Next, Final Frontier: Lessons Learned Investing in West & South Africa

During my time at global early stage seed fund, 500 Startups, I’ve led deals in agriculture marketplaces in Indonesia (iGrow), global workflow management software from Brazil (Pipefy), and even education or sewing marketplaces in “emerging markets” like the MidWest of the United States.
500 Startups has a culture of looking ahead to emerging markets, so I was encouraged to follow my investment thesis that there is massive opportunity in thinking ahead.
There were many haters, especially when I became interested in West Africa:

“These markets are too early.” 


There’s no downstream capital for these companies.”

Initially, I was worried about whether I would be stranding these companies or whether it was too early for 500 Startups.

Over the last eight months, we have invested in four companies in South and West Africa through our accelerator program: Sweepsouth, (B14),  KudoBuzz (B14), mVendr (B16),  Podozi (B16), and just recently accepted SureGifts in Batch 18, one of the fastest growing loyalty technology companies in Nigeria and Kenya.

This piece is about what I learned investing in these markets, and why I think all serious investors should learn and be aware about what’s happening on the African continent.

Geeks On A Plane 2016 will be in Africa, so there is an amazing opportunity coming in March.

Here’s what I learned.

1) Why go to West or East or South Africa in the first place? The Future is African. 

This stat that blew my mind: “Sub-Saharan Africa will have a population boom from today’s 900 million people to 2.4 billion by 2050, with almost half of the world’s children being on the continent by 2100.”

There are 54 countries in Africa with unique individual cultures that are all geared for massive economic growth – 50% of the people on the continent are 19 or younger.

I read this right before my trip, and my mind was blown. There were talks of startups like Paga, ACE, Jobberman, Jumia, and increased funding:

“$400 million in VC funding for African startups in 2014. More than a billion dollars will be invested in Africa by 2018.”

Trends in “M-commerce”, B2B for growing SMEs, fintech, big data, and more have been covered in great pieces like this one from I-Dev International. But, you have to go. There’s nothing you can read in a book that will prepare you for feeling the energy and innovation building in the ecosystem, and we international tech investors have a lot to learn.

2) Mentorship is more rare than money, and foreign investors and entrepreneurs can add immense value.

Meltwater Entrepreneurial School of Technology – a two-year entrepreneurship funded school that finds and invests in entrepreneurs from Nigeria, Ghana, and Kenya invited me to visit after I made an accelerator investment in a graduate company called KudoBuzz, a SaaS tool for e-commerce companies.

I was blown away during my time giving a guest lecture and spending time with the entrepreneurs at MEST. What also blew me away was that Jorn, CEO and founder of multi-national SaaA company Meltwater,  spends time every single quarter mentoring young entrepreneurs.

It’s his time, not just the considerable capital Meltwater has invested, that makes MEST an amazing addition to the ecosystem.

At 500, the main areas we were able to help the startups were around understanding the fundraising process.

From our South African founder of Sweepsouth, Aisha Pandoor, called Sweepsouth’s experience in San Francisco in the accelerator a “game-changer for SweepSouth in the level of mentors and the network we’ve had exposure to, both of which would previously have been quite far out of reach for a startup based on the other side of the world.

As one of the first services marketplaces in Africa, it was hard to find local founders and mentors with enough experience to provide meaningful advice, and this is a conundrum for other disruptive African startups.”

3) The challenges are real, but they can be overcome (with time).

Last batch, I led our first accelerator investment in a Nigeria-based company called Podozi, a beauty e-commerce company, going after the exciting African women market who spends five times more on beauty and hair than other ethnic groups and will continue to grow.They had graduated from, a Nairobi-based incubator.

My thesis around Podozi was around my conviction about the growing and interesting beauty market in Nigeria and across the continent, and in the founders, Teniola and Wale. Building an e-commerce beauty brand like Sephora will be challenging, but someone will win in this market. I believe Teni and Wale have the conviction and experience to win. However, their journey will be full of challenges.

