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How Giraffe Played The VC Game (And Won Funding)

Local start-up Giraffe has accomplished what many entrepreneurs would consider impossible: Not only did it win the Seedstars World’s Best Global Startup Award, it has also secured funding from Silicon Valley VC firm Omidyar Network. Here’s how the founders have managed it.

GG van Rooyen

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Vital Stats

  • Players: Anish Shivdasani and Shafin Anwarsha
  • Company: Giraffe
  • Established: 2015
  • Background: Giraffe is a fully-automated mobile recruitment agency service that enables businesses to recruit medium-skilled workers quickly and affordably.
  • Visit: giraffe.co.za

Most start-ups would kill for the sort of trajectory Giraffe has enjoyed over the last 18 months. Since launching early in 2015, the company has enjoyed solid growth and traction, received some great PR, walked away with an international award and managed to secure funding from a Silicon Valley VC firm.

This is all incredibly impressive, and there’s no doubt that most start-ups would love to emulate Giraffe’s success. So how have company founders Anish Shivdasani and Shafin Anwarsha managed to get the whole world talking about Giraffe? Here’s their advice on attracting VCs to your start-up.

Related: Giraffe Sticks Its Neck Out For Job Seekers

Solve a real problem

“We looked at the South African landscape and identified unemployment as a real problem. Then we asked ourselves how we could use technology to address and remedy the problem in the short term, if not solve it,” says Anish Shivdasani.

“We did this for two reasons: Firstly, we felt that there was a certain obligation to try and solve a real problem that the country was dealing with. Secondly, we realised that by looking at an emerging-market problem, it was not something that Silicon Valley start-ups would be looking at. We wouldn’t be competing with large and well-funded companies.”

So what does Giraffe do? Essentially, it allows jobseekers to upload a CV to the company’s mobi site for free. When employers need to hire, they simply submit a staff request at www.giraffe.co.za and algorithms sort through the thousands of CVs in the database and automatically identify, contact and schedule interviews with relevant candidates.

“We wanted to make the hiring process as easy and hassle-free as possible, both for employers and jobseekers. This meant coming up with an innovative solution. We created a system that allowed a CV to be completed quickly, but that didn’t require a lot of text. The system navigates a jobseeker through various options, ascertaining his or her skills and experience. So you don’t need to deal with hard-to-understand text,” says Shivdasani.

Lesson: Come up with a truly innovative product or service, and you’ll find that funding isn’t nearly as hard to come by as people often say. Build a solid company that addresses a real problem, and funding will find its way to you. 

Bootstrap as much as possible

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Unless you’re a hot Silicon Valley start-up with unicorn potential, you’re unlikely to attract funding until you’ve shown some traction.

Shivdasani and Anwarsha didn’t even think about funding during the early days of Giraffe. “We were focused on getting the platform and the business going,” says Shivdasani. “We had put our own money into the business and managed to give ourselves 12 months of runway. For that period, we didn’t give any thought to VCs and funding.”

“We also found that VCs will usually be reluctant to invest if you haven’t bootstrapped for a while,” adds Anwarsha. “They want to see that your company has some traction, and they want to see that you’re invested — that you’ve put your own money into the business and that you are committed to making it work.”

Lesson: Bootstrapping your business is a good idea. The best way to build a sustainable company is to spend as little money as possible up-front and get cashflow-positive as quickly as possible. Depending on funding for survival is risky. What if the money falls through? Create a business that can sustain itself. Rely on funding only for scaling.

Related: South African Venture Capital Company Launches To Help Local Start-Ups Take Off, Globally

Let the money come to you

“While we bootstrapped early on, we also met with investors. These were mostly people we had been put in contact with via our own personal networks,” says Shivdasani. “Importantly, we never asked for money. In fact, to this day, we haven’t asked for money. We simply introduced ourselves to investors and placed Giraffe on their radar.”

By introducing potential funders to the company, but not asking for money, the founders of Giraffe let the company’s performance speak for itself.

“We simply stated our intentions when we met with investors. When we saw them again six or twelve months later, we could tell them that we had followed through on our plans. We had attained some real traction, which made us worth investing in,” says Anwarsha.

Lesson: It is a stark reality of the start-up scene that the companies without much of a need for funding are usually the companies that attract it. This is hardly surprising. Investors want to fund companies with growth potential, not start-ups struggling for survival. So, focusing too much on attracting investment can be counter-productive. Instead, get the fundamentals right. Build a sustainable business. If you do that, the money will eventually come to you.

Don’t underestimate the value of PR

“While working together in the boardroom, I received an email from SeedStars to take part in the South African leg of its global start-up competition,” recalls Anwarsha.

“Anish told me to forget about the mail and get back to work. We were very careful not to be distracted from our primary goal of building the company, but I was keen to give it a try. Anish said it was okay, but there was one condition: Make sure you win.” Anwarsha did win, and it had a profound and immediate impact on the company.

“Until that moment, we had underestimated the impact that good PR could have,” says Shivdasani. “I was interviewed by John Robbie on 702 for a few minutes. Suddenly our servers were being overrun with new jobseekers and employers. It made us realise that entering things like start-up competitions is a good idea because of the PR it can generate.”

