Finance & Investing

Raising Capital in Africa: It’s Not Just About the Money

In this episode, discover how to maximize the value of your firm’s next funding round.

June 29, 2021

Meet Elo Umeh, managing director and CEO of Terragon Group, a Nigerian digital marketing and data insights company, and Andreata Muforo and Ido Sum from TLcom Capital, and learn how to make the most of your fund-raising efforts to successfully grow your business in Africa.

Umeh never intended to formally raise money — he initially relied on friends and family to launch Terragon. But as the business grew, so did his vision, and he needed to find an investor who understood the enormous opportunity in a rapidly growing sector. Since 2016, he’s led Terragon through two funding rounds: a $5 million Series A round and a bridge round of $4 million. Now a leader in Africa’s data and marketing technology space, Terragon is currently raising another $16 million for its Series B.

Umeh shares his fund-raising journey, explaining that it’s not just about the money — who provides the capital is also key. He ended up working with Andreata Muforo and Ido Sum from TLcom, a venture capital firm with experience investing in tech-enabled businesses across sub-Saharan Africa. Their relationship demonstrates how the right investors can help your business grow and actually enhance — not dampen — the quality of your decisions as a CEO.

Muforo and Sum of TLcom also share what they look for in a company and provide tips for how you can approach your next fund-raising round.

Grit & Growth is a podcast produced by Stanford Seed, an institute at Stanford Graduate School of Business which partners with entrepreneurs in emerging markets to build thriving enterprises that transform lives.

Hear these entrepreneurs’ stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.

Full Transcript

Elo Umeh: If you build a business and you have a vision that this can become a wealth creation engine, you then need to make sure that you work with people who have built vehicles that are now wealth creation engines. Entrepreneurship is not a show.

Darius Teter: As CEO and co-founder of Terragon Group, Elo Umeh is passionate about the journey, the whole journey.

Elo Umeh: Sometimes that journey is, it’s super lonely. Everybody’s going to be against you. Those long and sleepless nights, your dream, and your vision is valid.

Darius Teter: As an entrepreneur, Elo does everything at scale. A big company, a bigger vision and multiple fundraising rounds. But underneath everything is an even bigger sense of conviction because raising capital is about more than just the money. How much more? Well, let’s find out. I’m Darius Teter, and this is Grit & Growth with Stanford’s Seed. The show where Africa and Indias and intrepid entrepreneurs share their trials and triumphs with insights from Stanford faculty and global experts on how to tackle challenges and grow your business. Today, we meet Elo Umeh, CEO and co-founder of Terragon Group. We hear how he scaled this company from years of organic growth to a series A fundraising round, and then a bridge round and on to series B. As we discussed in our previous episode, the African technology sector has evolved rapidly over the past decade. And the sub-sector of data insights is even younger than that. To invest in a company that’s one of the first in their category on the continent, takes a certain kind of investor, and to build a company without a blueprint, takes a certain kind of entrepreneur.

Elo Umeh: My name is Elo Umeh, I am co-founder and CEO of Terragon. Terragon helps companies connect to their customers on mobile, any companies, but we’ll focus on three verticals. We’ll focus on banks, brands, and we’ll focus on digital natives. We pride ourselves as understanding Africans like no one else does. What does that mean? On a continent that is as large as Africa with 1.2 billion people, the intelligence, the data around mobile connections and knowing who those people are, and being able to provide that insight to companies to connect to those customers is what we do.

Darius Teter: In the data sector In Africa, Terragon Group, is a market leader. They’ve got a head office in Lagos, Nigeria, three other locations in South Africa, Kenya and Ghana. A large R&D center in Bangalore and an office in London. Considering this rapid growth, you’d be forgiven for assuming that Elo was one of those kids that grew up reading Warren Buffett’s autobiography, but the way he tells it, that couldn’t be further from the truth.