Not only were there challenges with logistics, basic office management, and recruiting – the dropping value of Nigerian Naira made tracking metrics complicated and disheartening for them.

Then, there was the bleak downstream capital situation. Clayton Bryan, in the SF office, helped me connect Wale to local angels, as well as explore more downstream capital sources for African-based companies in the European VC scene in London, Dublin, and other hubs.

There are super early stage programs like MEST, Savannah Fund and then growth funds, but very few options in between, which is why Podozi and other startups must focus on revenue and growth until they reach the stage they can access capital in their markets or foreign investors.

Four months after making the bet on this team, I watched Teniola (TeniBeauty to friends) pitch at Demo Day stage with confidence.


3) Focus on founders – experienced founders are beginning to emerge

Since downstream capital is challenging to close in the ecosystem, so it makes sense to filter for scrappy founders and innovative, clever business models who can be more cashflow generating if they haven’t raised locally.

Other accelerators are beginning to take notice. While I was at MEST, I also had the chance to coach three Ghanaian and Nigerian women, all-technical team, building a social app for African hair calledTress. Nine months later, they were accepted into the YC fellowship program, and today they are raising a seed round to grow faster.

I’m very excited about the team that is joining me in San Francisco this coming week for the launch of Batch 18 – SureGifts. The founders are ex-Jumia (one of most successful e-commerce brands out of Rocket Internet) early team members and have already raised capital. They have already proven they can expand out of their local market and have scaled from Nigeria to Kenya.

These are the types of founders that we are getting at 500 Startups now, since we have been investing, learning, and building relationships and reputation early.

4) Community is key.

Many programs and accelerators in emerging markets are early and still figuring out how to provide value in their early ecosystems.

Many “angel investors” aren’t used to investing in technology startups and come from real estate or private equity, not operating backgrounds, which can create problems between the local investors and entrepreneurs.  It’s another example where money is less valuable than mentors and experience.

Our role is to support and identify  the best credible and local investors to co-invest with, as well as to provide perspective and mentorship to entrepreneurs on the ground. Even if your fund does not support international investments, you can begin to make the relationships.

Distrust between local investors and entrepreneurs can be complicated, but as foreign investors we can provide perspective about the importance of fair practices and terms for early stage technology investments, as well as encourage communities of entrepreneurs to share information, help each other, and build sustainable communities.

Trust is hard to build, but after my experiences with MEST, She Leads Africa, and other great organizations, I am confident these communities can become sustainable.

 5)  Just go and learn for yourself.

If you’re an early stage investor and have any plans to be a part of the emerging economies globally, you’re missing out if you continue to ignore (or overlook) the African markets – the only color we care about as investors is green.

Foreign investors can provide a lot of value through mentorship and spending time helping entrepreneurs who are solving problems in their communities.

I urge other investors to pay attention to what is happening on the African continent, from Lagos and Accra to Nairobi to Johannesburg.

Come join us at GOAP and find out for yourself.

Additional Resources:

500 Startups Demo Day: Confessions From Batch 16 Founders

The green room at 500 Startups Demo Day is more like a pre-game locker room.

Startup founders with intense expressions pace back and forth while others sit alone, their heads slightly bowed as they focus like a laser on the next two minutes.

Clothing is adjusted, hair is combed. This is the culmination of 3+ months of startup pitch prep.

A boisterous group of founders crowds around a monitor blaring a live feed of the proceedings in the auditorium next door. There’s a tournament vibe in the air, but each participant will tell you that they aren’t competing with each other.

They’re competing against themselves.

Among the general public, people are more afraid of public speaking than they are of death.

Startup founders, however, are a different breed of cat; out of twenty-two I spoke with, only two admitted to being nervous immediately before giving their pitch. Then again, “act as if” is the entrepreneur’s credo.

One man delivers a sincere pitch about his startup to a window overlooking a parking lot, complete with hand gestures and pauses. Another founder walks in small circles, occasionally stopping to bounce to the music streaming through his earbuds. A woman with a thousand-yard stare stands in a disused kitchen area and breathes deeply. High fives, daps and hugs are exchanged.