Lesson: Marketing can be useful, but nothing compares to great PR when trying to introduce your start-up to the world. Winning a start-up competition — of which there are no shortage these days — is a good way to do it. Another is to contact media houses and pitch your story. It’s important, though, to focus on the problem you are solving. Journalists are particularly interested in companies that are either innovative, or working at solving social issues.

Don’t just take the money

venture-capital-advice

It’s very hard to say no to VC money, but before you grab anyone’s cash, it’s worth taking a moment to consider the long-term implications.

“It’s important to get on with the people who will be investing in your company. You need to be able to work with them. We were approached by another investor as well, but we ended up going with Omidyar Network — who had approached us after we won the local SeedStars event — because the firm was asking the right questions. They grilled us hard, but we realised that as an impact investor, they could bring value to the business,” says Anwarsha.

Giraffe has also been careful in how much investment it has actually accepted.

“After winning the local SeedStars competition, I travelled to Switzerland to represent Giraffe in the global event,” says Anwarsha. “To my complete surprise, I won. It was a surreal experience.”

The prize came with a maximum investment from SeedStars of $500 000, but Giraffe was reluctant to take it.“We had already closed a round of funding and had enough runway for at least 18 months,” says Shivdasani.

Lesson: Equity in a start-up can be cheap, and many founders have kicked themselves for giving away too much too soon. That’s why it’s important to keep operating with that bootstrapping mentality, even if you’ve received some investment. You want money to last as long as possible. The less money you need, after all, the less of your company you need to give away.

Related: Is Your Business Fundable? Venture Capitalist Clive Butkow’s Shares His Priceless Insights

Take note

If no one is willing to invest in your idea, you should take another careful look at it. Focus on solving a real problem and the money will usually follow.

 

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

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Financing That Backs Entrepreneurs

The SME landscape is fast and flexible. It requires financing that understands how entrepreneurial businesses operate. Through its unique processes and assessments, Spartan’s finance solutions are geared to do just that.

Spartan

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It takes an entrepreneur to know entrepreneurs, which is why Kumaran Padayachee and his team at Spartan are dedicated to financially backing an often-underserviced sector: SMEs.

“We’re fast, we’re flexible, and we’re understanding,” says Kumaran. “Every single person who works here is SME-centric. We hire for fit, looking for empathy and alignment in every position. All of our processes and assessments are done with empathy and understanding towards SMEs.”

Becoming funding ready

Thanks to these systems, processes and the team’s unique way of assessing SMEs, Spartan typically grants finance within seven days, although the fastest approval has been six hours, with the longest 15 days.

Related: Alternative Finance – Filling The Gap

“How quickly we can approve finance is determined by how prepared the business owner is,” explains Kumaran.

“Do they have all their basic documentation ready? These include financials, management accounts, debtors age analysis and creditors age analysis. From a working capital context, this information makes it easy to assess the health of the business. Every business owner and financial director should be on top of these figures.”

Finding a funding fit

Not every business needs funding. Some can grow organically and draw on their own cash reserves. Others choose an equity route.

Spartan is a debt funder. However, even as a debt funder, the team’s aim is to back entrepreneurs and help them grow their businesses. They evaluate what the finance will be used for, and if the return is greater than the repayments.

“There are numerous ways that finance can be applied incorrectly by SMEs,” says Kumaran. “One of the first flags we look for is debtors age. If the industry norm is payment in 30 days, but a business is typically paid by its clients in 60 or 120 days, then we know there is something wrong with their internal processes. Either the company is too shy to be assertive with clients, or it lacks the capacity or capability to invoice clients and collect cash efficiently. Either way, the result is a shortage of cash.

“Business owners in this situation apply for a loan in order to be able to pay the bills, when they should be reviewing their own business, pulling one or two levers, and improving their cash flows.

“A customer project or contract is an example of an expansionary and positive need for finance. These cases are ideally suited to bridging finance. The problem is that there’s a lead time gap. You need to start the project, spend cash to hire people or purchase equipment, build internal capacity, deliver on the project and then the customer only pays you. Working capital and bridging finance allows the entrepreneur to do just that, and the company grows as a result.”

Bridging finance, in particular, is high risk and requires a large amount of flexibility, which is why more traditional funding institutions shy away from it. Spartan, on the other hand, offers revolving bridging loans to customers the team has worked with. “We understand this space, and our aim is to support the entrepreneurs within it,” Kumaran concludes.

Related: Business & Leadership Lessons from Kumaran of Spartan

Alternative finance solutions

Spartan is a 36-year-old Non-Bank Finance Company — that specialises in financing Small and Mid-sized businesses by providing:

  • Growth Finance [structured finance for expansion]
  • Specialised Asset Finance [equipment/machinery/technology/software/office fit-outs/energy/etc.]
  • Working Capital Finance [bridging finance & medium term loans].

Bridging Finance

Bridging Finance is available for one to three month terms and is ideal for contract or project-based businesses. It is a solution that assists businesses with solving cash flow issues due to growth related challenges in their business and is either for a once-off need or for revolving business use.