Elo Umeh: My first recollection on entrepreneurship was way into my working career. I was living in Nairobi in 2007, where I had gone to set up a company. Before then, I had never thought about being an entrepreneur. And I remember the day I went to tell my dad, I was starting a business. He and I got into a big argument and I got an offer to launch Nokia Services Business. That offer was just under $10,000 every month. I told my dad, I wasn’t going to take that offer, and I was going to go on to start a business. And he thought I was crazy. We got into a big argument that day and we didn’t speak for another year. I remember-

Darius Teter: What, wait, wait, wait, wait. Another year?

Elo Umeh: Yep. This was three years after I had been nurturing this dream of starting a business, but of course, I had never communicated to them that I was trying to start a business. I was living in Kenya in 2007, the smartphone got launched. I saw it online, I saw that media was going to get aggregated to the cell phone and the iPhone was the trigger for entrepreneurship.

Darius Teter: Although entrepreneurship wasn’t always his plan, Elo saw his opportunity with this new technology, and so despite his father’s misgivings, he pulled together funds from friends and family to launch Terragon in 2010.

Elo Umeh: Terragon is a business that has grown from what I call social capital. And I never thought about raising money. I started the company and leveraged family, but it was never equity. If I got a deal, I would go to my family, my cousins, they finance the deal for me, I get a spread on it and I go back and return the money.

Darius Teter: Terragon grew organically for six years on its own revenues and Elo’s social capital until an inflection point in 2016. And since then, they’ve raised funds twice, $5 million in a series A round, a bridge round of $4 million. And now they’re raising another 16 million for a total series B of 20 million. But Elo says he never intended to raise money. So what happened?

Elo Umeh: When I launched Terragon, I wanted to build a business that was very focused on the objective of harnessing the power of the smartphone. And this was in a market that had less than 5% penetration of smartphones. So riding a wave, and that is the magic of riding waves. You can create a beast just by riding the wave. It was in five years, from 2010 to 2015, we grew the business to 100 people, $5 million in revenues. We didn’t have to raise money, but we started to think about it in 2015. If we raised money, we could have built a bigger business. That is the reality. We could have had products that were deep and our strategic positioning could have been very, very well differentiated.

Darius Teter: So you had built a beast, but you wanted a monster.

Elo Umeh: Absolutely. You captured it. We had fun doing a number of things. We had built Africa’s largest ad network. We’re doing this when everybody else in the world was doing it. So if we raised money at the time, we could have been globally competitive maybe. So in 2015, we looked at the business and we’re like, “What does this business have? This business is connected to Telcos, this business is an ad network, this business has an agency piece. What comes together is this business has data insights, knowledge on the marketing technology side of the continent. How can we put this together and pivot it to something else?“ And the thing that came out was data. We need to now understand who Africans are and put that together in a product that is highly, highly, highly differentiated.

Darius Teter: And get there first because you couldn’t have been the only people thinking about that.

Elo Umeh: Absolutely. That is something else that capital has done for us. I think capital and who provides the capital is also very important. It’s not about the money completely. I think the money is great, but the source of the money is also very important.

Darius Teter: The pivot to data insights was an attractive idea. Africa’s expanding network capability, lower network costs and cheaper devices presented lots of opportunities. And Elo as an early mover needed to find a great investor who would bring in more than just a cheque.

Andreata Muforo: It should be capital plus. You need to bring business building support, especially also if you’re investing in early-stage companies.

Ido Sum: I do think that Elo was always a very ambitious founder. And I think that in his mind, this was always a much bigger company than it was when we first met.

Darius Teter: The voices you’re hearing are Andreata Muforo and Ido Sum from TLcom Capital, a venture capital firm investing in tech enabled businesses across Sub-Saharan Africa.

Ido Sum: We are actually doing early to growth. So our main focus is seed and series A and then series B. What we define as seed is people who are able to take in half a million or a couple of millions in investment as a minimum, which means there is a product, there is a service that is well defined, the customers are defined and now they need to start growing and scaling that, this is where we see the largest shortage of capital in continent, especially capital that resides in continent.

Andreata Muforo: If you think about who’s investing in Africa tech, it is a fairly young ecosystem. I think when you compare the number of companies and opportunities in the market and the available capital is very little, it doesn’t match. We do need more capital on the continent to support these entrepreneurs.