On the other side of the wall, in a room packed to capacity with investors, Silicon Valley notables, media, friends and family, each founder will have 120 seconds on stage to pitch their idea — to show why theirs is a worthy investment. Two minutes to persuade a room full of strangers that they’ve created something unique and valuable. Two minutes to explain what they’ve been doing with their lives.

Andrea Barrica & Kate Seledets
Startup Pitch Coach Andrea Barrica & Demo Day Producer Kate Seledets

Founders from around the world, but “Silicon Valley style” pitch

Batch 16 is 500’s largest Accelerator group ever, but its participants aren’t representative of Silicon Valley; they’re much more diverse. Of 51 companies, 25% are founded by women, 14% by African-Americans, and 8% by Latinos. International startups comprise 37% of the total.

Before taking the stage, each founder stands still long enough for Batch 16 staffers to attach wireless mics and transmitters. Next, the door to the auditorium swings open, classic rock power chords rush into the green room, and they’re off. Moments later, they rematerialize on the monitor in a corner, and everyone who’s not rehearsing their pitch gathers around to watch.

When they return, they’ll be greeted with deafening cheers and applause from their team members and other Batch 16 participants. (Due to the noise, I abandon plans to record a podcast and pivot to writing a blog post featuring interviews with several Demo Day participants.)

What It’s Like To Pitch At 500 Startups Demo Day

Jay Lipman, Ethic
Jay Lipman, Ethic

Ethic: Jay Lipman, Founder

Ethic is a sustainable asset manager, so we’re bringing sustainable investments to the mainstream. We were one of the first companies to start working on our pitch. We sat down with [500 Startups Entrepreneur-in-Residence and pitch coach] Andrea Barrica as soon as we could. She’s a godsend, and everyone who can work with her should. We spent about two months working on it, about once every two weeks for the first month, and then once a week for the last month.

Andrea got us very ready. She made sure that we had 10 practice pitches, 3 preview days. We were ready because Andrea got us ready.

Practice, read Talk Like TED, which is an amazing book, watch Obama talk, work with Andrea as much as you can, and just relax. It’s got to be natural and enthusiastic.

I just stared off into the abyss and hoped for the best. — Jay Lipman, Ethic.

Phillip Akhzar, Arka
Phillip Akhzar, Arka

Arka: Phillip Akhzar, Founder

We’re a pain-free way for companies to source packaging online. We started prepping our pitch probably too late, much later than most.

500 does a really great job on making sure that you’re prepared months in advance, having at least a day a week dedicated with mentors being there to support you. I held it off probably until three weeks before the day, and then from there just made it my Number One priority.

You need to know what you’re talking about in the sense that you go and study what it is that you want your company to do for as long as possible, but there’s a difference between executing and strategizing. When it comes down to it, the most important thing about your company are its users. My advice: start yesterday, and talk to your users as quickly as possible that doesn’t just mean, grow, grow, and make money. You need as much feedback as possible, so don’t think you know what your users need; they’ll tell you.

How’d I sleep last night? Not well. (laughs)  — James Norman, Pilotly

James Norman, Pilotly
Right: James Norman, Pilotly


Pilotly: James Norman, Founder

We enable people to make better decisions around their video through viewer data. We spent probably the past month on the pitch — it takes time to hone a message into two minutes and make sure that you not only explain how great your product is, but how big the opportunity is.

Normally, I black out while I’m pitching, because I’m in the zone, I’m feeling the crowd, and that’s where I’m at. Today, I somehow was able to impact the crowd and still be conscious, so I could be a little bit more impulsive but still direct with my movements, which pleased me.

On stage, I look at everybody. I try to catch people’s eye in the crowd, find people who are in between looking their phone and looking up at me, and speaking loudly so I can grab their attention.

I think that the best outcome is people come and join our seed round and help us achieve the change that we’re looking to make in entertainment.

