, really
curious on science.
It was Physics for theImpossible.
Is it that book?
(13:58):
I don't remember, but basicallyhe listed classical mechanics.
That is where physicists, butbasically he listed classical
mechanics.
That is where physicists havereached.
Newton did this, paul Dirac didthis, wanner Heisenberg did
this, einstein then did this,and then Feynman is also a
(14:23):
prominent physicist.
He's called Feynman.
Feynman is also a prominentphysicist.
He's called Feynman.
Feynman did this, and then nowwe are here.
Speaker 2 (14:33):
So is he doing this in class?
Is it a YouTube video?
Speaker 5 (14:36):
Is it a book?
Speaker 2 (14:37):
It's a book, you are reading it and you see the
chronological account ofdifferent mathematicians Exactly
.
Speaker 5 (14:44):
Now, where we have reached mathematically to the
academic front, it's like ahistory book for equations,
because he was, he's like, he'sa big guy in academia.
Because he was listing out anequation with symbols Okay.
(15:09):
Because math and physics we useGreek symbols a lot.
Speaker 2 (15:14):
Yes.
Speaker 5 (15:14):
Now, I didn't know the symbols.
Speaker 2 (15:19):
So that was a bit confusing for you for a long
time.
Speaker 5 (15:22):
Very, very long time.
Now's just decided now to sitdown and now read the entire
Greek.
Speaker 2 (15:28):
And understand why are they using it and what they
mean.
So did you now reading Greek?
Were you reading it from thesymbol perspective or just to
understand how to speak andwrite Greek?
Speaker 5 (15:39):
Symbol.
Reading Greek was neverinteresting because also later
on, they started using Latin.
Now, if you wanted to learn howto speak Greek, you'll also
learn how to use.
Latin yeah, you get it.
Now it's just all mathematicalGreek symbols.
(16:00):
I had a sit down with myselfand then I looked them up a lot.
Youtube is a university.
I've done a lot of things onYouTube on my research.
When I was getting interestedin advanced level mathematics, I
did a lot of things on YouTubeand then now Google Scholar came
(16:23):
along.
Now I was going to.
YouTube, lot of things onYouTube.
And then now Google Scholarcame along.
Now I was going to YouTubeFirst I get the paper on Google
Scholar.
Google Scholar is literallylike a database for scientists.
Speaker 2 (16:41):
White papers are published there.
Some books are published there.
Exactly Some books arepublished there.
Speaker 5 (16:45):
Or are discovered.
Yeah.
Yeah, and then now, once I getthe paper, I don't understand
anything.
Speaker 2 (16:53):
I stop you, go and research.
Speaker 5 (16:55):
Exactly the entire thing, yeah, and then I come
back Okay, because I was notusing a curriculum.
Okay, like literally.
Speaker 2 (17:01):
You're just curious.
Speaker 5 (17:03):
Curious Curiosity, like literally nothing else.
I was just curious.
Let's say I'd go read the firstparagraph, only the abstract.
The abstract will take me liketwo, three days to complete.
Yeah, because grammar shida,choice of words, alignment of
words, shida Like need.
Speaker 2 (17:25):
So grammar was a problem to you or the
mathematicians?
Speaker 5 (17:29):
The grammar they use, like, let's say an example
don't do that.
Okay, a mathematician will tellyou 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 learnedoff the don't do that.
(17:51):
That's it.
Like.
This is what I learned, or likelegal jargon.
A lawyer can tell you two wordswith a paragraph.
You get it.
Speaker 2 (18:02):
Lawyers in the house.
Speaker 5 (18:07):
No hits.
No hits, by the way, I'm just,it's an analogy.
Speaker 2 (18:10):
No, you made your point, so I'm just trying to
emphasize on the point.
Yeah, same same.
Speaker 5 (18:21):
Now, also mathematicians use a lot of
jargon when it comes to doingproofs.
Okay, because?
Speaker 2 (18:28):
But do you think that also is highly contributed with
the background of thatparticular mathematician, as
opposed to using the?
Because, you see, if maybe youlearned Greek, like there's a
background of Greek and Latin,even English is made from, you
know, combination of so manylanguages, does it influence how
(18:50):
?
Even you?
You know, like you see, rightnow, if you are explaining
something, you'll add a bit ofSwahili here, some Shang.
It's just not because you wantto be complicated, it's because
you want to make a point and foryou it's just obvious, like if
I say this, people willunderstand more.
Speaker 5 (19:09):
I get what you're saying.
To some level.
Your background affects yourspeech Always.
To some level.
Because also there was a time Iwas very, very interested in
neurobiology.
Now studying psychiatry for thebrain.
Why were Now studyingpsychiatry for the brain?
Speaker 2 (19:25):
Okay, why were you studying psychiatry for the
brain and at what point?
Still in Form 2?
Speaker 5 (19:34):
No, that was in Form 2.
Like completely, I'd switchedoff.
Speaker 2 (19:37):
So you're just curious, learning anything and
everything that is interesting.
Speaker 5 (19:42):
I was not even doing my assignment.
Like, literally, I'd go toschool with a book the size of a
dictionary, learning anythingand everything that is
interesting.
I was not even doing myassignment.
Like literally I'd go to schoolwith a book the size of a
dictionary.
Archimedes' principleArchimedes is yeah, something
similar.
Encyclopedia Archimedes'principle.
It's not that difficult.
Let's say something like rocketscience, because for rocket
(20:12):
science, the main reason whyit's that big, it's because we
there's a lot of factorsaffecting rocket science when
you're doing when you're doingspeeds uh above mark three, mark
four hey that's that's.
Speaker 2 (20:26):
That's that's you're speeds above Mach 3, mach 4.
You're defying nature in someway, exactly.
Speaker 5 (20:29):
Anything that defies nature has a lot of mathematics
going around.
Now back to your question.
For mathematicians, it'sactually because I am one.
What I think is not thebackground, because I am fluent
in Shakespeare English, it'sbecause of what you're trying to
(20:55):
explain.
Okay, maybe, like, let me likenit to a dev.
Speaker 2 (21:01):
Okay.
Speaker 5 (21:02):
Talking to an agriculture enthusiast.
Two completely different words.
But they both come togetherbecause of tech.
You do Now we try explainingHTML, the difference between
HTML and CSS, to the farmer, andthen you're like, like, I
(21:27):
cannot use my language, becauseif I use my language, there is
nothing.
You'll get there now.
Same to mathematicians.
There's a level of speechmathematicians used between
mathematicians andmathematicians yeah
mathematicians and physicists,and then mathematicians and
engineers yeah and then mysummer, then mathematicians and
engineers, and thenmathematicians and non-academic
people like, also like biology.
(21:50):
Uh, neurobiologists usedcompletely different terminology
than mathematicians okay also,structure of thought is
completely different when, whenyou look at it in a thought
perspective, how they aligntheir words, it's completely
(22:10):
different.
Speaker 2 (22:11):
Absolutely so.
At this point I thought theteacher is supposed to break
this down for you.
They didn't do a good job onthat, or?
Speaker 5 (22:20):
We don't understand each other.
Why?
Because I was young, so that'sa faction of my youth.
I usually started because maybeI've not done an assignment.
And then now the teacher sayswhy have you not done an
assignment?
Because I know, so it's uselessfor me to do an assignment.
Speaker 2 (22:42):
Oh, you used to be that kid.
Speaker 5 (22:44):
I was that kid, so you don't do an assignment.
Oh, you used to be that kid, Iwas that kid.
Speaker 2 (22:46):
So you don't do an assignment because you know the
assignment.
Speaker 5 (22:48):
For what?
Why do I need to do anassignment?
Your curriculum tells you totest me.
I am telling you I am alreadybetter than your curriculum.
You are testing me for what?
How?
Speaker 2 (23:05):
did that end up.
You know it's very interestingto do that one.
Speaker 5 (23:11):
A few punishments, some few suspensions, because it
was repeated, mothers werepresent.
Parents had to be involvedBecause I was not listening to
teachers and on the grounds of Iunderstand mathematics better
(23:32):
than them.
I also bruised their ego,because back then that was, I
was 16, 16 or 17 now, and thenyou're like a full-grown man
with a family and then you'relike a full grown man with a
family.
Then there's a kid here tellsyou, with your 40 hours of
mathematics experience, canteach you mathematics.
Speaker 2 (23:52):
But did you do it actually, or it's just a matter
of exchange of words?
Speaker 5 (23:56):
No exchange, because if I did it physically, wow, it
would have been chaotic.
Speaker 2 (24:02):
No, I mean I had a friend of mine that I keep
referring to.
He used to solve math in hishead, 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 inthe flow, you would not.
Speaker 5 (24:20):
Yeah, he'll sing aloud, so for him.
Speaker 2 (24:22):
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, everythingflows.
And actually most of theteachers consulted him with love
.
Did you consider that as anoption?
Speaker 5 (24:41):
I was young.
Speaker 2 (24:43):
He was young too.
Speaker 5 (24:45):
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 (25:05):
So you didn't know how to express the knowledge.
Speaker 5 (25:07):
Yeah, exactly, and plus, a big problem was I was
blunt.
I didn't know how to break badnews to people, anything
negative.
Speaker 2 (25:18):
Yeah.
So let me now ask you do youthink maybe how people learn in
school should change A lot, andhow would it be better should?
Speaker 5 (25:27):
people do homeschooling.
Speaker 2 (25:29):
Should people not even homeschooling?
Speaker 5 (25:30):
like the biggest problem, even with it for
curriculum, is an interestedteacher teaching an uninterested
child.
Now, like even now, child.
Now, like even now, let's sayin uni, can you like even in
your social group, ask, like, doa random survey how many people
(25:55):
actually passed exams becausethey learned?
Or they passed because of theireducation or they did something
illegal.
That's why there's a highunprofessionalism rate.
Speaker 2 (26:09):
So people do not really pass exams because they
are learned.
There are other factors.
Speaker 5 (26:15):
A lot, but now no one is ready for that.
Speaker 2 (26:18):
The percentage that passes, because they learned.
Where would you put it?
Speaker 5 (26:23):
At maybe, let's say, 2% 2%.
Maybe 1.5.
Speaker 2 (26:27):
1.5%, not even 2%.
Speaker 5 (26:29):
Nah, 2% is a lot, because the people who a lot of
people my age back then, when wewere doing campus even you, you
had ambitions, you had youwanted to learn this and that
you get to campus You've beentold to do something that's not
(26:51):
completely related.
And then now the lecture.
You ask you know campus?
Most people think they canquestion why do, why do we do?
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 thelecturer, you finish your exams
(27:13):
and leave.
Speaker 2 (27:16):
I'm not paid enough to explain this.
I didn't say that.
Speaker 5 (27:22):
Because, yeah, the topic we're talking about what?
Speaker 2 (27:25):
is the excuse, because some of the guys who
taught me are from Yale, othersare from Stanford ah, no you
know, went to you know big bigIvy League schools and the
approach was different a bit.
Speaker 5 (27:37):
Completely, yeah, completely the problem with
Kenya is corruption is very,very, very painful for you to
pass a driving test you have tocharge some money you have to,
it is mandatory but that haschanged for us now for a while
(27:57):
let's hope so it has improved.
Speaker 2 (28:00):
You know one thing also, and I need to say the way
it is corruption is everywhere.
It's not just.
Africa or Kenya, but in Africait's put in a way that it
doesn't really even work.
You know, because also I feellike tipping is a form of
depending on if you tip beforeor after is a form of
(28:21):
streamlining things for you,because if you've gone to the US
, actually tipping is a form ofstreamlining things for you,
because if you've gone to the US, actually tipping is a culture.
If you don't tip, you'reconsidered rude.
So here in Kenya buying someonechai, which is considered
corruption.
If it's put well, it could betipping, like you know, maybe
(28:42):
this guy doesn't earn enough.
But now the problem is.
Let me give you the problemwhere I see it.
If you don't bribe someone,they might put you in a very
difficult situation, to anextent that it might cost you
even a life.
Speaker 5 (28:55):
Let's use the term forced tipping.
Speaker 2 (28:58):
Oh forced tipping.
Speaker 5 (28:59):
Yeah, you're forcing me to tip you or I'll use my
power against you.
Speaker 2 (29:07):
Now, that's pure corruption, pure.
Speaker 5 (29:10):
Because now if you check, let's say, government
offices, passport At least it'schanged, but even government
itself admitted you can go twoyears straight without tipping.
Without no first tipping, twoyears straight you don't get
your passport.
(29:31):
Let's say you are traveling toIndia as a medical tourist Two
years you're dead.
Speaker 2 (29:39):
I mean, yeah, there's a discussion there that some
services you could have thenormal process, that if it takes
three weeks, it takes threeweeks, 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 bevery pure.
(30:00):
I know, if I want to get mypassport in one day or whatever
service it is, it's officially,it is taxed, it's a revenue
generating process and it'squite out there.
Speaker 5 (30:13):
If it's public, so long as it's public, I feel like
that will address some of theseshenanigans.
The problem is internally atthe government offices.
They will hike.
Speaker 2 (30:25):
That tipping Exactly All right, all right.
So, titus, you are a person whois really interested in the
money markets investment,venture capitalists, startup
founders, ceos and you have alot of curated knowledge around.
(30:46):
This helped with yourmathematics background and
liking.
I think that's the next thingthat we should discuss in this
conversation, but ideally, Iwanted to know, particularly
after Form 2, were you able toprogress to Form 3, form 4?
How did you perform your KCC?
Speaker 5 (31:07):
Actually, I never did my KCC.
I got to a private school.
Getting to a private school, Iswitched 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.
(31:29):
Mm.
Mathematics.
My dad wanted me to do amedical course.
Mm Tried it.
Mm.
And it turned out well.
Yeah.
Because I I actually realized,other than curiosity, you need
strength.
Speaker 2 (31:44):
To do medicine.
Speaker 5 (31:45):
Yeah when.
Speaker 2 (31:47):
Where were you doing this medicine?
Speaker 5 (31:49):
I was doing KMTC.
Speaker 2 (31:51):
Do you do medicine or clinical office or whatever?
Speaker 5 (31:54):
Not medicine Orthopedics.
Speaker 2 (31:58):
Orthopedic.
Speaker 5 (31:58):
Yeah, I was doing, I don't remember something related
to bone.