Darius Teter: TLcom was founded over 20 years ago for a decade. They’ve been involved in Africa’s tech landscape, where they see local presence as a serious advantage.

Ido Sum: The money that comes from outside is a little bit more random and usually is less able to help with growth and local markets because of less understanding, less of local networks. So this is where we try to distinguish ourselves, not just saying we add value generally, but be more specific and more quantifiable on how we can do that. Which networks we can put to work and support the companies with our ability to understand what’s going on in the markets they want to expand into, which might be harder to a fund that is only based in the U.S., or in London and doesn’t have this type of visibility on the wider African market.

Andreata Muforo: We support our entrepreneurs as they think about strategy, around hiring, regulatory, networks, opening clients for them, which are also all very important for the entrepreneurs and for the businesses to grow.

Darius Teter: Growth had been on Elo’s mind for several years. In fact, he tried to raise funds from a local angel investor back in 2011.

Elo Umeh: The person I want to meet is somebody who positions himself as an investor. But this is the question. This is also part of my experience talking about, who do you get money from? The supply of investors was very limited. If I got money at that time, from an equity perspective, I could have sold probably 40 to 60% of Terragon for the investment and Terragon would not be where Terragon is today. For sure.

Darius Teter: I’d like to talk a little bit about that whole question around dilution. With a short supply of venture investors, valuations were going to not be great, you were going to lose a lot of the business. In your series A, how much did you give up?

Elo Umeh: We gave up about 20%, total, for five million. And I remember, I had in that conversation, it wasn’t really a pitch in 2012, 2013. It was more, “Hey, let me take over this business. You keep 10% of it, I take 90% of it.” And I agree to get, “I have all the cash, I’ll give you all the cash.“ And I’m like, “It’s not about your cash, it’s about my capability as an entrepreneur, understanding mobile, your cash is not going to lead anywhere.” The guy who I had this conversation with, is still very much in touch with me today.

Darius Teter: After his experience with the angel investor, Elo was certain of his own value as an entrepreneur, but he also knew what he was looking for from other investors. So eventually he would partner up with TLcom who led Terragon’s series A funding round in 2016 and remained with them for the bridge round and beyond.

Elo Umeh: They’ve been incredible partners to us. TLcom has its roots in the U.S. They’ve done a whole bunch of investments in Europe. They have a number of companies. They have the experience. They are venture guys. Venture is about risk taking and expecting outside success. So patience at the beginning is super, super important. For us, they have been very patient with us, that partner that has brought us this far, it has been invaluable. Within the Nigeria ecosystem it would take something to find investors — there will be money, but there’s going to be a lot of issues before you get to where you want to get to.

Darius Teter: It can be difficult to find the right investor. So I wondered, how did they first meet?

Elo Umeh: The initial contact came from them, in 2015. And I remember I was in New York on a trip and I received an email from one of the partners asking me what we are doing and how we saw the business. And I responded, and we started to build a relationship. This was three years before they closed the series A round.

Ido Sum: We probably read about them somewhere and had an initial call. We liked the concept or the space, but there were too many businesses in the business at the time. And we thought it’s a little bit messy. We anyway did not really have a fund yet. And we decided to check in later.

Elo Umeh: We stayed in touch. We built a relationship. I think there was some understanding. We were deep in what we were doing. Finding your way, way of pivoting the business. It’s like, there’s a vision, there’s a direction. Sometimes you have to take a left turn, take a right turn to get back on the straight road. It’s in these areas that the partner and the investor come in very handy.

Ido Sum: Elo was starting to think about pivoting this company that has three legs into one business, that would be a marketing platform and a software as a service platform. And he started stopping every now and then in London and spent an afternoon or morning with us. We liked him a lot. And his openness to having these conversations. The closer we got to our fund closing, the more interested we were in pursuing this as an investment opportunity not just a consulting opportunity for which we’re not really compensated. And at some point we offered Elo to think through that prism.

