Harambean Collaboration: An Essential Service in Times of Crisis

Photo: Left to Right, Jeremiah Gordon, Josephine Gordon, Obinna Okwodu H’16, Melvyn Lubega H’16

Co-authored by:
Sue Beaumont

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The global Coronavirus pandemic and the subsequent lockdown has resulted in unprecedented economic turmoil and devastation affecting businesses, lives and livelihoods in nearly every country on earth. It has, however, importantly illustrated the power of the human spirit and the reserves of resilience and grit of so many to persevere and survive. The Harambean network of African entrepreneurs has more than ever used the power of its network to adapt and thrive during this crisis.

Since the start of the pandemic, Harambeans have been gathering virtually for weekly Knowledge Transfer Sessions and workshops to learn from experts on how to transform the crisis into an opportunity and enable ventures to adapt and prosper in this new environment. Experts include Jonathan Rosenthal, Africa Editor at The Economist, Iyinoluwa Aboyeji H’10, University of Waterloo, Yasmin Kumi H’16, Oxford University, Yvonne Kamau H’12, University of Kansas, Zachariah George H’19, Stanford University, Seni Sulyman H’15, Harvard University, Velani Mboweni H’18, University of Cape Town and legal expert, Sonia Gioseffi, partner at K&L Gates.

Iyinoluwa Aboyeji H’10 is a seasoned entrepreneur and co-founder of tech successes, Andela, Flutterwave and Future Africa. Both Andela and Flutterwave were coincidentally founded in the middle of grave economic recessions and a health pandemic. “In times like these, you have to look at the cold, hard facts and be completely honest with yourself, your situation and your customers’ needs. If your purpose isn’t to help your customers, you have no chance of survival,” says Aboyeji. He talks about the importance of ‘repurposing assets’ to take advantage of the opportunities available to essential service providers. “You need to be asking what essential service/s you can support with the skills you have. If you do this well, you’ll have a longer-term business model than those businesses who choose to wait out the lockdown.” Lula, a ride hailing service based in Cape Town started by Velani Mboweni H’18, is one such example of a business that has pivoted and is providing transport for essential goods and services as opposed to transporting company employees.

Aboyeji cautions start-ups from using relief funding to pay salaries but rather to use funds for productive capital allocation. “While you want to keep as many of your employees as possible, you have to invest in the future of your business, which will sustain the jobs you’ve created,” he says. He also encourages entrepreneurs to sell non-critical assets to conserve cash and to do this before values slide. He emphasises the importance of collaboration, including the use of assets with competitors to offer support to or offer an essential service.

Another important aspect of surviving during the pandemic is effectively engaging with investors and positioning yourself to be successful in raising capital and keeping investors satisfied. Zachariah George H’19 is the Principal at Nedbank Venture Capital and Alternative Investments, Chief Investment Officer at Startupbootcamp Africa and a leading Africa Tech Angel Investor. George cautions that the economic impacts of the pandemic and repurposing assets is going to last a minimum of two years and believes this pandemic could be twenty times worse than the Global Financial Crisis of 2008. “Traditional business models will be turned on their heads!” says George.

George advises start-ups to cut back on their rent, office and accommodation if it is a big part of their P&L and look at working from home with AR and VR set-ups and even reviewing the level of their business insurance. “There won’t be a need to spend on capex for at least the next two years,” says George. “Partnerships will become more popular as they provide an opportunity to sign licensing agreements, revenue sharing agreements and pilots to expand geographically.”

Analysts predict that the pandemic will continue to result in a sharp and unprecedented drop in demand over the next two years, which will have ripple effects deep in the value chain. “Unless you can convince investors that you are prepared for and are aware of the macroeconomic factors in the market that affect your business and the customers’ change in behaviour, it’s going to be very hard for you to get any interest from them. You need to know what your Plan B is when talking to investors. Investors right now are focusing on capital preservation versus capital deployment, so will be looking for start-ups in their portfolio who are able to repurpose their assets. Investors are also looking to see how you’ve changed your business model to extend your runway, such as removing all non-essential costs and doing everything you can to retain your existing customers. They don’t want to fund new ideas that do not have proven traction,” says George.

“While investors previously invested in nice-to-have assets, now they are investing in assets that solve a clear purpose and have a clear benefit, with much shorter investment horizons,” cautions George. Having said that George emphasised that investors were not opposed to doing new deals, but would only invest on terms that adhere to what the start-ups target market could look like. “There is capital and arguably valuations are going to be at very favorable terms from an investor perspective, but the valuation argument has to be balanced with the opportunity argument,” said George.

George also emphasises the importance of start-ups being aware of the new trends that are emerging when approaching investors for funding, including an increased focus on digital, work from home, more specialized delivery solutions and supply chain optimizations.

Several Harambeans have lent their skills and resources to address the crisis. Yoco, co-founded by Lungisa Matshoba H’14, University of Cape Town, has adapted as a result of the lockdown implications imposed on businesses in South Africa by launching three online products in April to help merchants find more customers by tapping into the online space. “The whole idea is to give our customers options to trade at a time when trading is difficult,” says Matshoba.

Dr William Mapham H’18, Stellenbosch University, is another Harambean who is pioneering efforts to fight the COVID-19 pandemic in South Africa. Vula has a growing network of over 11 000 healthcare workers so is able to help identify those areas in need and ensure equipment and supplies get to where they’re needed. The app also enables healthcare workers to contact specialists for assistance with any potential COVID-19 cases and connect them to specialist advice at the National Institute of Communicable Diseases (NICD).

“In times of crisis, the value of any network increases. As entrepreneurs and investors update the map to navigate Africa’s entrepreneurial ecosystem, intramural collaboration and insights from our Alliance are in a way ‘an essential service’ for Harambeans and innovators at large to prosper . I am humbled by and grateful to so many members of our Alliance for the role they are playing as mentors, trusted advisors and funders as we help these extraordinary entrepreneurs to adapt and thrive,” said Okendo Lewis-Gayle, Founder of Harambeans.

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