Okay, now the problem is, Ihave to work with dead people.
Speaker 2 (32:09):
What are you doing with dead people?
Speaker 5 (32:11):
And I am an academic.
I also asked myself the samequestion you teach me here.
Why are you taking me to themorgue?
I'm going to do a Zoom class.
Speaker 2 (32:20):
Okay.
Speaker 5 (32:21):
You need to have direct contact with the
situation.
I am okay.
Speaker 2 (32:28):
Are you afraid of dead people?
I'm not afraid.
Speaker 5 (32:30):
I just don't like them seeing them on a Monday
morning.
No, wait a minute.
Speaker 2 (32:36):
You know this is becoming interesting.
What I understand is all medicsmay be the lower medics, like
nurses, and you know the pedicand clinical officers.
Uh, to the doctors and phd,most of them learn through dead
peoples that they can transactthem and what you know.
Just see the real that.
(32:58):
I mean go deeper in that person, right.
If it's the pain, you're toldit's your altar, you're showing
the outer it comes from.
Yeah, in that person, right.
If it's the vein, you're toldit's the aorta, you're shown the
aorta where it comes from.
Yeah, where it's from thisperson died because of heart
attack.
The heart is opened up.
You're shown where this clothappened.
You know for practicality yes,exactly.
(33:18):
And in high school I rememberwe used to dissect frogs right.
Frogs, yeah, or rats, yes,exactly.
So why would you have a problemwith that way of learning?
Speaker 5 (33:29):
No, the problem is I just don't prefer looking at
dead people Monday morning.
Speaker 2 (33:35):
But Tuesday morning you can look at them.
Speaker 5 (33:37):
Let's say evening.
Speaker 2 (33:38):
In the evening.
What is the logic around this?
Speaker 5 (33:43):
I didn't have First.
There was a time that Irealized I could not do medicine
, anything related to medicine,because that's still.
I wanted to pivot from bone toneurosurgery, but do they do?
Speaker 2 (33:59):
neurosurgeon.
Speaker 5 (34:00):
Nah, I don't know yet .
Speaker 2 (34:02):
Of course they don't.
That's a specialization.
You have to do medicine forfive years and then you
specialize in neurosurgery.
Speaker 5 (34:09):
Yeah, as you've said, dentists, doctors, nurses they
still learn the entire humanbody.
Speaker 2 (34:17):
For sure, but you see , you wanted to specialize.
Speaker 5 (34:20):
Yeah, no.
Speaker 2 (34:22):
No.
Speaker 5 (34:23):
Yeah.
Speaker 2 (34:23):
Obviously that's a specialization.
Speaker 5 (34:25):
I wanted to pivot, but now that's not pivot.
Speaker 2 (34:29):
That's specialization .
Pivot is where you stop doingthis.
You can come back.
Speaker 5 (34:34):
I wanted to specialize, but now it didn't
make that sense, because youcannot pivot that.
You cannot specialize from thatfar angle.
You are learning everythingfrom born and then now you want
to study.
Speaker 2 (34:50):
Neurosurgery.
So wait a minute, there'ssomething you have said there
that is very interesting.
So nurses also haveneurosurgeons.
Speaker 5 (34:58):
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 sevenFifth, fifth, mostly it's fifth.
Now you decide where you wantto specialize.
(35:24):
It's dentistry, neurosurgery,cardiology, oncology, depending
on now, someone who is learning.
But me, the person I met wassomeone who came with very, very
bruised, let's say, to apractitioner.
It will be interesting, aninteresting case, yeah.
Speaker 2 (35:48):
Dead body.
Speaker 5 (35:49):
No, not dead.
Almost the guy was snoring butwas unconscious.
Now you have now where is thesnore coming from?
And then now the doctors know,the nurse know, they know where
it's coming.
Now you're asked.
(36:09):
This is a great learningopportunity.
Speaker 2 (36:12):
I'm interested in the answer that you gave.
Speaker 5 (36:14):
I wouldn't give that answer, but it was completely
different.
It's not even a medical answerbut they were saying now come
closer.
This is a great learningopportunity.
Interesting cases like thisdon't arise.
And then, I'm like we shouldnot expect interesting cases.
(36:36):
And then now I'm looking at theguy.
The guy is bleeding, snoring,unconscious.
It's a big accident and I'mlike, by the way, medicine is
not necessary.
I am young, I have parents, Ican learn something else.
Actually, I did it because ofmy dad.
Speaker 2 (36:58):
Ok, not that you're interested in it.
Speaker 5 (37:01):
I was, but if it was medicine, I wanted to get into
clinical practice.
Clinical practice is getting tothe academic part of it.
You're doing, maybe, compscience.
You're doing a doctoral in compscience.
Now maybe you start doingsomething to do with philosophy.
You shift from actual practicecoding now, like now, doing the
(37:26):
philosophy of compliance same tomedicine, you shift to now
being the erotic exactly now youare coming up with equation,
not new equations, some do, Idon't.
You know, there's a beef in ourcommunity, uh, let's not get
into that beef.
But let's say some biologistscome up with equations, some
(37:49):
come up with cure, a new cure.
But now, when you're coming upwith a new cure, you see you're
not treating someone and youcannot 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 thatwas my goal before I went.
Speaker 2 (38:11):
So did you do that?
Speaker 5 (38:14):
I will do it.
Speaker 2 (38:15):
Or it's something that is in the process.
Speaker 5 (38:18):
Yeah, I got into finance.
Speaker 2 (38:21):
Okay, how did you get there?
Because that's actually themain topic.
Speaker 5 (38:26):
Yeah, the main topic of today.
Speaker 2 (38:31):
So did you leave that school altogether?
I didn't leave.
Speaker 5 (38:34):
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 gotinterested into how the market
(39:05):
moves.
Now, when you say you've placedan order, what does that mean
now, like when you've placed anorder and then the market goes
up.
How does it go up now?
Like the opposite of it, it hasgone down.
How exactly has it gone down?
What is market sentiment?
(39:29):
What is fundamental analysis,because also in economics you do
a lot of sentiment analysis andfundamental analysis.
Now I was interested.
There's a guy, it's called Abdi.
Now Abdi was doing Econ backthen.
(39:53):
And then telling me if you getinto Econ, I'm sure you'll
innovate something.
Because back in high school Iwas very, very innovative.
I had a friend we're stillsolid.
He's called Amfrey.
We were trying to build apyramid, literally, from the
(40:14):
resources that the schoolprovided.
We were trying to build anactual pyramid, or try to create
a model that will resemble theintricacies of pyramids of Egypt
.
Yeah, they are very, very, verychallenging Because no one up to
date we still don't know howexactly.
(40:37):
Because you look at the size ofthe stones, you look at the
level of technology back thenand 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 sizeof pyramids, those things make
(41:01):
humans look like ants.
Speaker 2 (41:04):
Now, from a couple of theories around that that have
been prompted by so manytheorists and mathematicians,
but ideally it can be done andit was done.
Speaker 5 (41:20):
Exactly, Exactly.
That's also my.
I live by that how it was doneno one has established that.
But it was done.
Speaker 2 (41:30):
But the evidence is there, so it was done Exactly.
Speaker 5 (41:33):
Because if you look at when you're doing numerology,
study of numbers, there's a lotof correlations.
When you're studying thepyramids, there's a lot.
It's the center of something.
(41:55):
It's the center of I don'tremember, I don't speak, what I
don't know, Like what I cannotascertain.
Now for us, what we are tryingto do with Humphrey.
We were trying to create a modelthat will equally distribute
force to the entire structureBecause we assume inside the
(42:20):
pyramid there is no pillar orpillars holding the walls.
It's literally a triangular wayof arranging stones Big, big
stones.
But if you look at weightdistribution, it's equal how?
(42:41):
Where Egyptians?
Because up when the conspiracytheory comes, it was built by
ancient aliens, it was built byStuart, immunology, that stuff,
but I actually don't believe it,it's just that white people.
Speaker 2 (42:59):
What do you believe?
Speaker 5 (43:00):
for that.
White people don't believeblack people have that type of
IQ.
Kwanzaa, if you've been to thestates you might have
experienced it.
There's a type of superiorityit's called white privilege.
Speaker 2 (43:16):
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 (43:24):
That's a huge statement right there.
Speaker 2 (43:25):
Yeah, but let's move away from that, because Shift
shift, yeah, sounds like you'resaying what you believe and
others believe something else,yeah, yeah, yeah.
It becomes a fight of beliefwhich no one wins.
Speaker 5 (43:35):
No one, yeah, yeah.
Speaker 2 (43:37):
Can you briefly explain what a VC termsheet is
and its importance in theinvestment process is?
And?
Speaker 5 (43:43):
its importance in the investment process.
A VC term sheet is an unbindingagreement, the same way you can
talk with your friend overdinner, over drinks, over coffee
.
Talk about I want, I have thisbusiness we want this much for
(44:06):
this much, and this might beyour exit strategy.
Now the other party becomesinterested how exactly does
someone fund you?
And now, let's say you've beenfunded, what will govern the
(44:31):
funding?
What will govern thatrelationship?
Now the VC term sheet.
Let's say not VC, there's aterm sheet.
Term sheet is literally anunbinding agreement of
discussing how much who hascontrol over what.
(44:54):
When voting rights, you'respeaking of liquidation
preference.
You're speaking of Some mightnot 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,
(45:17):
very detailed.
Now for the term sheet, itsimportance.
It will give a preliminary ofthe relationship, how, you
personally, we are speaking.
Speaker 2 (45:33):
As a founder or a CEO .
Speaker 5 (45:35):
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'smore of when I am giving you
money, I will put a clause thatwill say I, I will not give you,
(46:01):
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.
So, if I've given you, let's say, $10, you'll put a clause, as
there are two people the fundowner and the fund receiver.
(46:22):
Fund owner is now the VC.
The investor.
Fund receiver is now thefounder CEO.
Speaker 2 (46:32):
Or the company, or the company.
Speaker 5 (46:35):
Now fund owner will put a protective liquidation.
It depends how you use it.
It can be used as a protectiveprovision, but industry standard
it's not being used currentlyokay, because a lot of fund
owners started using it as a wayto hurt financially these young
(47:01):
now these big companies orstartups, startups that have
made like literally good amountgood returns, because a
liquidation preference will sayI'm giving you $10, I will not
accept anything less than $10.
(47:23):
When and if I'm selling my, ifI'm selling my shares, I'm
selling it to any investor, I'mselling it to the market, I'm
selling it back to you, I willonly take 1x.
If it's 2x, I'll take $20.
Speaker 2 (47:42):
Now, if you now and most of the time it's not 1x
time it's not 1x.
Speaker 5 (47:45):
Mostly it's not 1x.
People don't realize it.
Speaker 2 (47:48):
So what is the average?
Is it 2x, 3x, 4x Average?
Speaker 5 (47:51):
should be 1x.
Average should be 1x.
Speaker 2 (47:53):
Should be, but what is it?
Speaker 5 (47:55):
Because mostly what I've seen they're doing 2, 2.5.
Because imagine you've beenfunded, let's say $1.3 million,
you are returning 2.6.
Yeah.
What will you be left with?
(48:16):
No, I mean it's a debatablekind of yeah, it's very, very
Because at the end, of the day,before I give you money.
Speaker 2 (48:23):
There's what you promised me Exactly.
I'll get maybe in X years,right?
Speaker 5 (48:24):
Yeah, yeah, yeah, because at the end of the day,
before I give you money there'swhat you promise me exactly I'll
get, maybe in x years, right?
Speaker 2 (48:28):
yeah yeah, do you think maybe founders over
promise, uh, sometime they are abit angry and they will just
want money.
They overlook some of thesethings.
What goes wrong?
Because also, maybe I'mthinking from both end the
investors yeah they are businesspeople.
You want to put in money andmake money more money, right
(48:49):
they want to make more money?
yes.
Are they too also greedy, right?
Yeah, would they maybe bereasonable and say, okay,
especially where the developingmarkets maybe take 1.5?
If in the developed market theyare taking 2.5, they should
maybe, in developing market,consider to lower that
expectation so that it doesn'thurt the founder Also, for the
(49:12):
founder, are they over promising?
And then by the time they areliquidating or maybe they raise
the next round, they find, whoa,this money, I'm raising it, but
almost all of it I'm giving itback to the first investor or
seed investor or you know seriesA, you know.
So please expound where, wheredoes it go wrong and how can you
do this the right way, evenwith a VC term sheet?
Speaker 5 (49:37):
First of all, like when you're funding a startup,
it's a lot of guesswork, likeliterally.
I won't lie because I've been.
I've done a lot of financialmodels.
Valuation yeah, it's evaluationfor startups yeah, there is
different ways to value astartup, yeah, so you can use
(49:59):
the vc method, you can usetrading comps, you can use DCF
I'll expound later on those butthe problem, the core problem,
is your financial slide, not you, because most of these founders
(50:19):
so in Kenya are usuallynon-financial and even if they
are financial, they are nottechnical.
So we have one problem the teamis not matched.
There is no founder market fit.
Founder market fit is thecompany you're investing in as
(50:44):
an investor.
You're asking yourself do theyhave the type of talent to
manage corporate stuff, tomanage financial stuff, to
manage product development, tomanage marketing stuff, business
development, legal stuff,exactly?
But now, you see, at this earlyage, people don't have finances
(51:06):
to bring all these people onboard.
Now maybe the perfectcombination for now will be one
financial, one tech person, onefinancial person.
Now let's say the problem isthe founder is non-financial and
(51:29):
a tech person.
The founder will rely onestimates from Excel.
Excel, like forecasting.
Maybe you've made maybe somesales, three, four months.
(51:49):
You've made some sales and nowyou think that will be the rest
of your life.
Speaker 2 (51:56):
How are you able to tell if the future doesn't look
like that?
Speaker 5 (52:00):
Now there's a couple of ways you can do sensitivity
analysis.
You can do whatever.
Speaker 2 (52:06):
But now you're not financial, so how do you do that
?
Speaker 5 (52:08):
Now that's the problem.
Now you're not financial, nowyou trust your gut.
Your gut is telling you.
Speaker 2 (52:13):
But how do you do it the right way?
Do you hire PwC?
Do you hire KPMG?
Speaker 5 (52:18):
You can All this.
All this you can if you'renon-financial and you don't have
the resources.