Ticktate: Brian Canti, CEO, co-founder

We worked on it for the 16 weeks that we were in the 500 Startups program, but we really started to ramp up in the last three weeks; really getting down the pitch, cleaning up the jokes and making sure all the deliveries and punch lines were on point.

It came down to the fact that my co-founder and I felt that as CEO, I should be presenting. At first, I wasn’t that excited about it, but I got over my fear of speaking in public and really enjoyed myself. If I’m in a room with 20 people, I can hold the room and tell jokes. But there’s something about being the center of attention on stage. If I’m not prepared, I don’t like it, but in this case, I was so well prepared by the 500 folks that I really enjoyed it.

People spend a year plus working on these companies before joining these batches, so don’t be nervous about giving a two-minute speech about something you’ve spent years of your life on.

Rize Founder Justin Howell
Rize Co-founder Justin Howell

Rize: Justin Howell, CEO, cofounder

We are an automated savings platform built around behavioral design aimed for millenials, people in their 20s.

We started working on the demo probably about halfway through the batch and spent probably 20 – 30 hours over the last month and a half. I have a love/hate relationship with public speaking; sometimes I really enjoy it and being up on stage, but every time, there’s always those butterflies. It’s actually easier up there on stage with the lights in your eyes, because you can’t see people all that well.

We’ve all seen each others’ pitches so often that we know them by heart, and we’re all rooting for each other. We started out with a pitch that was pretty rough and I think we’ve come out with one that we’re really proud of through the combination of help from the 500 team and putting in the practice.

I’d like to come out with making some connections with potential investors.

BottlesTonight: John Rushworth, CEO

We’ve been in business for two years. We’re based in San Francisco, although we operate in 12 cities with 200 nightclubs using BottlesTonight to fill their unsold table inventory.

Two months in, we began startup pitching on a weekly basis. The last six weeks, it’s gone from once a week to twice a week, and in the last few weeks, every single day. The 500 program has really helped me get the pitch where it needed to be for today.

I was more nervous for Preview Day and our prior pitch sessions just amongst our batch. Today was just all excitement, and I think part of that is the trade show floor outside with all the companies, investors coming up to us being genuinely enthusiastic about what we’re doing. Everyone here has great camaraderie, everyone’s rooting for one another. It feels like playing sports with your friends.

Scott Lee, FoxType
Scott Lee, FoxType

FoxType: Scott Lee, CEO

If I’m ever not nervous, that’s when I’m going to do poorly. The nervous energy gets you to an optimum state of stress where you can think quickly and react to the audience.

Float: Max Klein, CEO, co-founder

I’m the CEO, so I’m usually unlucky enough to be called on stage. As you go up you essentially black out for 2 to 3 minutes, then you walk off stage and ask yourself what the hell happened.

I think I did OK. I’m hoping to impress some people, generate some buzz and have a good time with my team. I started working on today’s demo about two to three weeks ago. The ability to distill a message into two minutes is an extremely difficult thing, but it definitely helps with solidifying the core value proposition.

Worthix: Gui Cerqueira, CEO

Worthix is a software that combines econometric algorithms and cognitive systems to uncover what’s behind customer decisions. Basically, we explain why people buy.

I’m the guy that usually talks. The geeks, they don’t like to talk that much. — Gui Cerqueira, CEO Worthix

We always have that feeling of butterflies in your stomach before a presentation as important as Demo Day because it’s something that happens once in a lifetime as an entrepreneur. Basically, I try to concentrate, with very strong breathing before, but the problem is, they called me sooner than was expected. There were three more companies before me, but somehow it was good because I wasn’t expecting it to be my time to go on the stage.

Bond with your batch mates as soon as possible. A lot of entrepreneurs when they consider joining 500, they think about the opportunity to meet investors, but once you’re in the program, you realize that your batch mates are the strongest resource you have.

Next time, see the action for yourself. Sign up in advance for Batch 17 Demo Day here.

