What makes entrepreneurs entrepreneurial?

Hello there,

We are very excited to be announcing and sharing with you our inaugural newsletter for The Flip!

You can expect much of the same high-quality content that we’ve published on the podcast – thoughtful analysis, insights and commentary on the entrepreneurs, investors and startups changing the status quo in Africa. 

Each week, you will receive a long(ish)-form article contextually relevant to the current happenings in the ecosystem, as well as a handful of links. The articles are very much informed by the ongoing discussions and sentiment from the continent’s esteemed practitioners, and in some cases may act as the foundation for future episodes of The Flip. 

The newsletter will be sent weekly on Sundays at 12pm SAST/6am EST. It may help to add this email to your contacts to ensure it gets through to you properly each week. We welcome your comments, responses and feedback – please don’t hesitate to hit reply! 

Now, without any further ado… 


What makes entrepreneurs entrepreneurial? And what kind of entrepreneurs do we need right now?

Of all the (practical) content on entrepreneurship, one of my favorite is an academic paper entitled What makes entrepreneurs entrepreneurial? It is a look at the set of principles and characteristics that makes (successful) entrepreneurs “entrepreneurial”.

In short, entrepreneurs leverage “effectual reasoning”, which is the opposite of the managerial-minded “causal or predictive reasoning”. 

While causal thinkers believe that “If I can predict the future, I can control it”, the entrepreneurial effectual thinkers believe that “If I can control the future, I do not need to predict it”.

So why is this important? 

As we weather through the COVID-19 storm, the punditry has been applying causal reasoning to the situation in an effort to predict what the future will look like. “The economy will open up in X time”, or “the future will look like Y”. 

This is a fruitless exercise, not only because who the fuck knows what’s going to happen, but also because this line of questioning and predicting is the opposite of thinking like an entrepreneur. 

Effectual thinking consists of five principles that are instructive for operating in this new environment. 
 

  1. Bird in a Hand Principle – What are your means? Who you are, what you know, and who you know. 
  2. Affordable Loss Principle – Optimize for affordable loss rather than expected returns by deciding what you are willing to lose rather than making decisions based on what you expect to make. 
  3. Lemonade Principle – Turning lemons into lemonade. In most scenarios, surprises and unforeseen outcomes are considered bad. For entrepreneurial thinkers, anything and everything is potentially a surprise that can lead to a valuable opportunity. 
  4. Crazy Quilt Principle – Form partnerships and jointly create the future. 
  5. Pilot in the Plane Principles – Pilots are only in control of the plane. Not the weather or anything else. Worry only about controlling what you can control.

I recently interviewed Alitheia Capital’s Tokunboh Ishmael for an upcoming podcast episode of The Flip. Tokunboh founded her firm in 2007, and her experience at this time is an instructive demonstration of effectual thinking. 

Upon launching Alitheia, Tokunboh set out with the intention to raise a fund by leveraging relationships built during her career. However, the Global Financial Crisis of 2008 derailed her initial plans, forcing her to pivot. 

Rather than fight the uphill battle of fundraising during a downturn, or choosing to wait until the economy picked back up again Tokunboh fortuitously met the folks at Goodwell Investments, who were also looking for a local partner. As she recalls, 

It was a good marriage where they were in the place and could speak the language of the people who wanted to have the impact, and I was in a place where I could speak the language of the people that needed the funding to make that impact. 

And their partnership approach has endured over the 13 years of the firm. Most recently, Alitheia partnered with a South African fund manager, IDF capital, and the two parties jointly raised the Alitheia IDF Identity Fund, a $75 million fund investing in gender-diverse SMEs around the continent.

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Notes from around the ecosystem

I recently put together a centralized resource of innovation challenges, funding initiatives, information and webinars in light of COVID-19. You can check it out here. One initiative of note is Safe Hands Kenya – an impressive collaboration between startups, corporates, investors and other civic groups in Kenya. 

Africa Tech Venture’s Eline Blaauboer wrote an informative and transparent article on their experience fundraising. In short, it takes a really long time to fundraise for early-stage investing in Africa. In ATV’s experience, their initial funding commitment was signed in 2017, contingent upon the fund reaching a “minimum viable” fund size. Based on the length of time it took them to close investors, they won’t be able to reach first close and start deploying capital until this year!

Perhaps this experience underscores the necessity of innovative and alternative fundraising models now more than ever. To that end, what does a model like AngelList’s Rolling Venture Fund look like for the African ecosystem?

While COVID-19 will undoubtedly accelerate the rate of change of certain digital trends that were already happening, I remain bearish on big corporates’ ability to keep up. A recent case study from South Africa – 

  • March 5 – the first case of COVID-19 in South Africa, at the time that western countries were hitting the upslope of their exponential growth charts. 
  • March 18 – my gym, Planet Fitness, sends this email saying “Don’t let the coronavirus stop your workout”
  • March 23 – President Cyril Ramaphosa announces a 21-day nationwide lockdown, to commence on March 27
  • April 15 – Planet Fitness announces that online classes have arrived

Move fast and break things!

A week before the lockdown, I was fortunate enough to be asked to host a fireside chat with Gil Sperling, the Co-founder and CEO of Johannesburg-based proptech startup Flow, as part of their new product launch event. We talked about building technology to enhance – and not disrupt their prospective customers’ existing workflows, the challenges of and opportunities for double-sided marketplaces, and more. Check it out!

Thanks for reading, see you next week!

Justin

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