I'm assuming you don't have theresources, of course.
That's why you're raising theresources.
Speaker 2 (52:30):
That is the obvious thing.
How are you raising funds ifyou have the funds?
Speaker 5 (52:35):
So now let's say you don't have funds.
You know why have you taken theliberty to teach yourself this
stuff?
Speaker 2 (52:45):
So now you have to learn about economics.
Speaker 5 (52:48):
If you are not ready to learn about economics, don't
start a company.
Speaker 2 (52:52):
Oh, that's a big statement.
Speaker 5 (52:55):
I usually tell portfolio companies I work with
a couple of portfolio companiesI usually tell I can get you a
job, go do 9-5.
Startups have a lot of stress.
Speaker 2 (53:11):
I cannot advise you to start, but there's another
way to look at it, because fromthe when the world was created,
you can't learn everything.
Why don't you hire an expert inthis?
There are people who have doneeconomics.
There are people who have doneup to PhD.
Yeah.
And they know ins and outs ofthese things.
(53:32):
Yeah, especially financialthings.
Why not hire those guysstraight up, or even give them
some equity to be part of theteam.
Speaker 5 (53:42):
Yeah, but now, yeah, that's very, very.
That's a good way to bypass aproblem.
You've only bypassed, you'venot, you've not solved, you've
not solved why.
Speaker 2 (53:54):
Are these guys going to screw you up?
No, not even screw Not evenscrew you.
Speaker 5 (53:58):
you are their leader now, sindhu, you are their
leader.
These guys are.
You've gotten the perfect team.
You've gotten the financialpeople and you've gotten people
on tech development, yeah,marketing and all these teams.
You've arranged, so youunderstand nothing about finance
, about these teams.
Exactly.
Let's say you understand maybetwo of them.
(54:19):
You understand marketing.
You understand productdevelopment.
You don't understand marketing.
You understand productdevelopment.
You don't understand legal andfinancial.
Now, the biggest problem is itwill cloud your judgment.
You might have cash, but you'renot liquid.
Speaker 2 (54:44):
But your financials will say you're liquid, but
actually what is having cash andwhat is liquid?
Speaker 5 (54:51):
Being liquid is being able to purchase anytime,
meeting your debt obligations asthey are due.
So say now to mean immediately.
Speaker 2 (55:01):
And when you have cash and not liquid, what does
that mean?
Speaker 5 (55:04):
You have maybe cash that you can't spend.
Exactly, you have very, very,very good.
It's called account receivables.
Account receivables is moneycoming in, like Netflix.
Let's say, yeah, netflix ForUber, upon Uber, you pay on the
spot.
Or if it's, let's say yeah.
Netflix, netflix, uber, uber,uber.
(55:26):
You pay on the spot, or if it's, let's say, uber corporate,
Something.
Speaker 2 (55:32):
So they have to pay at the end of the month or maybe
mid month.
Speaker 5 (55:35):
But you have to pay everyone every week.
Exactly.
Speaker 2 (55:37):
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 paynow this corporate and then
wait for the corporate, exactly.
Speaker 5 (55:48):
You're not liquid.
Remember, you're not liquid.
You're depending like it's thiswater.
Let's use an example that willcreate a visual image.
You are waiting on a tree likea fruit let's say avocado.
You are.
You are waiting on tree like afruit, let's say avocado.
(56:09):
You are waiting for an avocadoto 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 (56:22):
I get you you are getting.
Speaker 5 (56:23):
Yes, there are petty stuff when it comes to
financials.
Okay, now this comes when.
Now you start doing that, butwhen you're in school, you learn
them at an advanced level.
That's why I prefer learning asyou go.
When you get the perfect team.
Let's say you have the techperson, you have, you're an
(56:48):
un-tech, you're an un-tech, andyou have financial persons.
This, let's say technicaljargon.
Let's say development, becausedevelopment is something that's
considerably highly abused.
(57:08):
I saw you did once a website forone month, and then now you're
telling me you'll do the samesomething that looks the same to
my eyes, in three months.
You are screwing me, you wantmore money, but now you remember
, this looks the same, but oneis a web app, one is a website.
Speaker 2 (57:31):
So you are saying it's very important for any
founder to understand two things, Especially if you're in tech
understand tech, understandfinance.
How will you make money for itIf you're in?
Agri-tech.
You need to understandagriculture, technology and
finance Exactly.
Speaker 5 (57:48):
If you're starting any company, you know there are
the passions, the burningemotions.
You have ABCD, abcd.
Yeah, that's very, very, verygood.
But remember, even if you bringme on board, I am not eating
your passion, my wife, I need to.
Speaker 2 (58:08):
You need to pay rent, you need to pay school fee, you
need to take your girlfriendout.
Speaker 5 (58:14):
First of all, women are expensive.
And then you're telling me thatyou have passion.
My girlfriend is yapping there,needs makeup.
But why do you take agirlfriend with yapping but
needs?
Speaker 2 (58:24):
makeup.
Then I'm looking at you, butwhy do you take a girlfriend?
With yapping but you'll talkabout that.
So what does a fully dilutedpost-money option pool mean in
the context of a VC term?
Speaker 5 (58:35):
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 premoney and there's post money
valuation.
If you have a pre moneyvaluation, that's, let's say,
(58:58):
let's do a one-on-one.
Speaker 2 (59:01):
I'm the VC, you're the founder, or I'm the founder,
you're the VC.
Speaker 5 (59:06):
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 acompany.
You are looking for a financialperson to do your valuation.
Now for financial.
You ask what's your premiumvaluation?
You come to me, I give you themath.
(59:29):
I say your pre-money valuationis 1.25 million Average.
Speaker 2 (59:35):
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 rightnow?
Speaker 5 (59:44):
Exactly as we speak.
Speaker 2 (59:45):
Yes, you say 1.25 million versus USD.
Speaker 5 (59:48):
USD, yeah, that's where startups range.
Speaker 2 (59:50):
Yeah, 9.50.
To 1.25.
To 1.25.
Speaker 5 (59:55):
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 novelproduct and then you have people
interested who are on the waitlist to buy your product.
Speaker 2 (01:00:10):
Especially in hardware.
Speaker 5 (01:00:13):
Now, you see, you have already some commitment.
You have commitment.
What you're lacking is money tofulfill commitment.
Now you can give me money tofulfill 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 (01:00:32):
They're serious people.
Speaker 5 (01:00:34):
Now you stick around.
You say what's your pre-moneyvaluation?
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 (01:00:53):
That's a financial person advising you.
So they are telling you toballoon where you are Exactly so
that you get even more.
Speaker 5 (01:01:01):
Exactly.
And then now you ask why are wedoing?
this.
Why?
Why, I don't know.
We will back it with APC, thecontract that we have Once they
become purchasing client.
Risk is equal.
Lord, remember, in financethere is two things risk, time,
(01:01:23):
value of money A dollar now isworth 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 againstAPCs?
(01:01:43):
And then I'm telling you, look,there is risk and return.
The investor is risking thismuch for this much.
But remember, these APCs arede-risking the company.
Now the investor, even if hepays money, will be risking less
(01:02:05):
, but for more, I hear you, butwon't they give you more?
Speaker 2 (01:02:14):
than what you are making, do they tend to give you
less For valuation.
Speaker 5 (01:02:19):
It depends that totally depends on your
negotiation skills.
They can give you moredepending on how you negotiate.
Because now I've backed myargument with an actual fact and
I've told the investor you aregetting bigger piece of my
(01:02:40):
company for less, for less risk.
Now, alternatively, you do withanother startup, you'll for the
same risk.
You'll not be sure of return.
Now, here I'm guaranteeing 20to 40 percent.
Your money is back.
That's leverage.
Okay, now, once you theinvestor, here is now interested
(01:03:02):
.
Leverage Okay Now, once theinvestor is now interested.
You know these things right.
Speaker 2 (01:03:08):
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 theyget a big piece of the company,
exactly.
Speaker 5 (01:03:19):
Now what they come to argue is what clause do you
have, remember?
You cannot share anyconfidential information.
Memoranda, it's called cim abulk of companies, documents
that are confidential instead ofconfidential information or
(01:03:41):
confidential documents.
Information.
Confidential document in acoyote memoranda.
Now the customer list strategy.
Speaker 2 (01:03:47):
You cannot share or you have to share.
You cannot share With who?
Speaker 5 (01:03:50):
You cannot share with the investor.
Speaker 2 (01:03:51):
Okay.
Speaker 5 (01:03:51):
If there is no letter of intent.
Letter of intent comes later on, but it comes on later on in
higher stages.
Speaker 2 (01:03:59):
Yes.
Speaker 5 (01:04:00):
Of funding.
Speaker 2 (01:04:00):
Remember Higher stages means that the discussion
is close for you to receive thefund or there is stages of
funding.
Remember higher stages meansthat the discussion is closed
for you to receive the fund.
Speaker 5 (01:04:07):
There are stages of funding.
There is precede Precede.
You're looking for money tocreate a company to validate the
idea.
You have an idea, you have aprototype.
You're looking for, let's say,to 50k to 500k for validation.
Speaker 2 (01:04:27):
USD or KTX USD.
Speaker 5 (01:04:28):
Everything I'm saying is USD.
So you're looking for, let'ssay, 250k to 500k for validation
, then you've gotten it.
Speaker 2 (01:04:38):
You're going now and at this point you don't give any
equity.
Speaker 5 (01:04:42):
At this point you give roughly, depending on how
good your negotiation is and howyou've funded the funding round
funding cycle.
You give roughly 7.5% to 15%.
Depends on you and also yourbudget, your internal company
(01:05:04):
stuff.
Now you've gotten higher.
Now, let's say you are lookingfor seed, seed round.
Seed round is you have aproduct, you have a market, you
want to service the market.
Now you're looking for money tosell more of what you have.
You get it.
(01:05:26):
And then now you go to let'ssay Now you're looking for money
to sell more of what you have,you get it.
Yeah.
And then now you go to, let'ssay, series A, the next round,
series A, you are looking formoney to scale.
Remember there's a differencebetween growth and scale.
Scale is increasing clientswithout increasing CAC.
Cac is Customer AcquisitionCost.
(01:05:51):
You are increasing.
Let's say, getting an imaginarynumber Getting a client costs
80,.
Speaker 2 (01:06:03):
Let's say $20.
Speaker 5 (01:06:04):
That the amount of marketing, the amount of meeting
logistics of the salespersonand the amount of salesperson he
distributes equally for theentire month and it costs $20.
Now your customer acquisitioncost it's at $20.
Now for you to scale.
(01:06:24):
You need to increase number ofclients.
Customer acquisition cost it'sat $20.
Now for you to scale you needto increase number of clients
without increasing.
Speaker 2 (01:06:31):
The number of cac.
Speaker 5 (01:06:32):
Cac Happen to Shideiko More clients.
Speaker 2 (01:06:36):
More expenditure.
Speaker 5 (01:06:37):
More expenditure.
Speaker 2 (01:06:38):
Yeah, so that is not always accounted when people are
talking about how they willgrow the business.
That's also another problem.
Speaker 3 (01:06:44):
In that number of like these.
We need these.
X is not always accounted.
When people are talking abouthow they will grow, the business
.
Speaker 2 (01:06:45):
It's not in that number of like we need this X
because of this expenditureExactly?
Why is it not accounted for ifit's well known?
Speaker 5 (01:06:56):
Now you know how to put it into the conversation.
Speaker 2 (01:07:02):
The way you ship it.
Speaker 5 (01:07:03):
Exactly Everything in funding, everything in investor
negotiations.
That's why there was a time Iwas very, very poor at
negotiations.
You.
Totally.
I was very, very.
You know you have to startsomewhere and you'll not start
at point A.
You'll start somewhere at 0, 1,2, 3.
(01:07:24):
You're getting, but what Irealized is depending on how you
structure your deal, that'severything.
Yeah.
You can get funded of over thecounter.
It's called over the counter.
Over the counter I haveportfolio companies who have
been funded over the counter.
They call me Investor may saymaybe CD Tell the counter.
(01:07:45):
Over the counter I haveportfolio companies who have
been funded.
Over the counter they call meinvestor may say, maybe cd tell
them, maybe cd.
Speaker 2 (01:07:53):
I can say maybe cd.
Tell them, maybe cd.
So is this on a call?
Is it on a call?
Speaker 5 (01:07:55):
like literally on a call yeah, I'm a what's up,
what's up text.
Okay, I'll call you likeinvestor may say my abcd.
We have him ABCD Investor and Ichange tone.
I say hi, he says ABCD.
You reply ABCD Because atnegotiations, remember, you
(01:08:17):
cannot make a good deal with abad person.
Speaker 2 (01:08:20):
So a bad person will always remain a bad person.
Speaker 5 (01:08:22):
Don't try to sugarcoat it, I'm blind, so they
remain a bad person.
Don't try to sugarcoat it, I'mblind, so they're also bad
investors.
Speaker 2 (01:08:28):
100%.
And bad VCs 100% Is that whatAfricans have been getting, or
African companies?
Not even Africa, because I knowof companies that have closed.
Speaker 5 (01:08:38):
Yeah, For funding.
Evil is everywhere.
Let's say that Evil iseverywhere.
Let's say that Evil is inhealthcare.
Evil is in government.
Evil also is in investment.
Speaker 2 (01:08:54):
And all of those guys are looking for funding.
Speaker 5 (01:08:57):
Exactly.
Speaker 2 (01:08:57):
In one way or the other.
Speaker 5 (01:08:59):
One way or the other.
And now there is another firm.
It's called Kostla Ventures Ilisten a lot to Kostla, Now the
founder.
And now there is another firm.
It's called Kossler Ventures Ilisten 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 inmature businesses, taking it to
(01:09:23):
the next level.
Let's say you're making 10 to50 million AAR.
Aar is annual recurring revenue.
You are doing 50 to 100 AAR andyou're thinking how can I
convert this to like 300, 500,like other big companies?
Now that's where you involvethe PE fund.
(01:09:44):
The PE fund will come in withthe funding.
They will come in with thestrategies.
They'll come in with theresources and the talent to
actually get your business tothe next level.
Speaker 2 (01:09:58):
Wait a minute.
What do you think?
Because I've also seen a coupleof companies where there is
funds and then the people whoactually give the money they
bring also the executives theybring all these people.
