WorkPay Africa: How We Fundraised During Covid-19
Last week, WorkPay Africa joined the list of leading African tech startups to have passed the million dollar mark having raised US$2.1 million in funding. The startup, originally called TozzaPlus, offers a cloud-based human resources management and payroll solution for small and medium-sized businesses (SMBs) in Africa. Through it’s time tracking and salary disbursement tools, the startup assists African businesses save money and time by eliminating ghost workers from their payroll as well as inefficiencies associated with cash payments. We had a candid conversation with Paul Kimani, CEO at WorkPay Africa to understand their fundraising journey during Covid-19.
What was your sentiment fundraising during covid-19?
PK: This time, it was harder fundraising because we started at the end of March which was during the peak of Covid-19 globally. Just as with a lot of businesses then, there was panic also among investors. We found that investors took time in decision making with some choosing to either reduce their ticket sizes while others chose to check on their current portfolios and support them as opposed to investing in new ventures. We also realized that for some investors, unlike before where they would be hard pressed explaining why they wouldn’t invest in your startup, Covid-19 provided a good excuse. On a personal level, I was also adjusting and away from my family on self-quarantine having traveled back from San Francisco, which was quite difficult.
In terms of the investor/fundraising process, how many investor meetings did you have and what are the lessons you gained from the investor meetings?
PK: We had our first meeting on 16th March and our last meeting towards the end of June. In total, we met 77 investors and had an average of 3 meetings per investor. Some important lessons we picked from investors was being straight forward with your ask. We also learnt that we need to understand investors i.e. if we fit the sector, market and/or category that they typically invest. For some investors, we did not fit their focus market and so they were not actively investing in the sector. However, we are keeping open lines of communication and updating them on our progress as we see them investing in us in the future as we expand.
Another important lesson for us was understanding the investor language,for example; if an investor told us that we were too early on to invest in or that they typically invest ticket sizes upwards of our ask, we knew that they would not be investing in us.
Additionally, since time was critical, we approached this process as a sales funnel i.e. starting with a lot of leads and going down the funnel which saved us time. We supported this by also being strategic and tactical. For example, when we started out, our goal was to hit the $200K mark, we sought the right investors who would make it easy for other investors to come on aboard. This is because a lot of investors have a “wait and see” approach i.e. they find it easier to invest if another investor has already done due diligence on the business hence minimizing risk. Once we hit the $500k mark the process became fluid and faster.
Lastly, as a startup, it is important to understand your highest leverage and capitalize on it to attract investors. For us, graduating from Y-Combinator was our highest leverage and we chose to strike when it’s still hot rather than loose the traction we had gained.
What is your take on what investors look for in startups when investing?
PK: Investors are keen on the team. They look for a team that is committed to the startup and has good experience in the industry. In some cases, they also consider the startup’s leadership i.e. the CEO and their ability to assemble a good team. Adding to this, investors also consider startup founders that have a good understanding of the market and how it operates. Lastly, investors are interested in startups who understand the problem they are solving. However, they do not expect the startup to have a one hundred per cent solution but expect them to have a clear plan on how they are going to solve the problem.
What advice would you give to startups when fundraising?
PK: We’d advice startup founders to understand that fundraising is not an everyday activity. We are aware that fundraising is tough for many African founders (we did try raising $300K before and it was really tough). However, we recommend having a specific person in the team focused on fundraising, preferably the CEO. This is why co-founders are important; while the CEO fundraises the co-founder will focus on shipping the product and operations. We say this because fundraising is time consuming. In our case, there were times I had night meetings because of different time zones and had to sleep during the day and so without a co-founder, the business would have been greatly affected.
Second, founders should also create leverage and use that to onboard investors. This could be a spike in sales, or joining an accelerator. They should also continuously work on expanding their networks. Lastly, founders should also build a brand around the product and the CEO, as this will help them get early-on investors thus creating a ripple effect for other investors to join.
What happens next for WorkPay?
PK: We’re very excited for what lies ahead for WorkPay Africa and we are taking a lesson from Covid-19. We will be diversifying how we approach the market. We have been focusing on SMEs but we will also be creating an enterprise arm as part of product development. This product will have features targeted towards enterprises that SMEs would not necessarily require as they are at an early stage. We will also be expanding our reach to the East African market by Q1 2021 and that will be our focus for the next 2 years. We hope to achieve this by tapping into our clients who have a presence in those markets as we expand. We will also be aggressively increasing our numbers to aid expansion.
