Investment tips for tech platform startups, with Fuzu’s founder, Jussi Hinkkanen
Building a platform company is a combination of design, psychology and social sciences. We caught up with Jussi Hinkkanen, Founder of Fuzu, to hear his tips for launching and scaling a platform app in East Africa.
East Africa is a region with huge potential and promise for tech startups. There is a vast thriving startup community, looking to raise and grow. But there’s also a large number of people competing for funding. Despite there being a huge opportunity for investors, funding is not as available as in other global regions (not within Africa). Also, according to Jussi Hinkkanen, founder of Fuzu, local Venture Capital investors in the traditional sense have only emerged over the past five years.
So for Fuzu, East Africa’s #1 career development app, to close Series A in 5 years, you cannot overlook this. With roughly 10 million lifetime users, what did they do so well that others could learn from? The simple truth remains that no matter how great your technical ability, no platform startup can succeed without investing in all areas of the business.
Fuzu is your one-stop shop for the largest selection of open jobs, insights into the East African job market, tailored career advice and skill training. According to Fuzu, you get exactly what you need to pursue your professional goals. Fuzu, in Swalihi, means ‘self-made success’.
In 2005, after working at a Finnish multinational deploying large scale corporate IT systems around the world, Jussi turned his focus to emerging markets and moved to Mozambique. For the first 5 years on the African continent, Jussi worked initially at the UN, pushing the first wave of ICT for development initiatives and then became the advisor to the Mozambican Minister of Science and Technology. During these years he gained valuable perspective on how to impact the lives with scalable technology solutions and to overcome implementation challenges in complex environments.
Following the years in the non-for-profit world Jussi returned to private sector and joined Nokia’s leadership team for India, Middle East and Africa. Over the next five years Jussi crisscrossed the vast region of 69 countries building strategic partnerships with corporates and governments and got to understand the complexities of the region country by country and culture by culture. Jussi, together with his team, also supported the first wave of Africa’s startup scene, by setting up funding and startup incubation programs across the continent.
“The young people and the young entrepreneurs will be the ones who change the face of the continent and come up with the big solutions”, he says during our call.
So what advice does Jussi have for young (and old) entrepreneurs to get started? How did Jussi build a scalable tech solution to help millions of people unleash their potential? Investment comes after a great idea, backed up with relentless passion. Then building a great team, business model and tech. And supported by investors who believe in the vision.
Raising financial capital, Jussi says, has become easier than it was 6 years ago. The equity market has been maturing and investors are expanding to the African region. Still, the continent is seeing about the same levels of investment as the country of Finland. That's 5.5 million people compared to over 1 billion. There is both limited access to capital and fierce competition. Also, it can be difficult to find investors outside the popular sectors like eCommerce, fintech and logistics. For example human capital has only recently started to attract attention from investors.
INVESTMENT TIPS FOR AFRICA'S TECH STARTUPS:
TIP #1: Have a blended finance model to avoid diluting yourself too early
As an East African tech startup, look for a mix of equity, debt and grants. Jussi says most of the investors aren’t traditional VC investors, as in other continents. In East Africa, by his experience, many VCs at the core operate according to the same principles as private equity investors. Which means they often look at the world through a private equity lens. As a result, they may have a different approach to valuation levels and business cases. This, he says, is unsurprising, due to lack of data and lack of exit stories so far. So it's important to build momentum and subsequently to increase the valuation of your business with the support of alternative means of funding.
The good news is that Nigeria, Kenya and South Africa are the largest recipients for venture capital funding on the continent. So it is always worth knocking on the doors of local investors. Make sure you approach the right investors for your stage and sector. Also, do your research as investors have preferred sectors. Talk to Angels too, because there’s more opportunity for that in East Africa now than there was 5 - 6 years ago.
TIP #2: As well as blending your finance, blend your market and be present in a few to mitigate risk.
Risk is a huge challenge for any tech startup, particularly in East Africa. Despite their success, Jussi suggests they could have extended from East Africa earlier. To scale organically in new markets, understand the user, their psychology and their trigger points. How can you get your product top of mind and get them to trust you? Launching a successful platform product is more than a technical exercise. You need a good team, tech solution, business model and visionary investors.
With Fuzu, Jussi sees firsthand the skills and competences available in the region. As well as where shortages are. He says the primary difference between the East African job market and elsewhere is the gap between talent and experience. While there’s huge talent in the area, people have rarely had the opportunity to build large platform products or to work in world class teams. Fuzu has complex AI-based architecture, so it’s a bit harder to find programmers that fit the technology stack requirements. Still, supporting young talent is also central to their company mission.
TIP #3: Invest in a mix of experience and emerging talent and invest in the company culture.
Invest in your internal messaging. The Fuzelets, as Hinekken admirably titles the team, are very passionate about their work. They all share the change they want to make in the world. This is essential for collaborating as they grow. Once a month they host Fuzu Friday and welcome old team members as well as current.
Why is that important? A team that is passionate about your cause can also find the right tone of voice with the end users and clients, helping to drive strong organic traction and word of mouth.
TIP #4: To start a movement with your platform product, invest in internal and external ambassadors.
Over the past year, the Fuzelets tackled Covid and reinvented, building what Jussi describes the best team in the market.
Building a successful online company, particularly one that focuses on both b2c and b2b consumers relies heavily on the understanding of how both sides of the business feed each other, creating a virtuous cycle.
INTRODUCING THE FUZELETS
"The Fuzelets tackled Covid and reinvented, building what Jussi describes the best team in the market."