Is that good or bad?
Speaker 5 (01:10:13):
Depends With what the people coming in PE funds can
bring in.
Executives.
Let's say when PE funds investin your company, starting need
20 to 50 million USD.
Executive when let's say whenPE funds invest in your company,
starting need 20 to 50 millionUSD and upwards.
Yeah.
And that's not acquisition it'sjust funding.
(01:10:35):
Yeah, it's funding, that's notacquisition Depends.
Also, there are PE funds, likethe biggest PE fund, kkr.
Hey, that guy is no joke.
That guy once had a bid forlike 1.4 billion back then in
(01:10:56):
the 90s.
So that's roughly 15 to 16billion.
Speaker 2 (01:11:00):
Trying to invest in a company Acquisition.
Okay, acquisition.
Speaker 5 (01:11:05):
And that was more of a hostile takeover.
Pe funds when they come, theybring in their people.
Depends on what is their agenda, and if you were able to get
their agenda earlier on, a PEfund can bring in their people
(01:11:25):
to kill the company Incumbentmanagement, not the company
Incumbent management To takeover.
To take over Politically, totake over.
When they take over, they firepeople, change operations, shift
the revenue, like literallyeverything.
They change a lot of thingsYou're getting.
(01:11:47):
Once they've done that, theymake sure the company is at its
climax.
They sell.
Speaker 2 (01:11:56):
Very nice.
So we talked about post-moneyoption pool.
So what is you know this fullydiluted post-money option pool?
An option pool?
Let's start with the optionpool.
So what is a you know thisfully diluted post money option?
Speaker 5 (01:12:06):
pool, an option pool.
Let's start with the option.
Option pool is a way tomotivate the starting team by
allocating a certain percentageto them.
Like 100%.
Speaker 2 (01:12:24):
So it's equity, equity.
Speaker 5 (01:12:27):
But it's not direct equity, it's an option of.
Speaker 2 (01:12:31):
So you can sell later or Hold.
Speaker 5 (01:12:34):
But, I will not give you an expiry period.
Speaker 2 (01:12:39):
So, as long as you're the company, or even if you
leave and you have met all theconditions.
They are called vesting.
Yeah.
Speaker 5 (01:12:49):
They have to vest.
I'll give you 250,000 sharesOptions not shares Options.
I'll give you 250,000 optionsfor four years.
After four years, you will youas the owner, you will decide.
Do I sell, maybe double theinvestment?
(01:13:12):
I'm a hold and wait for moreinvestment.
True, now that's an option, afully diluted option pool.
Speaker 2 (01:13:23):
Everyone has vested, you're getting yeah everyone now
is including the founder no thefounder has equity, okay,
option pool.
Speaker 5 (01:13:33):
It's literally instead of me giving you mark,
I'm giving you an almost nearalternative to mark.
Okay, because in finance,principles remain the same.
Okay, we just change maybe onething.
It becomes totally different.
Yeah.
Options and equity are not thesame.
But option is literally acontract to give the owner the
(01:14:04):
option to either hold or sellthe underlying asset.
Underlying asset is the equityof the company You're getting.
Let me give you a more clearexample.
In finance there arederivatives.
From the word derivatives, youare deriving a product, a
(01:14:28):
financial product, from theunderlying asset.
If it's option, if it's equity,you are giving an option of
equity.
Underlying is equity.
You can give an option fordifferent things Commodities.
You can give an option fordifferent things.
Commodities you can give, socommodities gold, oil, rice.
Speaker 2 (01:14:51):
Depends Nice, so how does this impact startup
valuation?
Speaker 5 (01:14:58):
For fully diluted.
They will have to Depends.
They can come in and they needto allocate more shares.
You're getting it when you'reallocating more shares.
That means also your money willbe affected you as the investor
(01:15:20):
, Because that does not existfor investment.
Speaker 2 (01:15:24):
It's a pool that is set aside.
Speaker 5 (01:15:27):
Yeah, that's not my business.
I am coming in to give you moremoney.
Speaker 2 (01:15:34):
For what exists.
Speaker 5 (01:15:35):
What exists and then tomorrow I get more money, but
now you will use my money toallocate more to your founding
team.
That's why a lot of VCs andinvestors want the option pool
before they invest.
I don't know if you can seethat.
(01:15:58):
But there are some cheekyfounders who will always say
it's done, but they've notfinalized the paperwork.
But you've finalized thepaperwork on funding let me
drink water.
That happens a lot it happenswhen a lot of corporate
(01:16:20):
litigation don't reach courtpeople, a lot of people in
finance want to settle out ofcourt Arbitration mediation
negotiation.
Speaker 2 (01:16:31):
Okay, so let's give a shout out to our sponsors, who
have made this podcast possible.
Speaker 1 (01:16:45):
Quick pause, folks.
We're stepping into a briefinterlude, but stay tuned,
because after the break we divedeeper into the incredible
journey of our guests.
Meanwhile, we'd like to send amassive shout out to our
sponsors for empowering thisexchange of ideas and innovation
.
We'll be right back on ImpactMasters Subscribe, follow and
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(01:17:05):
We'll be right back on ImpactMasters Subscribe, follow and
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Check us out atwwwimpactmastersio.
See you after the break.
Speaker 2 (01:17:17):
Welcome back.
Welcome back.
This is quite interestingconversation.
Shout out to Africa Stalkingand you can find Africa Stalking
at africastalkingcom forpowering this conversation.
Africa Stalking provides telcoAPIs on voice, sms, ussd,
(01:17:39):
insight Charts API fordevelopers to build scalable
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And one of the key aspects ofAfrica Stalking is empowering
(01:18:00):
developers across Africa.
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And if you listen to us, youwant to support us.
Let us know.
(01:18:20):
If you want us to host you aguest who is a moving shaker in
the tech ecosystem, also let usknow.
We'll make that possible.
Today we are hosting TitusNdeto Ndongo.
Yeah, I don't know which iswhich, but he has so many names.
But also he has a wealth ofknowledge and he's sharing with
(01:18:43):
us around startup raising money,his life in high school and
primary school.
He's a curious gentleman andyou can hear even in his story.
If you've not listened to theprevious recording, just go
there.
Start from the word go and youget all this and understand who
(01:19:04):
he is as a person, as well asthe wealth of knowledge that he
has.
So we're talking about thevaluation.
You know, post, pre and, as wellas you know, option pool, some
of these that actually, when astartup is coming up actually
tech you don't really focus moreon what that means.
(01:19:25):
They just want to build aproduct, 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 adelivery or erp solution for
different businesses?
And then when they raise funds,they realize, oh, we give the
whole company to someone and theintention is all clear.
(01:19:45):
Or maybe my employees are notmotivated well enough.
I need an expert who needs tobe paid.
So it's quite a mushy water totrend in.
But some of this knowledgeyou're sharing actually gives
some details into how do Iprepare myself financially and
even if I'm consulting afinancial person, I'm able to
(01:20:07):
actually articulate this personwho will come in to give me this
world of knowledge.
Uh, there's been also rumorswhere, you know, finance people
collude for the highest bidderto take over the company.
There's also what you talkedabout AR, or the guys who bring
the people, kkr, kkr who bringin the people.
(01:20:29):
They take over the company.
So there's a lot that goes on.
Speaker 5 (01:20:33):
Before we continue, kkr, do not bring in bad people.
They don't run tax online.
Speaker 2 (01:20:42):
I did not say they bring bad people, but they bring
people with intention, clearintention, and most of those
intentions are always favorableto the founder.
Speaker 5 (01:20:50):
Yeah, exactly that's a good way of putting it, it's
favorable to them.
Speaker 2 (01:20:54):
Either they're planning to take over or acquire
the company or grow thatcompany to an extent that it
creates value and sell it.
Speaker 5 (01:21:01):
Both for the founder and themselves.
Speaker 2 (01:21:03):
Yes, exactly and actually it's good for everyone.
It's just that it hurts theintention of the company.
There are companies that havenow started to just make
billions of dollars.
Maybe they make billions ofdollars, but this billions of
dollars is quite distributed tocreate wealth in different
communities across the world andnot to be concentrated on one
(01:21:24):
point.
But of course the investorwants to make billions.
Maybe that's the intention theywant to make more money to
invest in more companies and forthem, actually they're looking
at it from the point of yeah, ifI have more billions, I invest
in another 50 companies.
I've impacted the same communityyou're trying to impact and you
take shorter time.
So there's always thatdisconnect.
(01:21:46):
But of course, at this pointyou are looking at how do we?
You know, knowledge is power,how do we bring this into light
and how these processesinterlude with each other, and
so and so forth.
So these are series of uhconversations and we want to
cover a lot of things aroundthese, because everyone is
(01:22:07):
complaining, everyone isfrustrated, but no one actually
sits down and asks wow, where dowe start talking about these
things and this?
Is the place.
Welcome back.
So right now, titus, I want usto venture more into pre-money
versus post-money valuation.
As you said, most founders arenot finance gurus to figure this
(01:22:31):
out.
So what is the differencebetween the pre-money and
post-money valuation?
Speaker 5 (01:22:36):
Pre-money and post-money the biggest
difference is if the investorhas put in money or not.
Let's get back to our example.
You have the company, I'm yourfinance guy.
You ask me investor, I'm in NBRthis much.
(01:22:59):
What is the pre valuation?
How would I answer?
I tell them, I ask, I tell you,go and tell them one to try.
one point to five yeah yeah, andthen Rudy, now what will be a
post money valuation?
And then one beer.
That depends on the oxygen, onwhat am I saying Now for post
(01:23:24):
money?
It depends largely on the moneycoming in.
If it's 1 million, post moneywill be 1 million plus 1.25
million.
So it will be 2.25 million, Ifit's 10 million it will be 11.25
million, depending on theinvestment be 11.25 million,
depending on the investment.
Speaker 2 (01:23:43):
So pre-money is assets, money you're making, the
value that you're creating, thepromise, the pre-orders, all
that brought together.
It might be liquid or notliquid.
Speaker 5 (01:23:57):
But that's the valuation pre.
Speaker 2 (01:24:00):
It's the pre-money that exists before the
investment.
Post-money valuation is plus.
Now the investment.
Now what is crucial forfounders to understand the
inclusion of the option pool inthese valuations.
Speaker 5 (01:24:19):
For option pools.
Inclusion is not on thefounder's side, but mostly it's
the main point of the optionpool for the startup founder
(01:24:46):
will be a way of financiallymotivating the early employees
that took the risk with themBecause maybe they weren't being
paid that good, they weretaking long hours for short pay.
Some used their own money,stuff like that.
But now the option pool, onceit's set aside, it will hurt the
(01:25:15):
equity budget.
Equity budget is the budget youare spending on getting funding
.
Is the budget you are spendingon getting funding.
If you're looking for fundingat seed level, your equity
budget should be roughly 10 to15.
10 to 15 percent For roughlyseed 75,000 to how much?
(01:25:43):
75 to 100k at sea level.
That's a good amount startingfrom there.
Now when you do the option poolbefore the funds, you will get
(01:26:03):
7.5 million.
It will be there.
But now when you do after apiece of that, 7.5 million will
be affected Because you will setaside the option pool at
post-money valuation but theinvestor is investing at
(01:26:24):
pre-money valuation.
But the investor is investingat pre-money valuation.
You're getting Now you'll takea piece of the funds, the
percentage the investor had togive to the employees.
Now most investors are not thatgenerous when it comes to
(01:26:44):
equity, because equity they are,let's say they are ways.
They are ways Most foundersthink equity is control.
Depending on this structure, Ofthe organization.
(01:27:06):
That's not always the case.
You can have majority stake.
Speaker 2 (01:27:11):
And you're not in control.
Speaker 5 (01:27:13):
Exactly.
Speaker 2 (01:27:14):
Depending on the percentage or what determines
that.
Speaker 5 (01:27:17):
Close.
Speaker 2 (01:27:19):
What is close?
Speaker 5 (01:27:20):
What do you put in the contract?
What did you put in the companyby lose?
Speaker 2 (01:27:27):
now, that's where the legal comes into play, or?
Speaker 5 (01:27:29):
yeah, it's called technical, technical, a legal
technicality.
Speaker 2 (01:27:37):
Okay so do you need to go and study law as a founder
or do you need to hire a goodlawyer?
Speaker 5 (01:27:43):
You need to understand it.
Just read enough.
Read business law.
What I'm avoiding is onceyou've hired a good lawyer, you
still do not understand legaltechnicalities.
Speaker 2 (01:27:57):
But you trust they will guard your interests.
Speaker 5 (01:28:01):
Yeah, till when.
Speaker 2 (01:28:04):
Until you stop paying them.
Speaker 5 (01:28:07):
Or when the funding round is roughly 100 million.
That's how much in Kenyanshillings, that's more than 12
billion.
Yeah, 13 billion, it's 130.
Yeah.
Now you are paying me 7 millionper month.
This guy is wanting to give mea billion.
(01:28:28):
Bro, I love you, but you won'tunderstand.
Speaker 2 (01:28:35):
So it goes to the side of the investor.
Speaker 5 (01:28:37):
Yeah, these guys come with floats.
They come loaded, heavily,heavily loaded.
Speaker 2 (01:28:43):
So like how much does that guy pay?
You Will double, triple it.
Speaker 5 (01:28:47):
Even 10x.
You want this contract to favorus 10x.
Speaker 2 (01:28:52):
Ah how often does that happen.
Speaker 5 (01:28:56):
Depends on interested parties.
The company has to havesomething that will entice
attract that type of group.
Speaker 2 (01:29:07):
Yeah.
Speaker 5 (01:29:08):
Unona.
Yeah, let's say, maybe you'recreating the next Google.
Oh.
But you, as the founder, youdon't know the revenue model,
the business aspect of it.
You know that model, thebusiness aspect of it.
You know that's the problemmost tech founders?
Uh, don't understand.
Not all most tech foundersdon't understand the money part
(01:29:31):
of their company.
Remember, you cannot entrustthese positions to everyone
always because now, now, likethe financial technicality being
cash at bank, not cash at bank,being high on account
receivables but low on liquidityAccount receivables need the
(01:29:54):
money you're being paid at theend of the month.
Let's say you have 10 millionof it.
You have a contract now.
You cannot fulfill it, becauseeverything is on your OPEX.
Speaker 2 (01:30:06):
Can you take a loan?