Zero to Million Dollar Run Rate — A Story of Growth & Hustle ft. Avanoo

Avanoo is a 500 Startups Batch 12 company that went from being a zero dollar business to hitting a million dollar run rate by the time they got to Demo Day this past May.

Prosper Nwankpa AvanooI first met Prosper and Daniel back at Founders’ Weekend in Vegas, and I’ll be honest — I was a tiny bit skeptical of these earnest young founders and their plan to build a business off of 3-minute self development videos.

But that’s exactly what they’ve done, with clients like Toyota, KPMG and Kaiser Permanente, among others of similar gargantuan stature.

Today’s growth case with Avanoo’s Prosper Nwankpa looks at:

  • how Avanoo went from a 3% email open rate to 60%
  • their biggest time waster for building out sales teams
  • their early strategic mistake that almost cost them their business
  • and how they went from zero dollars in revenue to a million dollar run rate in 10 months

Zero to a million. Give us the summary.

Avanoo logoWe partner with the world’s best experts in human potential — New York times bestsellers, renowned corporate speakers and others — and we work with them to create 3 minute a day, daily programs that help people unlock their potential and improve their performance in the workplace.

Back in August 2014, we had zero dollars in revenue. In April 2015, we did $50,000 in revenue. In May, we hit $80,0000 — our million dollar run rate.

When we joined 500’s Batch 12, we were still messing around with consumer and doing B2B as a trial, thinking about how to crack into the corporate training space.

When we started working with the Distro team, it became very clearly that we needed to focus on enterprise in order to scale.

So strategic guidance from the Distro team — aka Distro Real Talk — moved you to B2B, and towards that million dollar run rate.

Not only that but Distro also helped us to focus on a more systematic way to bring clients in and convert them to paid product.

Dominic, aka DistroDom, was instrumental in helping us figure out how to get leads, to turn cold leads into warm leads. 

How did you turn those cold leads into sales?

We experimented in a ton of things: advertising on LinkedIn and Facebook, social media outreach through Twitter.

In the end what ended up working well was finding people in our target market through LinkedIn (looking at positions and companies we were interested in). We would then cold-email them and try to get them interested in Avanoo.

Early on, it was a pain in the butt because our emails were all going to spam or not being received. Even when they did go through, we didn’t have good subject lines and so those emails didn’t get opened.

Eventually, after a lot of experimentation and a few key fixes, we went from an open rate of 3% to over 60%.

We experimented a lot with where we got our leads. We started out with because it was super cheap, but the emails were so crappy, and that’s how we got the 3% open rates. Heads up for anyone who’s looking for a bunch of crappy leads 🙂

Then we had to figure out how else to get leads. At first it was like, these are email addresses, why wouldn’t they work? Dom and Matt helped us to a lot here, to understand that just having a bunch of email addresses isn’t enough.

So we tried another source of emails — finding people randomly on the Internet, visiting the company’s website, using our gut to decide who the key decision makers were, doing whatever we could to figure out their contact info, and then cold-email. That worked a little better.

But it was when we got into LinkedIn that we discovered the gold mine.

We saw the open rates go above 60% when we started using LinkedIn for sales sourcing.

Then we layered Proleads on top of it, and that got our response rates up as well.

It’s a lot of grunt work (more on this below).

What were some things that you were mistaken about, growth-wise, in the beginning?

1. Consumer vs enterprise

I thought our big bet was going to be in consumer because we had started the subscription model and it was mildly successful early on. We had some early traction there, and I thought hey if we can just push it a bit more, it can scale.

But when we investigated, we realized that growing a consumer base wasn’t going to happen very quickly and/or we were going to have to spend a LOT of money to get it to happen. 

Realizing that we didn’t have a lot of money to spend on marketing, we decided to focus on growth we can achieve for free, or with a lot of grunt work.

2. Grunt work

My second mistake was thinking we weren’t going to have to do a lot of grunt work 🙂 We thought, “I can just write a script to farm a bunch of emails!”

And I actually did this!

I got 3 million emails. And then I thought well now I have 3 million emails, all I have to do is email them and badabing badaboom.

