Fundamo Diaries — Raising capital for an African startup [Part 3]

The following article is part of a series of extracts from South African entrepreneur Hannes Van Rensburg’s upcoming book, “Cash In, Cash Out”. The founder and CEO of the fintech company, Fundamo, recalls the events that have helped shape the world’s mobile banking industry as we know it as well as those leading up to the company’s exit to Visa for a whopping US$110-million.

In this article, Van Rensburg takes us through his journey in Europe, looking for investors in Fundamo. While there were many precious lessons to be learnt for the entrepreneur, Van Rensburg recalls the difficulties faced by African startup looking for foreign investors.

During the summer of 2006, I travelled to Vienna and met up with Falk Müller-Veerse for our first round of presentations. I made four presentations and also met with a semi-government institution to investigate grants offered by the Austrian government. It was at this meeting that I almost lost my temper when I was told that, while everything about the company was impressive, there was no way that they would be able to offer us a grant because we were an African company. Had we been a German company, for instance, giving us a grant would have been easy. Falk had to calm me down with a beer in a nearby tavern as I had almost lost it during the meeting.

This should have foreshadowed what was to come for us. At that stage – things have changed now, hopefully – there seemed to have been a huge negative bias towards any technology innovation produced in Africa.

Our investment tour took us to Munich, Frankfurt and Paris. I presented to most of the important venture capital companies in Europe. I believe that the story I told them was a compelling one. In all fairness, it was quite different, in a few ways, to the typical ideas that companies would pitch to them. For instance, we did not have much of an Internet story; our solution was built for mobile devices. Mobile utility was not as big a thing then as it is today.

Also, we were doing business in countries that Europe perceived as unfamiliar: the guys to whom I was presenting could not relate to these countries’ economies and markets. And then, of course, we were from Africa. It was not as if none of the firms had ever invested in Africa. At that stage, some of the NGO-type companies had investments in Africa, but more in infrastructure (roads and telecommunications infrastructure) than in high-tech innovation. It became increasingly clear as the tour progressed that it would be difficult to find a willing investor for a high-tech African company.

After each rebuttal, Falk and I would retire to an interesting establishment in each of the cities we visited. We would order a beer and some food and dissect the meeting. There was a lot of self-analysis on my part. Had I delivered the message correctly? Which mistakes had I made? Falk knew most of the people we presented to well; he could usually make a few phone calls to get feedback on why there was no or little interest.

‘It is not the type of investment that we typically make.’

‘Very interesting concept, but we just cannot get our heads around it.’ ‘Impressive demonstration, but we are not sure if there is business there.’

We were pitching a great concept to an audience who did not understand what we were saying. If they did, they were just not really interested. After the second visit, the responses started to become quite predictable.

One investor did show some interest. He had made his money out of technology solutions developed in Poland. Originally from Slovakia, he was living in Austria when we presented to him. He understood what we wanted to achieve and we started talking. There were a few follow-up meetings, but discussions did not get past the initial exploratory stage.

We’d generated some interest, at least.

The final presentation to 3i in London was no different: close, but no cigar. As we walked out onto the street, I said goodbye to Falk. It had been an amazing journey; I had learnt a lot about raising capital. I now realise it was probably a good thing that we failed to raise investments in Europe. European shareholders were not likely to have understood what we needed and where we were going. They may have been able to provide much-needed capital, but we would have had to have spent a lot of time explaining things. Our South African shareholders, while often frustrated with the progress we were making, had a much better appreciation of the problem space and the opportunity. In some ways, not getting European investors was a blessing in disguise.

I had one last appointment to make before I got on a flight back to Cape Town. I have known Mark Shuttleworth for a long time – since way before he sold his company to Verisign and instantly became one of the ten wealthiest South Africans at the tender age of 27. We were old friends and I had a lunch scheduled with him in Chelsea, which was where he was living at that time. It was a bright sunny day in London and we sat outside at one of the special restaurants that dotted the streets in the upmarket suburb. His girlfriend at that time, a Scandinavian woman, joined us for lunch. We talked about life and what we were both doing. I told him about Fundamo and the successes we’d had with our platform. He asked if I would be interested in him making an investment in Fundamo.

Six months later, this lunch and Mark’s offer played a critical role in the survival of the company – but more about that in the next chapter.

More Fundamo Diaries:

Fundamo diaries: launching the world’s first mobile money service in Africa [Part 1]

Fundamo Diaries — Building real solutions for big clients [Part 2]

Cash in, Cash Out is available on Amazon, Exclusive Books, and the official book site.