Speaker 5 (01:30:07):
You can take a loan against accounts receivable.
Speaker 2 (01:30:12):
But, it will be expensive At all interest.
Speaker 5 (01:30:16):
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.
(01:30:37):
Now if you're given the retailat 14% of 100 million, that's
quite a lot.
Speaker 2 (01:30:47):
Yeah, so how does including 15% option pool in the
pre-money valuation affect theequity stake of the founders?
Or what is the right percentageto really include for option
pool.
Speaker 5 (01:31:00):
The average option pool is at 10 20 okay, so 15 is
yeah median yeah now, uh, for 10to 20.
Uh, let's say, for 20 you arein love with your employees
because Because now you have atleast a lot of flexibility.
(01:31:24):
But for 15, you are not that inlove with employees Because,
remember you, as the founder atseries A, you should be owning
40%.
That's the average.
Okay, because a lot of guyscall me to clean up their cap
(01:31:45):
table.
Cap table is a capitalizationtable.
Who owns what when.
Speaker 2 (01:31:49):
So what if at Series A you own 30%?
Is that really bad?
Speaker 5 (01:31:53):
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 (01:32:04):
But here we are considering maybe we have one
founder.
What if we have two or threefounders?
How possible is it for onefounder to own 40%, or is it a
combination of all?
Speaker 5 (01:32:17):
If you're solid, if you're good friends, if you have
the good work ethic, you canI've said, if you can own us
joint.
Speaker 2 (01:32:29):
All founders should be able to have 40%.
Speaker 5 (01:32:32):
All founders.
Yeah, that will be easier andit will loosen the belt.
You get it Because remember,everything is at 100%.
You have 40%.
Speaker 2 (01:32:42):
Already, you took away 15 15 plus 40 yeah 55, 55
you have, so the company stillhas yeah, you have now roughly
45 yeah you have one investoryeah at 10, 35.
Speaker 5 (01:32:57):
You have maybe what else, let's say 35 remaining.
Speaker 2 (01:33:02):
Precede maybe 7.5 gone 7.5 gone.
Speaker 5 (01:33:05):
That's also.
That's how much 20, how much,call it 10.
Call it 10.
Now, when you at Series A, youare being funded roughly 5 to 20
million for most likely 15%.
(01:33:28):
So that will mean you'll haveto eat your investors.
Am I will have to eat yourpeople.
Am I will have to eat yourself?
Speaker 2 (01:33:35):
Mostly yourself.
Speaker 5 (01:33:36):
Mostly yourself.
What are you remaining?
Speaker 2 (01:33:38):
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 (01:33:43):
I want to cash out.
Speaker 2 (01:33:44):
Yeah, that's the best person, so everyone has to lose
at some point.
Speaker 5 (01:33:48):
Now, that's the problem.
At some point in companies youhave to take sacrifices.
That's the issue.
Yeah.
Now, the sacrifice should not bethat big to kill you.
Don't take a sacrifice that youcannot handle.
You're getting.
Now let's say at series A,they've come in, they've given
(01:34:15):
20% for 10 million.
Now everything now starts tolike a small amount makes
considerable change to leak.
A small amount Makesconsiderable change.
A small percentage.
Now Assume you own.
Let's say what If you had 10?
(01:34:37):
Let's say you own 7%, thisamount, you own 7% of your
company.
Speaker 2 (01:34:44):
How easy of you to lose it.
It's very easy because there'sno control there.
Other people have control overyou, that's the issue.
That's 93% worth of control.
That's a big very, very bigEven you don't consider, you
(01:35:04):
just you're just an employeeyeah, you're an employee, yeah,
I don't so you mean that couldeven happen at series b, if you
are?
Speaker 5 (01:35:12):
if you're not careful , because I usually advise my
portfolio companies yeah cleanup kwanzaa your cup table.
Buy out as much people aspossible.
What does?
Speaker 2 (01:35:25):
that mean.
Speaker 5 (01:35:26):
Buy out is you have a lot of dead investors.
You had an investor who paid200,000.
That's 2K USD.
Speaker 2 (01:35:34):
You buy it back.
Speaker 5 (01:35:36):
You pay 5,000.
You have another investor.
Speaker 2 (01:35:41):
But they have to accept it though, and you're
assuming that people will taketheir 5k for 200,000 not
necessarily.
Speaker 5 (01:35:49):
They don't have to accept so what do you do?
Speaker 2 (01:35:51):
do you hamstring them ?
Speaker 5 (01:35:54):
there are ways, please indulge me there are ways
of forcing a buyout what ways?
I don't want to seem like anevil person, but maybe for you
to force a buyout with aninvestor is to offer a premium.
Offer a premium is if theyinvested 2,000 USD, give them
(01:36:24):
10,000.
For them to refuse, they'llhave to substantially decline
the offer with reason.
Speaker 2 (01:36:35):
So here you're suggesting that if someone gave
x, you can double it, double itor, you know, triple it, just to
make it enticing now you'llhave, but the intention is to
buy it exactly not because youlove him, mama, it was.
Speaker 5 (01:36:52):
The intention is to lose dead weight you'll have a
lot of dead investors.
Your mom, yeah, your mominvested.
Yeah, your bro invested.
What value are they bring?
Company?
Because also, that's a thing Iinsist- Look for an investor in
the same area as you.
Speaker 2 (01:37:11):
Because they will bring even knowledge,
connections, network.
Speaker 5 (01:37:16):
If even anyone is bringing industry participants
on the table that's huge, hugevalue.
Huge value Kwanzaa, when youare young, huge value.
Speaker 2 (01:37:26):
How young can you be young?
Speaker 5 (01:37:28):
Young.
Let's say you are making lessthan 10 million, that's 100,000.
Speaker 2 (01:37:33):
Oh, you are talking young money-wise, not the age
Money-wise, yeah, not age.
Speaker 5 (01:37:38):
I know for age.
I don't mind about age at all.
Yeah.
If you have the people behindyou.
Yes.
Speaker 2 (01:37:45):
That's what matters.
Oh, interesting, so you talkedabout negotiation, that a
founder should have to be ableto get more from the investor.
So what strategies can foundersuse to negotiate higher
pre-money valuation?
That doesn't include the optionpool, because now option pool
is one that attracts the optionpool, because now the option
pool is the one that attractsthe dead weight.
Speaker 5 (01:38:08):
Yeah, the dead weight Lambda.
Maybe you do make thenegotiation inclusive, instead
of making the investor feelyou're giving, I'm giving money
and then I'm stepping aside.
Also, like, ask the investorrarely will they accept.
(01:38:32):
Ask the investor to take up anadvisory role, because the
investor you're targeting alsohas different companies.
Speaker 2 (01:38:42):
So that should be one of the offering.
If you don't take this, welower down that option.
Speaker 5 (01:38:47):
It depends.
It depends Because taking up anadvisory role depends on the
investor, because, let's say,you have an investor who's?
Let's say, you're in MedTechand you have an investor in
MedTech that should be a hugevalue.
You should?
Let's say, you're in MedTechand you have an investor in
MedTech.
Speaker 2 (01:39:05):
That should be a A huge value yeah.
Speaker 5 (01:39:07):
You should.
That should be a bargainingchip, because they'll bring in
people.
It will be easier for you toget into those doors via him
than via yourself.
Yeah.
Plus.
Now you're in MedTechcredibility.
Speaker 2 (01:39:27):
Ah, okay, if this guy has invested in this exactly
must be very important exactlythat's just take the advisory
role.
Speaker 5 (01:39:36):
advisory role, you know, there are roles covered,
no matter how small it is, itdoes not change.
Speaker 2 (01:39:42):
Do you get paid to be on the board?
Obviously.
Speaker 5 (01:39:48):
Because you are not coming to the meetings for free.
Speaker 2 (01:39:52):
So you mean there is sitting allowance?
Yeah, sitting allowance, goodfood.
Speaker 5 (01:39:57):
Obviously boards must have good food.
Any board meeting.
Speaker 2 (01:40:00):
Some giveaways.
Those must be expected, butthere is no salary, really
Mostly.
Speaker 5 (01:40:05):
Some giveaways.
Those are what you expect.
But there's no salary.
Really, mostly Really.
Yeah, there is If the advisoryrole it's very, very interactive
.
Let's say you have an advisoryrole on legal.
Okay, you know, you know a lot,okay.
Speaker 2 (01:40:20):
It depends with the time consumed in the role.
Speaker 5 (01:40:24):
Yeah, okay, so any other negotiation?
Speaker 2 (01:40:25):
skill.
It depends on the time consumedin the role.
Any other negotiation skillthat you can share.
Speaker 5 (01:40:32):
Know who you are negotiating against.
Speaker 2 (01:40:35):
Do background search?
Speaker 5 (01:40:39):
Do not fear investors because they are giving you
money.
Most people are desperate.
Speaker 2 (01:40:46):
Okay With money.
Speaker 5 (01:40:47):
Ah, they will say speak.
They will speak in a very, very, very ambitious voice.
I do not care, I put in ironthere.
Let the guy sit at the tableand then the investor proposes
to call off the deal of a pettything.
(01:41:08):
The deal value is roughly 15million USD 15 million is petty.
Nah.
Investors usually call off thedeal over petty reasons.
Speaker 2 (01:41:19):
Okay, not the 15 million, Not the 15 million.
Speaker 5 (01:41:22):
You know this investor doesn't want to give
you this.
Speaker 2 (01:41:25):
They want to give lower, lower.
Speaker 5 (01:41:28):
So now they are looking for reasons.
Speaker 2 (01:41:31):
Like which petty issues that investors are
bringing on the table.
Team, you're too tall, tooshort.
Speaker 5 (01:41:37):
No, that's very, very petty.
Speaker 2 (01:41:40):
No, you said the petty things, so I was thinking
the pettiest of the petty.
Speaker 5 (01:41:44):
For petty, I'm meaning petty thing, so I was
thinking the pettyest of thebest.
Fupueti are meaning financiallypetty.
Okay, let's say you don't havean accountant.
Okay.
And then they start arguing youwill not manage money Properly.
The other rounds, who did it?
Speaker 2 (01:41:57):
Okay, what if maybe this is your series A?
Speaker 5 (01:42:02):
Series A is usually mostly series A in the price
round.
A price round is like there aremore than three different
people.
You have an investor there.
The investor will come with ateam.
You will come with your team.
Let's say you're meeting twopeople, but in actual sense
(01:42:23):
there are 15 people in theboardroom.
He's giving you, let's say,you're meeting two people, okay,
but in actual sense there are15 people in the boardroom.
Yes, he's giving you, let's say, 100 million shillings.
Ah, yeah, yeah, yeah, you'llhave to pay for it.
Yeah.
You will have to Because theywill check everything, even your
friends.
Investors are very, very shrewd.
For you to become an investor,most likely.
Speaker 2 (01:42:46):
So do they even hire FBI, cia, private investigators?
Pay people around you to turnthem.
Speaker 5 (01:42:58):
You know.
Let me give a case study in theEuropean market European market
, a lot of people follow, not alot.
People must follow the rules.
Now, a good background checkwill yield everything Crime
records, school records, healthrecords, offenses, court records
(01:43:19):
and do you disclose it openlyor 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 (01:43:33):
That's why most people don't go to raise in
Europe, I see.
Speaker 5 (01:43:36):
For Europe.
Europe is a tough market.
They will give.
How can I?
Yeah.
But they will do theirbackground checks, they will
legally.
They legally have to ask.
Speaker 2 (01:43:46):
Okay, we'll discuss this somewhere else, but that
begs me to ask how did Londonsurpass Silicon Valley?
Is it because of Brexit?
Now they don't have to abide bythe European Union rules.
Speaker 5 (01:44:00):
To some point, I might say, the very, very, very
laws you're putting in place toprotect you are also a danger to
you, because if you look at,let's say, food laws in European
market, they are only buyingonly organic.
Speaker 2 (01:44:24):
Purely.
Speaker 5 (01:44:25):
Purely yeah.
So now what happens?
If you don't, Will your countrystarve to death?
Speaker 2 (01:44:32):
I have no idea.
You grow organic.
Speaker 5 (01:44:35):
Till.
When.
Speaker 2 (01:44:38):
Until you have surplus.
Speaker 5 (01:44:41):
Now.
That's why most likely theremight be a deficit always on
balance of trade.
They're importing more thanexporting because of their laws
they've put in place so inEurope you can only consume or
sell them organic food nah,depends, depends on the region.
(01:45:02):
You know, europe is very, verybig.
Europe is very, very big.
Europe is a conglomeration ofcountries.
Let's say a place likeQuinteria, netherlands.
Netherlands rarely take foodswith fertilizer.
Literally even when you'reimporting, when you're exporting
(01:45:24):
to them within Netherlands,they can they can grow it and
take it because they havecontrol they have control over
there what they plant thechemicals yeah now let's say
what about Kenya?
Speaker 2 (01:45:36):
I'm curious Kenya imports?
Kenya any guidelines therelet's hope they are.
You have not heard of anyStringent Stringent guidelines.
Speaker 5 (01:45:50):
I have not.
Speaker 2 (01:45:52):
Do you think they would be good for us?
Very.
Speaker 5 (01:45:56):
Because now look at China.
China was once the fake country.
Everything fake China.
Look at the lows they have.
Speaker 2 (01:46:07):
So you start gradually.
Speaker 5 (01:46:11):
You just open up but with time you tighten the ropes,
Because for China what they did.
I have a friend who exports toChina.
Speaker 2 (01:46:19):
What does he export?
Speaker 5 (01:46:22):
Fresh produce, that's vegetables.
I don't know vegetables fruitsapples, avocado different types
mangoes what else Sweet corn?
No, it depends.
Speaker 2 (01:46:35):
And this is very interesting because in the
couple of coming series we'lltalk about, because it's kind of
investment where you growproducts, you add some value by
packaging or washing and findinga good market and you export
out value-added goods as a wayof business, because, you know,
most people think now, with thetech boom, everything is tech,
(01:46:59):
which is not the case, becausepeople will always eat.
People will always party peoplealways party.
People always use clothes.
You know there are so manyother markets that are not
tapped and we're exporting orimporting most of those things,
even within Africa.
Speaker 5 (01:47:12):
Yeah, even within Africa.