Darius Teter: An important feature of this relationship is that it began long before Elo needed the money. As he was getting to know their investment thesis, TLcom was learning more about him in the business and the dynamic they established in those early conversations would pave the way for their future relationship.

Elo Umeh: TLcom know how to, they’re very versed at being an investor and letting you be an entrepreneur. I think that also points to who you get money from. Sometimes investors want to be entrepreneurs while sometimes when an entrepreneur gets money from an investor, he starts to defer to an investor. And I have to say, initially, I made that mistake, but over time, I think I’m coming out of it. You need to continue to be an entrepreneur. That is what will get the business to where the business needs to be. And the investor needs to also respect how to be an investor. Governance, direction, providing support, it’s soundboard, staying focused on the market and the opportunity, those things, I think TLcom are very good at.

Darius Teter: Elo has listed several benefits that an investor can bring to the table. I wanted to know, what does TLcom look for in an initial investment opportunity?

Andreata Muforo: There are three main questions that we want to answer. So the question is, is this an attractive market? Because we are looking for large underserved growing markets. Is this a good company? And then next, is the business model that the company is pursuing one that can capture the market? And then is this a team that can execute on that business model? And then the third bucket of questions we’re asking ourselves is around, is this a good investment? The team is very important throughout the life, whether it’s early or it’s growing. So we look at the vision of the founders, the strength of the C-level in terms of the experience, execution, what is it that they’ve achieved? And then we also form a view and an opinion around the strength of the team. And part of it is, can be feedback around, like, what Elo said, realizing that these are great teams for this stage, but probably not for the next stage.

Darius Teter: What was your view of the Terragon team, specifically when you met them?

Ido Sum: At the time we thought it’s a team that worked very well together. We were very impressed with Elo’s ability to attract a fairly strong team around him that was committed and was there for a long time. Retention is something that definitely we look at when we invest, especially with companies that are slightly older to see, what’s the people’s turnover, and what can we learn from that?

Darius Teter: Elo had built a very successful business for eight years organically, and he was confident in his vision for Terragon, but the $5 million external funding round brought some new considerations to the surface around his team.

Elo Umeh: Terragon has been a business that we’ve built with people in mind. And we’ve been very deliberate about that. When we raised money, we continued to pay attention to people. However, the pressure that comes with growing or raising money, creating a return, which is not the pressure that was deliberately there, but it was just more of, “You’re taking $5 million, a hell of a lot of money. You want to show this return?“ I think we accelerated, bringing in a lot of people into the company, to the detriment of the existing team. I made the wrong call. I could have done it in a different way.

Darius Teter: So this attempt to grow rapidly to staff up actually affected the culture of your company.

Elo Umeh: Absolutely. I believe in the fact that what got you here will not take you there. We need to look at the team. We need to look at the numbers. We need to look at where we are going to, and we appropriately staff for it.

Darius Teter: So presumably, the fact that you built a $5 million business organically without outside investors means you must have had pretty aggressive targets for growth and accountability structures, internal management reporting. So you were keeping your eye on the ball, but when you brought in outside investors, it escalated. It became more real because it wasn’t just about your revenue and your gains or losses. It was about somebody else’s.

Elo Umeh: Yes. That is one. Something else that is the way you framed this question, I never thought about it. The circumstances of starting Terragon, you remember, was that I had been nurturing this for three years. My family, my closest unit, didn’t have the confidence that I could do this, which is natural. That put a lot of pressure on me to stay on the ball. But in the culture of the business, a lot of folks had sacrificed a lot to support me on this journey. Then I raised money, and I felt that they were not good enough to continue on that journey. That created some conflict.

Darius Teter: Investors were interested in the quality of Elo’s team, but they also cared about his governance arrangements. Terragon was well prepared for that conversation. Thanks to Elo’s foresight. He put in a statutory board to make sure that he was held accountable two years before bringing in serious outside capital. And that decision was partly based on observations of his peers.

Elo Umeh: I got a first hand from somebody who had sat on boards. I got a first hand on governance as a tool and understood the leverage of what governance could give. Even before TLcom came in, I was very deliberate about governance, two years before we closed, we set up a board. I didn’t have to.