Spartan is an Authorised Financial Services Provider 47631 and Registered Credit Provider NCRCP8669.

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Is Venture Capital Right For You?

Take this online test to find out if venture capital is what your business needs.

Monique Verduyn

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It’s important to know the ins and outs of venture capital before applying for backing as it may not necessarily be the right solution for all entrepreneurs, or for the particular stage your business is at.

To help prospective businesses determine if they are suitable candidates for venture capital funding, Mark Shuttleworth’s local venture capital company, Here Be Dragons (HBD), has compiled a venture capital readiness test. To check your readiness – visit the South African version of the site – Knife Capital below.

Take the VC Test

The HBD test is quick and practical, designed to educate and prepare potential applicants for what they can expect from venture capital.

The test guides applicants through an umber of important decisions and points they will have to consider carefully should they wish to embark on a partnership with a venture capitalist. Consisting of three deal breakers and another 15 questions, it looks at the components of a venture capital investment.

Related: 5 Key Questions To Answer For Raising Funding

Questions such as: “Will your revenue grow by at least 30% each year?” and“Are you prepared to part with a significant ownership stake in your business which may result in the loss of control?” are tough choices that need to be made ahead of time. Your answers will determine whether you are on the right track for venture capital.

Contact

Take the test at Knife Capital.

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5 Key Questions To Answer For Raising Funding

As your business grows, should you be raising capital or focusing on organic growth?

Nicholas Haralambous

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There’s a nagging question that lingers in the back of the mind for many entrepreneurs: Should I raise funding? The answer is never simple and the truth is that there is no single answer to rule them all. It all depends on your business, the industry you’re in, how your business is performing and if there are even investors in your field.

Here are some key points to consider as you weigh up the options within your personal growth journey.

Is investment right for me?

The media in larger markets like the US and Europe have turned raising funding into some kind of sport. Funding events are extremely well covered by the media and often glorified as some kind of victory.

I’ve raised money from all kinds of investors over the past decade and can confirm that not all money raised is equal. Money comes with strings attached and a lot of formality that may not have existed in your business before.

Once you’ve taken external funding of any kind you immediately take on a fiduciary responsibility outside of just ‘If I screw this up, I walk away’. You are tied to your company and investors until the money dries up or you make everyone rich. Neither is a simple process.

Don’t get me wrong, there can be a lot of value in the raising of strategic capital, but it is not to be seen as some form of victory. When you raise money you should have a clear path to profit and a clear strategy on how you are going to use the money and what the potential of recouping it is. Without these things you’re just taking other people’s money to spend and pay your salary. That’s not cool.

Related: 6 Great Tips For A Successful Shark Tank Pitch

The Different Kinds of Investment

If you don’t know what’s out there, it’s easy to think that banks are the only institutions with money. They’re not. Often they are the worst kind of money to raise and come with very formal strings attached that you cannot break free from. However, if you have a relatively straight-forward and stable business, banks can be a useful option to get a loan and then pay back the money relatively quickly.

I always suggest that the first port of call for funding should be sales. So if you think you need funding, what you are really saying is you need money and money comes from making sales. The best place to start for sales? The three Fs: Friends, Family and Fools. Sell to everyone and anyone you can find. A lot of young entrepreneurs will raise small amounts of investment from the three Fs too. This is very risky because you are putting your relationships at risk if the business collapses and all of your friends and family lose money because of you.

You can then graduate up into angel investment. Angels are high net-worth individuals who are looking to find very early stage start-ups with small batches of money. Usually this is a round of less than R500 000 for a pretty decent chunk of equity in your business.

Out of angel investors grow institutional venture capital firms. These companies will give you a lot of money for a lot of equity and help you grow. They’ll sit on your board (or formulate one if you haven’t) and they will drive you to grow your business at near-exponential rates. This level of funding is all about return on investment. If they put in R1 million, they expect to get R10 million in five years. It’s your job to make it happen.

Overall, with investment comes pressure and formality, but also the potential to grow something mammoth and meaningful very quickly.

My favourite kind of funding is the oldest kind out there: Profit. If you want to maintain control of your business and grow it, then you need to be profitable and reinvest the money in your company, not your cool new car.

Related: How To Start A Business With No Money

Is there a right time to raise funding?

travis-kalanick

In my experience there are a multitude of situations when your business might require external funding. The ‘right’ time can only be decided by the person running the show. If you are raising money out of desperation, perhaps it’s not the right time to raise. However, finding funding at this point may save your business.

On the flip side, raising growth capital is perhaps the safest time to raise funding. Your business should have profit and traction, it should be showing incredible value in the market and you should have a very clear plan to increase profits and growth exponentially.

If you take this plan to a variety of investors you are able to shop for the best terms and the best partners. That’s the kind of money you want. But bear in mind, if things take a turn for the worst your investors can become your worst nightmare. Just ask Travis Kalanick at Uber who is being sued by one of his major investors.

Raising funding is an extremely personal decision that business owners should think through carefully and plan for the worst as well as the best-case scenarios.

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