Speaker 2 (01:47:13):
So we'll get there and talk about all these
opportunities that exist.
Speaker 5 (01:47:17):
On exports.
Speaker 2 (01:47:17):
Yeah, there are lots, even within Africa, actually.
Speaker 5 (01:47:20):
Yeah, even within Africa.
Actually yeah, because that guyI was doing his numbers he
sells $7.95 per fruit.
Speaker 2 (01:47:34):
That's a huge margin.
Speaker 5 (01:47:36):
That's 10x the margin .
Speaker 2 (01:47:38):
Even when you remove or subtract the logistics.
Speaker 5 (01:47:43):
Because the margin rarely is less than 15x.
Speaker 2 (01:47:46):
Oh nice.
Speaker 5 (01:47:47):
Really, maybe you're doing bad management, because a
lot of guys this begs me to askhow did Twigger fail?
Speaker 2 (01:47:55):
Okay, I don't know if it failed, but why is it
struggling to really make thedifference?
But this is not your discussionfor today.
Speaker 5 (01:48:03):
Let me, let me, let me.
Speaker 2 (01:48:04):
I like this discussion.
You're a private waiter, youknow.
This chief has analyzed all thecompanies that actually have
failed.
Yeah, at least in Kenya or inAfrica, for you not to repeat it
and actually has analyzed howthe process was.
That's why I like this.
But let's go into the detailsand then we'll go to specifics
later on for Tinga.
Speaker 5 (01:48:26):
There was interested parties.
Interested parties, people whowant to eat the company
foreigners, investors, founders,let's not mention up, but you
just know they were interestedparties.
People who want to like let'snot mention up, but you just
know they are interested parties.
Okay, people who want to likeeat the company.
(01:48:47):
The company should benefit you.
As an individual as anindividual, indeed, you as also
an employee, also a stakeholder,even if it's indirect
employment.
Speaker 2 (01:48:58):
But they could have created the value and then
eventually they will still eatif they want to eat, yeah but we
in kenya okay in kenya.
Speaker 5 (01:49:09):
You will raise using western philosophy and theories.
They are not applicable inkenya.
Have you ordered?
Trigger you personally.
But that trigger you personally, but you tend to have your own.
Speaker 2 (01:49:24):
Let me correct that analogy.
I buy it.
I know them for bananas, rightGreen bananas.
If there was a clear way, likethe way you order at Carrefour
or Naiva's, and then I could sayokay, bring me two bananas.
Maybe if I buy it in Kisii it'slike 200.
(01:49:45):
Maybe you sell me the wholething.
I don't know how it's calledBunch, Not even bunch.
The bunch are attached to that.
Speaker 5 (01:49:53):
Oh the whole thing.
Speaker 2 (01:49:55):
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 Ican order it with an app and
maybe pay 50 bucks for transport.
Yeah, I'll be their firstcustomers, but maybe it didn't
look like I'm the targetcustomers.
Speaker 5 (01:50:13):
No Before.
Even I lose that same analogy.
You've said at 450 fortransport.
Where are you getting this forhalf the price?
Kisi.
Kenyans are very, very uniquepeople.
Their habits put you inbusiness.
(01:50:34):
I'm going to put you out ofbusiness.
Speaker 2 (01:50:37):
Okay.
Speaker 5 (01:50:39):
Generally.
Speaker 2 (01:50:39):
Africans.
Speaker 5 (01:50:41):
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, evenyou, in your social group they
prefer buying bananas when theytravel Because you know the
problem with Kenya.
(01:51:03):
Need businesses.
Need businesses.
They are not solving a problem,they are filling a need.
Need businesses don't usuallysell for long.
They sell, but not for long.
How many fake Jack Daniels arethere in Kenya?
I don't know.
So let's say a lot.
(01:51:23):
I don't know.
So let's say a lot, Becausethere's, I had a case of it.
They say a lot there are peoplemanufacturing fake JD.
There are people manufacturingfake Mac Mac accessories.
Speaker 2 (01:51:40):
MacBook, you mean.
Speaker 5 (01:51:41):
Accessories, not the Mac.
You know the Mac.
For you to fake it, you'll haveto Use a lot of cash, because
there's a lot.
Speaker 2 (01:51:49):
You mean like the mouse, the wires, the chargers
and everything.
Speaker 5 (01:51:52):
Yeah, you get it.
Also, like I've ever bought Afake cable, the type C one.
Yes, a fake cable, yeah, yeah,but let's say Louis Vuitton,
louis Vuitton.
Louis Vuitton publiclyannounced they have not hit the
Kenyan market.
Your friends have LV clothes.
Speaker 2 (01:52:14):
But there are guys who go to Dubai and buy some of
these clothes.
Speaker 5 (01:52:18):
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 youthere.
Speaker 2 (01:52:34):
We'll talk more about that in another session.
Same thing.
No, I knew if we go to thatroute it will just take us off
the rails.
So any other strategy for afounder when they're negotiating
.
Speaker 5 (01:52:50):
Speech be articulate.
Be also financial savvy.
No terms before you get intothe meeting.
No terms.
Because investors like they'repeople also.
People like to shorten stuff.
They're not shortening itbecause they want to screw you
(01:53:11):
off Like cack the investor mightnot like, want to prefer
customer acquisition costs like10 times.
Just say cack.
Maybe what else Negotiation bearticulated?
Do not answer questions youdon't know or you're not sure of
(01:53:34):
.
It will bite you in the back.
Two, three years, four yearslater you will have established
you know investor relationshipsare like marriages.
One party does something wrong.
Use it in the future.
(01:53:58):
Now that's the problem.
You're getting into a marriagewith this man, this woman,
whatever they identify as, andthen I'm keen.
I don't want backlash.
Speaker 2 (01:54:16):
I see you're very inclusive yeah, you have to.
Speaker 5 (01:54:20):
Now you have these guys coming into the company and
you switch talks with them withlies.
The lies usually run out.
They start asking Now, since weare together, you just tell me
(01:54:42):
what was your evaluation.
Were together.
You just tell me what was yourevaluation.
You, because you think you arevery, very good, solid people.
You say that's a legal issue.
You lied.
You have admitted to theopposing party opposing council.
You have admitted you lied.
Let's say, you do petty, pettystuff like switching clients.
(01:55:07):
Okay, exaggerating APC.
Apc a lot nowadays, because forpilots, when you do a pilot,
let's say of software, mostlyit's free, but you're expecting
the one you're targeting thepilot, they convert to the
client of software, mostly it'sfree, but you're expecting the
one you're targeting the pilot,they convert to the client.
(01:55:29):
Now you can have the APC, youradvanced purchase commitment.
Speaker 2 (01:55:32):
Can you repeat what APC stands for again?
Speaker 5 (01:55:34):
Advanced purchase commitment.
Okay, Now it's just basicallycommitment.
Speaker 2 (01:55:41):
With bonus or you're just trying out the market.
Speaker 5 (01:55:44):
No, you are not trying For a client, for you to
sign an APC with a client, theclient has to know what I am
signing.
Speaker 2 (01:55:52):
So they either pay some percentage or they pay in
full or discounted Discounted.
Speaker 5 (01:55:58):
The point I am signing the APC is you will
discount this software for thislong by this much.
Now, when I'm converting, ifyou 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 APCis low market, low market crack.
(01:56:22):
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.
Talk to some few guys here atthe co-working space, Test it
out your interests.
Now you know you've spentconsiderably less on crack and
(01:56:42):
you have at least a workingmodel to show people.
This.
I've done this, I've purchasedthis, I've committed.
These are APC.
Now, that's very, very, veryvaluable 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
(01:57:06):
investor or a prototype or yeah,it has to be a prototype.
But now, since it's the KenyanMarket funding also getting for
getting funding it's becomingtougher and tougher because of
the failing companies.
Uh, they say you have to haverevenue.
They they increase the baryou're getting.
Now you have revenue, you havethe prototype.
(01:57:29):
You want to develop the MVPclearly perfectly and also
convert the MVP to the full-onproduct.
Also, you want to use part ofthat money to launch the stuff
you're getting.
Speaker 2 (01:57:45):
This means hiring, exactly.
Speaker 5 (01:57:46):
Hiring.
Speaker 2 (01:57:47):
Acquiring customers.
Speaker 5 (01:57:49):
Marketing ad revenue office space.
Speaker 2 (01:57:53):
If you didn't have an accountant, you hire one.
Speaker 5 (01:57:54):
Yeah, you hire one, you get a good financial guy up
there.
Speaker 2 (01:57:57):
You're using Futsubishi.
Now you want to get yourself anRange.
Speaker 5 (01:58:02):
Rover.
Yeah, yeah, also an Range Rover.
Yeah, you're getting now theproblem.
Even with my experience infunding, uh, funding is not the
issue.
The issue is 10x in the returnthat's where most people fail
it's not easy.
People come come off with themarket will.
(01:58:27):
Will purchase the market willmarket will when.
How long have you been doingthis?
It's only like three monthssales.
That's not reliable.
For reliable standard deviationyou have to have a standard
deviation comes to play whenyou're doing the sales focused,
(01:58:49):
using background from thepatterns your three-month sales
and then now when you are q3, q4yeah you ask yourself how much?
By how much have I deviated?
From the mean.
Yeah.
Now that's where standarddeviation comes into play.
If you said you're expecting 10million by Q4, by what
(01:59:13):
percentage have you achievedthat?
Okay, now if it's like lower,you adjust your expectations.
Now you see like, the marketdoes not respond to your
adjustments.
Now you see, the market doesnot respond to your adjustments.
Speaker 2 (01:59:27):
So what are these trade-offs that you expect when
negotiating a higher valuation?
Speaker 5 (01:59:36):
For trade-offs.
Obviously you'll have tonegotiate connections, because
me, I prefer investors withconnections, An investor who
will give me money and then goesthere, and then I multiply my
(01:59:59):
income, you get it.
Yes.
There's the financial andfinancial set off, obviously.
Uh, you'll have to give upequity, you'll have to give up a
portion of control, you'll haveto give up maybe a lot of your
(02:00:21):
work-life balance, because,remember, this money comes in
for it to become double, not foryour Range Rover.
Speaker 2 (02:00:30):
And it will not just work itself.
You have to put in some work,exactly.
Speaker 5 (02:00:36):
Now it comes in, maybe it also will require
skills.
It will require strategists.
It'll require someone who isvery, very, very good at
exploring different markets subis dev you're getting all this
cost.
You're getting, yeah, now thenon-financial then and financial
(02:00:58):
in your work life balance whatabout where the negotiations
take longer Time?
Also, time is a resource.
Yeah.
You know the shortest that youcan get funded by a VC, it's
three months.
Speaker 2 (02:01:19):
Because they have to do the due diligence.
Speaker 5 (02:01:21):
Filing, yeah, filing, because the biggest issue is
not even the due diligencefiling, yeah, filing, because
the biggest issue in Akwaga noteven the DD market research is
your company actually makingmoney?
Speaker 2 (02:01:34):
You have cooked the figures.
Speaker 5 (02:01:35):
Exactly Because I'm giving you my money, my
hard-earned money, for what youknow, I can't risk some things
with you.
Yeah, we're solid, we'refriends, we're best friends.
But I've given you money.
You've done the marketing.
Has the company actually mademoney?
Will the company actually makemoney?
(02:01:58):
Yes.
Will the company actually make?
Will product market fit?
Yes.
Because how can your VC earn aquagga?
Roughly reluctant Will thecompany actually make?
Will product market fit?
Yes, because this is where VCis roughly reluctant.
This money I'm giving is notmine either.
I raised it.
Investor wants a certainpercentage.
Irr.
IRR is Internal Rate of Return.
(02:02:22):
Okay, Internal rate is like howmuch percentage are you giving
on top of the percentage thatyou've gotten?
Let's say 10%.
Let me start from the top.
When you're doing a fundinground in VC venture capital,
(02:02:49):
venture capital, there are twopeoples.
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-dayrunning of the business.
They do not interfere withday-to-day running of the
business.
They do not interfere withday-to-day.
Yes, general partner raisesfrom lp.
(02:03:09):
Okay, lp, akikam akikam kwasinwho is lp?
Speaker 2 (02:03:15):
limited partner okay, minimize the abbreviation,
because in raising that's howyou get confused by the investor
.
Before you know it, 90% of thecompany is gone.
No, no, no.
Speaker 5 (02:03:31):
There are two people.
There is limited partner,general partner in venture
capital.
Now background they are VC, qua.
Limited partner he's the guywith the VC For a limited
partner.
He's the guy with the money.
General partner he's the guywith the deal flow.
He's the guy who knows whereyou will take your money.
(02:03:54):
For example, a limited partneris a wealthy sovereign fund.
A sovereign fund is Like Norway, dubai Family.
Norway is the country.
There is the royal family inNorway, same here, denmark.
(02:04:16):
They have a lot of money.
What do they do with it?
They get in contact with nowgeneral partners.
See, I have ABCD companies.
If you can invest in them, Ican guarantee this percentage.
Now the limited partner getsinterested.
(02:04:37):
Now limited partner can befamily offices.
Family offices are like hisfamily.
Speaker 2 (02:04:45):
Okay, they cannot afford.
Speaker 5 (02:04:47):
They cannot afford Can be a limited partner.
Okay Now family offices you canraise from established
investors, investors, accreditedinvestors.
Accredited investors is theaccreditation that is given to
investors past $200,000 mark byNEC, your New York Stock
(02:05:13):
Exchange.
They give you the accreditedinvestor accreditation once
after you've subtracted themoney generating assets, you're
still left with 200k yes afterliabilities, everything work was
what I have for me two hundredthousand dollars two hundred
(02:05:34):
thousand dollars, yeah, twentymillion.
Speaker 2 (02:05:36):
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 (02:05:45):
So you've invested, I still have 200.
Speaker 2 (02:05:51):
I've invested 800,000 .
Speaker 5 (02:05:52):
After assets To our living expenses.
Speaker 2 (02:05:55):
Now I can invest 500.
Speaker 5 (02:05:58):
If you can comfortably invest 500, remain
with 500, you're good Now you'llbe able to access.
Speaker 2 (02:06:08):
That must be there, yeah, that must be there.
Speaker 5 (02:06:12):
He sees savings, he needs disposable income, he
needs fare 10 million, somethinglike that.
Now for your accreditedinvestors they get risky
investments.
