[kictanet] Finance Policy - Tech Startups

Fri Jul 8 13:36:28 EAT 2011

Hi,

The last thing that a technology start-up needs to be doubling in is finance 
issues they must make sure that they have a seasoned finance person or 
organisation by their side to make those decisions for them while they 
concentrate on the core business.

Out sourcing is about more than just transcription, let them out source the 
finance function if they cannot bring it on-board as an equity partner, director 
or mentor.  The niche that the venture capital firms have filled with start-ups 
is the financial strategy and making sure that the organisation goes public or 
is sold off when the pre-agreed milestones are reached.

In addition I would recommend that you make it clear to them that if an 
opportunity arises such as a buy out that they had not factored into their 
business plan that they should take it, products or innovations are not 
offspring.  

Back to the question, they should re-invest the money into the businesses growth 
either internally or by acquisition as a means of fattening then buy the big 
cars, plots, government bonds with the money they will get after listing just 
like Thakaar of Scangroup, the Somen Brothers of AccessKenya did and 
Transcentury is about to do.  Which is called eating your cake and having it.

Regards
 Robert Yawe
KAY System Technologies Ltd
Phoenix House, 6th Floor
P O Box 55806 Nairobi, 00200
Kenya

Tel: +254722511225, +254202010696

________________________________
From: Phares Kariuki <pkariuki at gmail.com>
To: robertyawe at yahoo.co.uk
Cc: KICTAnet ICT Policy Discussions <kictanet at lists.kictanet.or.ke>
Sent: Thu, 7 July, 2011 18:45:06
Subject: Re: [kictanet] Finance Policy - Tech Startups

Firstly, thank you all for your feedback. 

Let me expound on why I was asking this question, I'm still developing the 
curriculum that's being used for startups during the mentorship program. One of 
the things my (very) unscientific research brought out was the fact that Kenyan 
Tech startups operated on a 'feast/famine' model, i.e. You have a huge deal one 
day, buy a series of company cars, brand them, go on a hiring spree, one year 
later, company is laying off people and selling the now 

Question is, if our tech firms had a solid asset base (including patents), 
wouldn't it be easier for them to list in the stock exchange? 

I realize that in the earlier years, you need to do R&D and expand, but, 
shouldn't you cushion yourself against fluctuations that *will* happen? Nokia 
did not plan for the iPhone, they needed to have enough money to survive and 
have a response to it. Otherwise, they might have ended up like Palm... 

@Suhayl Sadly I'm not in that situation :-(, but I do get your point on R&D. 

@Andrea That's actually what I was thinking, some can be in say 90 day T-Bills, 
some bank, and some in longer term securities. 

@Dorcas Hence my asking. We are yet to get a tech company listed (that is not in 
the telecommunication space), so I still have no idea what happens in the 
background. 

@Liko Sounds like real estate is more lucrative? :-)

On Thu, Jul 7, 2011 at 6:18 PM, Suhayl Esmailjee <suhayl at esmailjee.com> wrote:

Hi Phares,
> 
>You are in a luxury position that won't last long. Invest into the next "big" 
>product/service/solution now. What's that Thomas Edision said? ...."I have not 
>failed. I've just found 10,000 ways that won't work.
> 
>Statistic for you: 46% of Huawei employees are in R&D
> 
>Best
> 
>SE
>
>
>On Thu, Jul 7, 2011 at 12:15 PM, Phares Kariuki <pkariuki at gmail.com> wrote:
>
>Hi,
>> 
>>
>>
>>Question, for those who have run tech startups, how do you deal with excessive 
>>revenue? Given that tech firms many times operate on high margins, let's, for 
>>the sake of example, say you have a product that, with an expense book of 
>>roughly 1M (Rent + Salaries), and your monthly revenue is 8 M KES. What do you 
>>do with the remaining 7M? Some say invest in product development but even then, 
>>you will still have quite an amount of change. What happens to that change? 
>>Invested in a bank? Or in some form of Fixed Income Securities (Bonds, T-Bills 
>>etc). What's the general practice in .ke? 
>>
>>
>>
>>-- 
>>With Regards,
>>
>>Phares Kariuki
>>
>>| T: +254 720 406 093 | E: pkariuki at gmail.com | Twitter: kaboro | Skype: 
>>kariukiphares | B: http://www.kaboro.com/ |
>>
>>
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>The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform for 
>people and institutions interested and involved in ICT policy and regulation. 
>The network aims to act as a catalyst for reform in the ICT sector in support of 
>the national aim of ICT enabled growth and development.
>
>KICTANetiquette : Adhere to the same standards of acceptable behaviors online 
>that you follow in real life: respect people's times and bandwidth, share 
>knowledge, don't flame or abuse or personalize, respect privacy, do not spam, do 
>not market your wares or qualifications.
>

-- 
With Regards,

Phares Kariuki

| T: +254 720 406 093 | E: pkariuki at gmail.com | Twitter: kaboro | Skype: 
kariukiphares | B: http://www.kaboro.com/ |
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