We were wrong about that one too.

Anything you can do that easily, a lot of other people can do too. It would be overdone, and value-less — impossible for it to make money. 

3. Enable domain keys

After we started using LinkedIn for email sourcing, we were able to get a 30% open rate.

But Dominic (aka DistroDom) kept telling us, “Dude, you can definitely get over 50% because I’ve gotten over 60.”

I was thinking, “In what WORLD are you getting over 60% open rates??”

It turns out we had to enable domain keys. Dom telling us, “Dude, I know you can do it!” and helping us figure out how was the key to this.

4. One magic bullet

It’s never one magic bullet that does it.

We learned the hard way that finding salespeople is not easy.

We figured once we have the leads, we can just hire a bunch of salespeople, and close the deals. We found some sales people, they could talk a good game, and had experience in other sales, but when it came to enterprise, it was worlds harder to close.

There’s a certain level of polish + passion + knowledge of industry + knowledge of product + timing + persuasion that is required to get the deal made. Not many people have this mix, and that was a hard lesson for us too.

What have you done about your sales problem?

My cofounder has been selling, haha.

And we’ve found one other salesperson who’s been helping him out. And we’ve leveraged everything else we can to free up Daniel’s time and make it happen.

We’ve also optimized the hell out of the process to make it easier for the salesperson to succeed.

As a success metric, we used to get to scheduling the demo on the 3rd call, but now we do them on the 1st call.

A huge factor is that we’ve gotten really good at being able to tell up front who’s going to be a good client, who’s ready to buy and then getting them into it.

Now we know our sales process works, and we just have to put enough firepower into it.

What advice would you give founders just starting out? Just starting out with growth?

We really paid attention to our customers to try to understand what they wanted, “listening between the lines” to understand what they really need. That helped us a lot in our growth process, to understand not just what they say they want but what they’re DEALING WITH.

If you think about who the user is, what problems they’re dealing with, this became really clear to us during 500 through all of the talks and workshops.

Understanding the customer is more important than building the product. Their situation will inform everything about what you do.

Don’t be afraid to blow things up! 🙂 hehe. Sometimes you need to blow things up and do something else, other times you need to keep it going.

What were your ANTI-time wasters?

Spending time with founders in 500 was more than worth it. There’s a lot of synergy, and people are really helpful in terms of making intros. I see it happening now, when most of us aren’t even that big yet. Imagine that those friendships remain this tight and we actually go places and grow much bigger networks.

500 pitch prep was very useful as well (shout-out Andrea Barrica). After Demo Day, a few of us entered a pitch competition, and that was just funny.

It was a world of difference to see the 500 pitches versus everyone else. We won all places — 1st, 2nd, and 3rd place.

What’s your favorite thing about the Accelerator?

We came to 500 for funding, and this is still reason number one just because it was so easy to raise funding and not have to waste months and months chasing money.

The second thing… would have to be Dom. It’s a hard pick. He’s a really close second to the money 🙂

Andrea helped so much as well. She understands the kinds of problems that startups deal with, and understands how to help you get some perspective.

We raised 3.3M total from very respected VCs in the Valley in SAAS and B2B. New money was about 3M. We did that in record time, valuation is strong at $15M premoney. We feel really fortunate.

What’s next for us is how to crack the content marketing conundrum. It’s a long investment that will eventually pay off for us. We feel like it’s a really big opportunity because we have nothing but really amazing content.

What are you most excited about coming up for Avanoo?

 For me personally, I’m really excited about what we’re building because we have a real chance at changing the world in a meaningful way. 🙂

There’s so much hurt. Why do people ever get fired? Why do people ever divorce? Why do people not know how to raise their kids? There is so much potential not tapped.

What we found at Avanoo, is that the potential is all there within each of us. It’s simply about finding it and learning how to deploy it.

That’s our mission and that’s what I’m always excited about coming up — enabling people to become superstars in all areas of their lives.



  • Customer Success Manager
  • Account exec

More info on Avanoo jobs here.

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