Risky investments higher,higher returns.
(02:06:32):
That's why people go aftertheir accreditation.
Now sasa they can talk to nowlike kama.
You've heard of Uyu JimiWanjigi saying the sovereign
wealth loan.
I'm a bond sovereign wealthbond.
That is a family, the UK royalfamily, loaning the Kenyan
(02:06:56):
government.
Now, once you hear thesovereign wealth, there's a
sovereign, a conglomeration ofpeople giving out money in a
different manner.
Now there is the family.
There are established investorsas LP.
Lp is limited partners.
There are now people who haveit and don't know where to.
(02:07:20):
Also, limited partners can becorporate.
Let's say equity, Equity.
Have a ton of cash lying around.
Inflation comes.
Inflation hits them higher thaninvesting.
Than they've invested, you knowwhat I mean.
So now mostly it's corporateventure.
(02:07:42):
Okay.
It's called that Corporateventure backed capital.
It's a corporate venture.
Okay, it's called corporateventure-backed capital.
It's called CVBC.
Okay.
Now, a company like Equitygives you, as the general
partner, this amount to developthe company and sell back to it.
Okay, because Equity cannotstart a company.
Speaker 2 (02:08:01):
They are too busy for that, yeah.
Obviously, and that's not theirmain business and that's not
their main business.
Speaker 5 (02:08:06):
That's not their main business, like the way they are
doing their high ondiversification.
You know they're in health,you're getting, they want to go
into agriculture, but they don'thave a sustainable business
model that can be absorbed bythe core business.
Yeah.
That's why they are stillangling areas of collaboration
with different general partnersand different entrepreneurs to
(02:08:28):
develop the company for them.
After the company is developed,now they can absorb it entirely
as their own.
Now that's corporate venturebacked capital.
And then for general partnergeneral partner has deal flow.
You have good deals, you havegood companies, you have good
(02:08:52):
innovative companies that can10x the return.
Now that's the general partner.
General partner is responsiblefor day-to-day fund management,
offices, offices, utilities,normal expenditure, payroll.
They manage that.
But now there is the model 2and 20.
(02:09:15):
2% out of the entire pool goesdirectly to management.
Now to pay salary, abcd, allexpenses, and then 20% as carry.
There's something called carry.
If you agree with now thelimited partner, if you have,
(02:09:38):
let's say, I give you 30 millionUSD to invest in 10 companies,
yes, and then I'm expecting backroughly 35.
Yeah.
Now you pass 35 million dollar,mark that you will return 50.
Speaker 2 (02:10:01):
Okay.
Speaker 5 (02:10:03):
Now you're like aye, we talked 35.
This is my money, okay.
Now you're like aye, so wetalked 35.
All this is my money.
And then the investors are likeno.
Then the limited partner islike no, what is that money?
Ah, okay, so there's a disputeNow to solve.
It is now where Kari comes in.
Speaker 2 (02:10:19):
What is Kari?
Speaker 5 (02:10:20):
Kari, is that money Okay you?
Speaker 2 (02:10:22):
know what is.
Speaker 5 (02:10:23):
Kari Kari, is that money you know you are targeting
?
You gave me a target of 35.
I returned 50, so that's whatis known as Kari Kari so how is
it divided?
Speaker 2 (02:10:38):
legally or without dispute?
Speaker 5 (02:10:40):
now legally it's 20%, now the general partner remains
20% of all amounts aboveWithout dispute.
Speaker 2 (02:10:44):
Now, legally it's 20% .
Speaker 5 (02:10:44):
Now the general partner Remains with 20% of all
amounts above.
The agreed Amount Okay, plusthe 2% of the 2% of the, 2% of
the, that's the sustained fund.
Speaker 2 (02:10:58):
So let me ask then because now we have gotten there
.
So if I have 30 million millionand I'm taking 2%, and
sometimes it takes longer toinvest this 30 million, what
happens then?
Do I need to return even the 2%?
What is the guideline there?
Speaker 5 (02:11:15):
Pools have a natural death.
I am giving you 30 million forfive years.
Speaker 2 (02:11:20):
So after 30 years, even if I'm not invested, that
money disappears.
Speaker 5 (02:11:25):
It disappears.
I'm expecting 35 after fiveyears.
Speaker 2 (02:11:31):
If you invested or not.
That's your problem.
What do you agree?
Ah, I see.
So that's, why some investorsor VCs are quite aggressive
sometimes to invest.
Speaker 5 (02:11:45):
So now the death is occurring.
Speaker 2 (02:11:47):
And that's why now the strategy of acquisition,
hostile takeover, all thesethings, yeah, because they need
to get the percentage.
Okay, and the returns?
So even for them it's asurvival tactic.
Speaker 5 (02:12:00):
Everyone is surviving in finance.
Speaker 2 (02:12:02):
Ah, okay, everyone, Including the banks.
Speaker 5 (02:12:04):
Even the banks, even government.
Look at our government.
Speaker 2 (02:12:10):
The financial part of the government Left right and
center.
Speaker 5 (02:12:13):
Like I cannot even explain how wrong is that?
Because once you have anunpredictable business economy,
You're in a mess.
Speaker 2 (02:12:24):
Actually, we'll talk about government investment
because sometimes, as you said,it's not mostly that government
give other governments money.
Speaker 5 (02:12:33):
Sometimes it's sovereign money individuals,
companies, high net worth, whenit were UNHW.
Speaker 2 (02:12:40):
Yeah, pension funds and all these things.
So I think that's somethingelse people might want to
understand, because if you're inan environment where there is
bad investment as a country,even driving as an entrepreneur
is quite difficult.
Speaker 5 (02:12:53):
Yeah, like now it will be now pronounced the
difficulty it ain't in Angazaka.
Speaker 2 (02:12:59):
Now let me ask this so what are the common?
Okay, we talked about that, butwith this pool, how should the
founder allocate the option poolamong key team members like the
CEO?
Ceo executive team now, that'sdifficult.
Speaker 5 (02:13:17):
I cannot let me see for that that.
You will have to agree, maybewhat I can do best, because
that's a topic I don't discusswith my portfolio companies.
I usually feel like it'soverstepping, because now you
know, you came out of noia totell us how we'll divide our
(02:13:40):
cash but there should be like aframework, just not to give
everything, because we have seenpeople.
Speaker 2 (02:13:46):
You trust someone, maybe they come and run a
company.
You give them a certainpercentage Afterwards.
Now it's like they own it andthey are no longer with the
company, or priorities changedor you did not agree at some
point.
These happen.
Speaker 5 (02:14:00):
Yeah, things happen.
But mostly what I do is I givea framework, I don't give a
definite answer.
For that.
What I usually say is mostlylet's get down to who is doing
what.
Who has the mostresponsibilities, realistically,
(02:14:23):
who has?
The most responsibilities.
Realistically, who has the mostresponsibilities?
Who goes to work?
Who does a lot of work?
Who does a little work?
Who does a little work?
Speaker 2 (02:14:36):
So if someone is putting in more work, should get
more equity.
Speaker 5 (02:14:41):
If you don't give them more equity they will be
demotivated.
Speaker 2 (02:14:45):
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 theconnection.
You know that's considered ashigh value.
Speaker 5 (02:14:57):
Yeah, that's considered as high value.
Yeah, that's a good thing.
But now also now, how will youquantify that?
Speaker 2 (02:15:07):
I mean, you should maybe set a target.
Speaker 5 (02:15:10):
Yeah, If you work with targets now that you know
this one is doing a lot ofreasonably, when you're at the
early age of startups, everyoneis doing everything, At least
you and your marketing.
We're focusing on marketingalone.
There is no time to get admin.
Have people paid?
You start calling people.
(02:15:30):
Your payment is if I do, thereis a late fee you are getting.
The CEO is not there.
Will the meeting stop?
You are getting at some point.
Speaker 2 (02:15:41):
Everyone is doing everything, but realistically
there is one person.
Speaker 5 (02:15:43):
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 canhave the entire company.
Speaker 2 (02:15:55):
Akitoka, you are, you crumble.
Speaker 5 (02:15:59):
Cramble literally within days.
Yeah, that's also why a lot ofinvestors want founder market
feed.
Not everyone is depending onpassword.
Speaker 2 (02:16:12):
There's an issue under the bus analogy.
So when you're considering someof these factors for allocation
, we have said one of the mostimportant thing is the
responsibility, the role one isplaying.
Motivation should be consideredso that those who are putting
in more do not feel like youknow, we are putting in more but
(02:16:35):
we're getting less for it.
Speaker 5 (02:16:37):
First if it reaches here.
If a member of the foundingteam states that explicitly he
is ready, maybe he wants to live.
He has already given up Becausehe has seen it.
It's not fair For me.
I'm not getting any value.
What happens when you don't getvalue?
(02:16:58):
Realistically, you just lookfor where you will get value
normal human nature.
What I usually advise is havemore of a dynamic split, a split
that will change over time.
You might have the idea, butyou don't know how to execute
(02:17:22):
which is very, very important.
You have nothing withoutexecution, but you don't know
how to execute.
Yes, which is very, veryimportant, you have nothing
without execution.
Now, the person who is doingthe execution obviously will
want more.
But it is yours.
Give them more now.
It will change later.
Always remember these thingsare negotiations, they are not
(02:17:44):
fixed.
Speaker 2 (02:17:47):
Can you negotiate down someone once you already
give them?
Speaker 5 (02:17:51):
Technically, technically you can.
Speaker 2 (02:17:55):
Will not that look like you are blackmailing them,
screwing them?
Speaker 5 (02:18:00):
It's finance.
Speaker 2 (02:18:02):
What does that mean?
You play with numbers.
Speaker 5 (02:18:06):
Play with numbers.
Everything is an exchange.
You have control.
So you mean in all this game.
Speaker 2 (02:18:13):
Someone has to.
Speaker 5 (02:18:17):
Welcome to corporate.
Speaker 2 (02:18:19):
Oh, that's corporate Corporate 101.
Speaker 5 (02:18:23):
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, morecontrol.
Speaker 2 (02:18:42):
So it is always good for the investor and the
receiver of the investment to beable to negotiate better deals
at all times.
Speaker 5 (02:18:54):
When, let's say, when the deal is nearing its death.
You need to let me see how do Iput it.
You need to like me see how doI put it.
You need to, like now, startspeaking real, like it's how
you've invested interested.
What exactly are you speaking?
(02:19:14):
Yeah.
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 yourcompany.
You're just a good talker.
(02:19:36):
You're not a good executioner.
The investor expects to turnthe next return anything else is
just stories because that's thevision you created yeah so in
some way it's still your faultyeah now the investor comes.
You don't even like basicbalance sheet but does this even
(02:20:00):
affect internal rangos?
it does employees vestedinterest option.
It does because.
But does this even affectinternal Rangos?
Employees Vested?
Speaker 2 (02:20:05):
interests.
Speaker 5 (02:20:07):
It does, because Everyone always Expect.
These are companies, everyonehas interest, okay.
Speaker 2 (02:20:17):
The higher you realize that, the better.
Anyway, you talked about captable and option Pool, so what
are some of the best practicesfounders manage their cap, table
and option?
Speaker 5 (02:20:34):
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 sweetspots are.
(02:20:56):
People will know, not now, notlater, let's say 10 years down
the line.
They will know, unless now youstart firing people because of
the mistakes you did, but forcap table.
Be very, very, very consciousof the cap table.
Be very, very very.
It will mess you.
Speaker 2 (02:21:16):
And how do you make sure it doesn't mess?
Speaker 5 (02:21:20):
you Begin early With people.
It's better to have a largeroption pool with less dead
investors than a smallinvestment pool yeah with more
dead investors for you to manage?
Uh, the cap table.
(02:21:40):
If someone is coming in, whatdo they bring other than
finances?
Yeah, that's the question.
Yeah.
For someone to convert as a deadinvestor is someone who had
only money, nothing else.
You have a dead investor.
That's why a lot of angels areusually dead investors, most not
(02:22:02):
all.
If you've raised from an angelwho was an entrepreneur, you
have a very, very, very, verygood investor.
This will help you.
Same investors are people.
You might get an investor whois starting out.
He is paranoid of everything.
Speaker 2 (02:22:25):
Including.
Speaker 5 (02:22:28):
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 orsomething which has corporate.
He has come from marketing.
He has come from medtech orsomething which has corporate.
He has come from corporate.
(02:22:48):
People who are from corporateknow budgets.
Even before budgets arerequested, they are very, very
planned.
Then they tell me at this eventsecurity has been lost we need
to hire A new security.
There is a lot ofinconsistencies when you are
(02:23:11):
doing events Than when you areworking in corporate.
I used to hear all theseinconsistencies and I this guy
is stealing from me.
This guy is stealing from me.
How come you paid these guys?
Speaker 2 (02:23:25):
You paid these guys down payment.
Speaker 5 (02:23:28):
They accepted what happened.
What happened?
You don't have time to explainBecause events, people will come
to see what.
People have paid tickets to seemaybe a celeb or maybe someone.
The celeb is not there.
You need to have a backup plan.
The investor wants anexplanation, wants a meeting.
Speaker 2 (02:23:50):
I wanted Davido, now I'm getting Calligraph Jones.
Speaker 5 (02:23:55):
I wanted.
Speaker 2 (02:23:55):
Calligraph Jones.
Now I'm getting these otherguys.
Speaker 5 (02:23:59):
Who you are, danny, I don't know.
Simple boy Simple, boy Simpleboy, I don't know what simple is
.
Speaker 2 (02:24:07):
I don't know what simple is I'm getting the other
lady Kanjo, lady Aye, you know.
So it's always yeah, andactually it happens a lot
because people get sick, peopleget, they can't refuse.
Speaker 5 (02:24:20):
Things happen, yeah, but now investors have left
corporate.
Yeah, they are so rigid.
Things happen, yeah, but nowinvestors have come from
corporate.
Speaker 2 (02:24:24):
Yeah, they are so rigid Very very planned, yeah,
and rigid, yeah.
Speaker 5 (02:24:31):
I had the experience, yeah.
Events.
Yeah.
That's why I usually insist.
Yeah.
Speaker 2 (02:24:38):
Raise from people who are in the same industry, or
close to that industry, or closeto that industry or close to
that.
Speaker 5 (02:24:45):
Yeah, even if it's an indirect relation Raised from
people who are in this almostsame industry.