Ido Sum: A statutory board or an advisory board?

Elo Umeh: A statutory board, and we didn’t have to, I could have set up a board of my friends and associates. No, we set up a board of very strong individuals. For instance, the ex CFO of MTN Nigeria sits on our board. The lady who used to run strategy for SAP sits on our board, a president of Publicis Europe, Middle East, and Africa, sits on our board. And all this happened before TLcom came in.

Darius Teter: This is fascinating because it’s unusual. It’s unusual to not only establish this statutory board so early, but also to look for such a high powered board, which might get into your business. What was it that you wanted from that board?

Elo Umeh: I needed to get more comfortable with the idea of governance. Culturally, in Terragon, we go into the deep, we take big challenges. And as a leader, I can’t say I want to set up a board and we set up a board of people who have been coming to have coffee with me in the office, it needs to be with people that when my colleagues and co-founders look at the board, we set ourselves straight. So when we get investors, we’re not going to start getting used to that then. I think CEOs are now becoming more responsible, but there’s been several businesses that have been invested in and CEOs lose the insight of responsibility because they see fundraising as a destination. I talked about the story of me increasing the volume of accountability and responsibility in the business. I’m bringing in more people who I thought could drive performance and do all sorts of things. I think that the board is there to do that, to do exactly that. And it’s very important that you have a board, not of friends, because your friends will not tell the truth.

Darius Teter: After TLcom’s investment, they became a part of Terragon’s board. I asked Ido Sum to describe the nature of their relationship today.

Ido Sum: We joined the board. So I am the board director and Maurizio is the observer, which is a structure as a comment that we try and have with pretty much all of our portfolio companies who have two of us support them and just gives more flexibility and gives us more feet on the ground in terms of support. And each of us can bring something slightly different. We also, are part of the strategy committee of the company, and we try to work fairly closely with Elo on strategy, on fundraising, on initially, putting an OKR system into the business in its earlier years and really redefining or better defining the OKRs and the KPIs for the business, how to measure and how to report, then helped with some of the key hires into the business in the last 12 months.

We’ve helped a lot with bringing some of the bridge investors as well as some of the more serious conversations on the series B and made lots of intros on that front, some client intros, both in Nigeria and elsewhere to hopefully help the company grow through that. Really try and work closely with Elo and we communicate very often, we speak a few times a week and try and just be there as a thinking counterpart to bounce ideas off and to help wherever we can with our network.

Darius Teter: That really brings home the point about it’s not just the capital. In fact, everything you just described sounds so extremely valuable to Elo. Is there a line that you could cross where you become almost too involved in the business?

Ido Sum: I’m not fearing to cross the line because I don’t think we are not operators. So we are not executives in the business. We are always somewhere between consultants on steroids and friends, and of course, investors and we are more incentivized than consultants because we have a stake. We have skin in the game, in the business. So we are very aligned on the upside with the entrepreneur, which is somewhat different from a consulting firm that you hire for a purpose, but we are not. And we don’t perceive ourselves as operators in the business. We are trying to get better at being good investors and good board members and good contributors. There are times where you don’t see eye-to-eye, or you’re not empathetic enough. So I cannot say that there’ve never been instances in which we had issues to solve, but this is part of the journey. This is part of the game. And I think, it’s much more about how you solve it rather than promising you’ll never have such issues.

Darius Teter: Fear of losing control can dissuade entrepreneurs from both establishing strong governance structures and seeking funds. I wanted to dig in a little deeper with Elo about how key decisions are made in Terragon. When it comes to proving budgets or key hires auditing, does the board have the power?

