This story was written on the 10th of December in 2020 and originally appeared on Fari Mudzingwa's blog on Medium…

Earlier this year, I got into talks with the founder of an early-stage fashion startup. The fashion industry fascinates me and I believe it’s one of the ways in which Africa can export its culture abroad whilst gaining monetary value. Fair-trade methinks…

Anyway, the early-stage startup (which I’ll refer to as Startup X from now) is an Afrocentric clothing brand. I had grand visions of myself being an angel within a business that would impact the lives of many one day.

Beyond my fascination with fashion and making an impact on the continent I had no misgivings about the task at hand. Venture funding in Zimbabwe & Africa generally isn’t exactly a common occurrence. Startups have a challenging time financing, especially in the early stage where they cannot present enough collateral to banks to get loans. Investing in a startup was (and still is) therefore one of the things on my bucket list and after identifying Startup X, I got in touch with the owner and we kicked things off.

From the onset there were complications. I couldn’t meet with the founder in person because 1) meeting people in person was pretty hard — as you may have noticed there is a pandemic and 2) we were in different countries.

We started off our talks where I tried to understand if the founder was interested in taking investment, to begin with, and if Startup X was actually ready to take investment.

We had to determine how much investment they needed and whether I would be getting ROI as equity or as an amount of money (essentially a loan). I preferred equity because I was in it for the long term and that’s where we stumbled onto our first hurdle. Because the Founder wasn’t actively seeking investment (and had been randomly approached by an investor), they had to start educating themselves on how equity works and place a valuation on their business.

Startup X is a 3 man team, but really the founder was working as the accountant, social media manager, designer and a bunch of other roles. The 2 other helpers involved were not permanent employees but contract workers who occasionally helped make clothes when demand was high.

We got in touch a week later and Startup X’s founder presented what they would use the investment for and we then came upon the next stumbling block — VALUATION. Because there isn’t much of an VC culture in the region, the founder had no idea how to approach the issue of valuation. To be fair, I didn’t either. Classic case of the blind leading the blind I guess. We lost weeks and this ultimately became the downfall of our deal. With a full-time job, studies, adding this deal and legal process that would come following any agreement — the founder became tentative and withdrew citing they were overwhelmed.

It’s been 6 months since our initial contact and Startup X continues to grow — well at least as far as I can tell — and I hope we can one day work together still…

Whilst the deal didn’t pan out as I had hoped, there were a few lessons I took from that experience regarding dealing with early-stage startups in the region;

  1. Many startups are 1–3 man teams in the early stage which makes working with them requiring patience.

  2. The biggest hurdle you’ll face is on the legal side of things. Most early-stage startups have no legal representation as that is i) a cost they can’t afford or ii) they don’t know where to get affordable legal advice and representation. I’ve heard LawBasket is great at this (but I’ve never used it).

  3. Early-stage startups are less about the business idea and existing systems and more about the founder — the more we communicated the more it felt like I was investing in the founder and not necessarily the business. If the founder is reliable, that exponentially increases the chances of them succeeding if and once they get funding. I enjoyed working with this founder particularly because they were going to soldier on with or without my funding.

  4. When it comes to investing in early-stage startups, know there are no industry standards and many times no precedence. The canvas is blank and depending on you, that’s either great news or a catastrophe.