They understand, they know whenyou have a problem, you're in
MedTech, you have a founder, youhave an investor from tech.
How do you help?
Most viable option is if thetech aspect of the company fails
(02:25:11):
, you have a very, very goodoption.
What happens when the medicineaspect crumbles?
What happens?
That's an issue.
Now, when you're speaking toinvestors, always try it's not
easy also, but always try to getsomeone who is in the same
space as you.
(02:25:32):
It will be easier for you inthe long run Because, remember,
they are investing time horizon.
In 2-3 years You're locked inwith some guys for 2, three
years.
Imagine you're talking.
You've met an investor who ison a 12, the guys who talk a lot
(02:25:55):
when one anxiety attacks.
Now imagine being shouted atNow.
Imagine being shouted at everyday at 7 to 7.30 because of
someone's mistake.
For two straight years You'llstart asking when is this
company going to close?
(02:26:15):
Aye, now the mental healthaspect comes into play Kicks in?
Speaker 2 (02:26:18):
yeah.
Speaker 5 (02:26:19):
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 willfake it, but eventually you give
it.
I have founders, a lot offounders who fake?
Relationships for the money,but now they are like we need to
(02:26:45):
boot out this investor yeah,yeah and I'm like now it will be
costly because you'll have tobuy him out you have someone
very expensive yeah, you havesomeone who who's liquid enough
to buy him out like evil so whatis your take about?
Speaker 2 (02:27:01):
because, also, when you raise funds and you hire
people, some of them give themsome option and then you raise,
maybe series B.
Right yeah, the people who youhire, they don't know how the
process has been, but they'requite talented, they are quite
motivated, they buy in themission and vision of the
company and they think now youhave raised series B, maybe a
(02:27:22):
hundred million, so they expectyou to cash in.
Right, how do you educate thesepeople to really either
persevere more or put in morework and ensure that you build
the value of the company as youbuild the value of the investor
and not feel like they'reworking for the investor?
Speaker 5 (02:27:41):
Yeah, there is a rule in finance corporate finance,
also corporate managementmaximize the value.
This is not human.
Come in.
We maximize the shareholdervalue, maximum shareholder value
.
Once we've done that, the restis ours.
(02:28:01):
The shareholders will takeroughly 60, 70,.
They don't care because thepeople they are talking with,
they have flutes and they havebudget expectations.
There is a portion you mightpass.
They are comfortable You'regetting not always.
Also, don't take it as it's inentirety.
(02:28:23):
You might get investors Notalways.
Also, don't take it as it's inentirety.
You might get investors who aregreedy.
You make a hundred million,they want a hundred million.
Speaker 2 (02:28:33):
One off for every year.
Speaker 5 (02:28:36):
No, not one off.
You've made good returns.
Speaker 2 (02:28:41):
This is dividends or.
Speaker 5 (02:28:43):
Now the payout depends.
You can payout using dividends.
Shareholder withdrawal.
Speaker 2 (02:28:51):
And that means you take back your shares.
Speaker 5 (02:28:55):
You take back the.
Now you are allocating yourselfincome.
Okay, you're getting.
Shares remain the same, buteveryone is given according to
how much they own.
Yeah, there is this cake.
Now you own 20% of this cake.
Speaker 2 (02:29:16):
So if you make another cake from that cake, you
should expect 20% of what youmake Exactly.
Ah, okay.
Speaker 5 (02:29:24):
Now the cake.
Speaker 2 (02:29:25):
So what if I want to eat the?
Speaker 5 (02:29:27):
Yeah, there's.
So your cake still exists.
Speaker 2 (02:29:29):
Yeah, yeah, you made a new cake.
Yeah, it did not exist, butthis 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 (02:29:41):
The founder yeah, as an investor, but as a founder.
Speaker 2 (02:29:44):
It happens.
I always because now whatresults from that, Because
someone will eventually know ah,the cake was eaten.
Someone decided to eat thiscake.
Speaker 5 (02:29:57):
Mostly what I do is I start bringing in elements of
transparency.
Once everything is in the lightpeople give.
I start bringing in elements oftransparency.
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 canknow a thief by the actions, not
(02:30:22):
and I make very, very, verylong announcements Very, very a
lot of technical jargon Coveringup a loss.
So this loss is 100%.
Speaker 2 (02:30:36):
Repeat what you have just said.
You make what?
Speaker 5 (02:30:41):
There are ways.
Speaker 2 (02:30:42):
I won't lie.
You discover there is somethinggoing wrong here.
Speaker 5 (02:30:45):
Yeah, there are ways.
There are people who want to doit, Because there are people
who allege.
Also there are some interestedparties at Twiga who wanted the
kekalon.
Speaker 2 (02:30:59):
But it's alleged.
Speaker 5 (02:31:00):
Alleged.
Yeah, I used the word alleged,let me give a disclaimer at this
point.
Speaker 2 (02:31:03):
Alleged All the views .
Speaker 5 (02:31:06):
It's only allegations .
I know nothing about it.
Speaker 2 (02:31:09):
Now.
From our guests?
They're not.
Speaker 5 (02:31:14):
Are personal.
Speaker 2 (02:31:14):
They are personal.
Speaker 5 (02:31:16):
Those are my personal views, views and opinions.
Yes, nothing more.
Yes.
Speaker 2 (02:31:21):
They are not coming direct from this podcast, or it
was.
Speaker 5 (02:31:26):
Now, what was he saying?
Speaker 2 (02:31:30):
No, you're saying that transparency should be
encouraged.
Speaker 5 (02:31:33):
Now, when you start doing issues like transparency,
you start reminding the founderit's not transparent To notify
the entire board yes, and thenit's okay to cover up loss.
It's not transparent.
We need to notify the entireboard.
Yes, they have started to shift.
And then it's okay to cover uploss.
You need to cover up yourlosses.
You need to cover up how willyou regain that loss.
And then the founder is notthinking that.
(02:31:55):
He's thinking how will I coverthis 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 youlose 100?
(02:32:16):
Million entire.
What will it be?
What happened?
It will cause a lot of interest.
How will you lose all thatmoney?
How?
Because now audits taxshareholders.
What now will come at you?
(02:32:37):
Because now that's the mistakethey usually do.
If you want to eat the cakealone.
Eat a small bunch.
Eat the rest for the others.
Speaker 2 (02:32:49):
No one goes angry.
Speaker 5 (02:32:50):
If someone goes angry , one person goes angry, they
can disrupt the entire, likethere's this case for Banyimadov
.
Banyimadov was like, considereda very, very, very, very shrewd
investor.
Now by the amount of what he did.
It's called more of a Ponzischeme.
You come as an investor, yougive me $2,000, I tell you I am
(02:33:17):
investing.
I fabricate the market.
I'm a masker.
I can lie with statistics, likeliterally in your face, and it
will be evident.
No, no, you know I'm lying, butthe facts are up.
No, no, mathematicians buildfacts.
You know how to skew them orfavor You're getting.
(02:33:39):
Now he did that, had a very,very solid quantitative analyst.
He had a very, very solidquantity, fabricated everything
ABCD, abcd.
Now he went to the publicmarket and started picking
(02:34:00):
investors at $10, $20.
Remember he has $2,000.
$10, $20.
Remember, he has $2,000.
$10, $20.
Maturity $2,000, equal at theend of the year.
Maturity at $10, $20, equalbetween the month.
You give me a $10, at the endof the month I give you the $10
(02:34:22):
interest and I get $2,000.
Repeat, repeat, repeat me a tendollars.
At the end of the end of themonth I give you the ten dollars
interest not to acquire twothousand dollars.
Repeat, repeat, repeat, repeat.
And then, uh, let's say afinancial bubble happens, say
I've lost 50 percent.
So I tell you now, from yourten dollars I have five.
Now, see, it's factually backed.
(02:34:44):
Now that's a loss, but youstill have something you're
getting.
Speaker 2 (02:34:48):
It's not like you lost that money.
Speaker 5 (02:34:50):
Yeah, yeah, the main guy, the one who's running.
Speaker 2 (02:35:00):
So they only get $1,000.
You're all ducks.
Speaker 5 (02:35:11):
So they only get A thousand bucks.
Your ducks Welcome to finance.
Everything is a transaction.
Everything is a transaction.
Speaker 2 (02:35:17):
So, as we conclude this segment, any recommendation
Reading books, you know, aroundinvestment.
As we conclude this segment,any recommendation reading books
around investment.
Speaker 5 (02:35:32):
For finding what I'd recommend.
There's no one good book I'dfind.
Speaker 2 (02:35:37):
Yeah, there are like 10 of them.
Speaker 5 (02:35:43):
For finding.
What I'd recommend is go intoCorporate Finance Institute.
They have a channel that isonline.
Yeah, on YouTube.
Okay, listen to these types ofpodcasts.
Listen to financial podcasts,because the issue with founders
(02:36:03):
is they know the product aspectbut they don't know how to make
money.
Because the issue with foundersis they know the product aspect
but they don't know how to makemoney from the product.
That's the issue.
Listen to what we are talkingabout.
Listen to corporate finance.
Even if you hate math, you hatefinance, but to some point, to
some degree you'll have to do it, because how will you make
(02:36:24):
money from it?
That's the issue.
Yeah.
Go to Corporate FinanceInstitute.
They have the YouTube channel.
Yeah.
Go to LBO Model Tutorial.
Mm-hmm.
Go to Patrick Boyle YouTubechannel.
Yeah.
(02:36:45):
Krasmir Petrov YouTube channel.
Krasmir Petrov YouTube channel.
They will teach you a lot in ayear than a 10-year program will
, because you have the material.
You're looking on the go.
Just get into the lesson ofyour choice.
This is where I am.
(02:37:06):
I'm at valuation.
Watch that valuation.
Only that one video Tomorrow.
At least you have something toargue.
Look at Aswath Damodath yeah,aswath Damodath, yeah.
Look at you YouTube, still onYouTube.
He will teach you everything oncorporate finance, corporate
management, everything,literally everything.
(02:37:28):
He's an assured investor.
He will give you experiences ofwhat to expect in the market
you're getting now.
At least do this one hour a day, you will be good.
Speaker 2 (02:37:47):
So you are saying from the University of YouTube
there exists more content.
Speaker 5 (02:37:52):
No, any paperback, no any Kindle, more relevant
content that you need as afounder, 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'tremember.
Speaker 2 (02:38:10):
No problem, once we meet again, we can always
recommend a few books.
There are people actually whovideo.
Maybe is not their thing,unless they watch Impact Masters
podcast or podcast.
Yeah, yeah yeah, you know, andso on and so forth.
So next time we meet we'll godeeper into different aspects
(02:38:32):
and how to avoid pitfalls, teamdynamics, greediness on both
ends of an investor, foundersand all that we also like to
talk about.
You know, should investments,should you build a house in
Ushago?
Should you put money in thestock exchange?
(02:38:53):
What is this?
Ula Baloo with the forexexchange and people are buying
cars like they're in wash washbusiness, those kind of things.
Is it really if you invest inforex, you'll make money?
All those kind of things.
Is it really, if you invest inForex, you'll make money?
All those kind of things?
Because also, I've realized amajority, especially even black
Americans, hispanic, kenyans,africans when they get money,
(02:39:16):
the investment they makesometimes is not really wise, to
be honest, and it's quite ofhigh risk.
Also, we don't want to investin ourselves.
We want to buy shiny stuff, wewant to live large.
It's a good thing and it's abad thing because we end up not
creating generational wealth andso on.
So there's a discussion that wecan have around that.
Speaker 5 (02:39:37):
Yeah, about wealth.
It's called wealth creation,exactly.
Yeah, we can always haveconversations, yeah so thank you
so much.
Speaker 2 (02:39:44):
Titus Ndeto, are you related to the Ndeto Ndeto?
Speaker 5 (02:39:48):
Nah, I'm not.
No, I'm not, actually, I preferNdeto Ndongo.
Speaker 2 (02:39:52):
Ndeto Ndongo.
Speaker 5 (02:39:53):
Yeah, I'm an academic .
I rarely use my English name.
Speaker 2 (02:39:56):
Ah, okay, yeah, okay, ndeto Ndongo yeah.
Speaker 5 (02:39:59):
Ndeto.
Speaker 2 (02:39:59):
Ndongoon Ndungu.
Speaker 5 (02:40:01):
Not related to Ndeton .
Speaker 2 (02:40:03):
You know the Ndeton I'm talking about?
Yeah, I'm not.
Are you sure you know?
Before we sit down, I alwaysalso do my due diligence.
Speaker 5 (02:40:16):
Okay.
Speaker 2 (02:40:23):
Thank you so much, Ndeton Ndungu.
And it was really quite a good,insightful conversation and
here at Impact Masters and RetroPodcast you always like such
conversation, telling our ownstory, impacting Africa, trying
to share the knowledge andensuring that you're moving in
the right direction.
Until next time, maybe youshould tell guys please
(02:40:44):
subscribe to the channel.
Follow, there's a camera overthere, that you're moving in the
right direction.
Until next time, maybe youshould tell guys please
subscribe to the channel follow.
Speaker 5 (02:40:53):
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 chapterwe'll be doing a lot of finance,
a lot of valuation, a lot offinance, a lot of valuation, a
lot of funding.
Where to get this funding?
Where to get, uh, guys like meto back you on?
Where to get also, guys like atto have to conduct your
(02:41:16):
solution, also for you to getahead of your game on anything
to do with finance, anything todo with valuation, anything to
do with Shreed Investments?
Have a listen, so drop thatlike, drop that follow, share
content.
It will help us a lot then itwill help you.
(02:41:38):
Thanks.
Speaker 2 (02:41:41):
Nice, that's quite interesting.
And yeah, yeah, I mean that hasbeen yeah.
Speaker 1 (02:41:53):
And that's a wrap On today's episode of Impact
Masters.
Thank you for tuning in andsharing this space of growth and
empowerment With us.
Remember every step you takehas the potential to create an
impact.
Keep exploring, keepquestioning, keep implementing
and, most importantly, keepmastering your impact.
Remember to check us out on allplatforms by searching for
(02:42:17):
Impact Masters.
Subscribe, follow and sharewwwimpactmastersio.
See you in the next one.
Follow and sharewwwimpactmastersio.
See you in the next one.
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