Elo Umeh: Yes. That’s the case now. Absolutely. But sincerely speaking, I don’t think it’s a bad thing. If you take somebody’s money. I think it’s a good idea to have transparency with audits, but forget about where the money comes from for a second. And let’s talk about the entrepreneur con true, and the very nature of chasing a dream. If you have auditors and you have a board committee that the auditors are reporting to, it doesn’t stop you from dreaming. What it does, is that it provides common sense to your dreams. The other part is key appointments. In my case, it would approve appointments that report directly to the CEO. That is a succession question. The board can recommend people to hire, but at the end of the day, in my case, it’s my call to hire them, but must be approved by the board, right? So if you want to build a business, I think that there is the part where you need to hire the best people that are available at the most responsible cost or the most competitive cost.

But from a pure succession standpoint, the guys who report to you should also have whatever interactions with the board at the committee level. What do those interactions help foster? It gives them a sense of responsibility and accountability to the overall business, which strengthens the business. And it helps you, like I told my direct reports that, “You guys make my work harder, but I love you guys for it.” Because the quality of interaction improves and the decision making of the CEO, which the CEO’s job at the core of it, is to make the best decisions. The quality of the decisions that are to be made, is enhanced 10 times because of these dynamics. But in my experience, I don’t feel that there’s a hand break on my ability to perform as CEO and entrepreneur in the Terragon business pre fundraise and post fundraise. There hasn’t been that. In fact, I can argue that maybe, my power, I now have a true appreciation for my position as CEO.

Darius Teter: So Elo, those three minutes were probably the best explanation I have ever heard for why good board governance can help a business grow. The commitment you have to bringing accountability into your own management style, I don’t actually hear that all the time. Why don’t more entrepreneurs think like that?

Elo Umeh: That’s a difficult question, Darius. I would use myself as an example. I think the first part would be a lack of courage. You are afraid, but you still go ahead because you find the conviction that it’s in the best interest of something that is bigger than you, but if you keep it at, it’s about you, you would not come out of it. And this is all goes back to leadership, until you appreciate the vulnerability that comes with leadership, you’re still self serving. So the question around governance and why entrepreneurs don’t take steps in this direction. I think it’s just lack of courage.

Darius Teter: Well, and maybe linked to a lack of vision where as you said, the money is not the destination, but too many entrepreneurs treat it that way. And again, you see this in the U.S. with so many flashy startups. The first thing they do is they build out a huge and beautiful office, extremely high cost. And they’re pre-revenue and they’re going to be pre-revenue for five years, but they’re spending the money like, “Look at us, we’re important, we’ve arrived, we got money.”

Elo Umeh: I think that there’s several moving parts and responsibility is a big part of it. I think being afraid is another part of it. I think losing that sense of, “I am the guy” is another part of it. But a key too (which for anybody that seeks my advice and I give it to them freely), is to build a business that can stay the test of time it’s super important that governance and accountability is a big part of it.

Darius Teter: You said something else there, which is this feeling that, “I am the guy.” Feeling that it’s all about me and my individual ideas and drive and leadership as opposed to understanding what you described, which is you make better decisions when people challenge you.

Elo Umeh: It’s just a question of control. People feel that when there’s governance, they lose a big chunk of control. I tell people a lot of the time that money, capital, people, at the end of the day, follow a vision, the vision doesn’t follow those things. And that’s why capital is not a destination. When you have a vision to do something and you look at the pillars that will be required to get there. You look at the guardrails that need to lead you to that destination, and you have an appreciation for what it would take. You will do everything possible to put those things in place. The least of your concerns is going to be control. So if the vision is so tiny that it’s sometimes to make sure I pay my child’s school fee next year, you don’t need the governance or board or whatever for that.

But if you build a business or you are in the process of building a business and you have a vision that this can become a wealth creation engine in some shape or form, you then need to make sure that you work with people who have built vehicles or have worked in vehicles that are now wealth creation engines. We talk about the stock markets in Nigeria and Africa, not having liquidity, but it’s on entrepreneurs to make sure that, that liquidity happens. It’s not on anybody, because if you build great companies, you will get the markets to be liquid and the markets will continue to grow from there. So if your own goal is to build a wealth creation engine that pays your child’s school fee, then you should not be going to raise money, if you want to pay your children’s school fee. You should go and work and pay your children’s school fee. Entrepreneurship is not a show.

Darius Teter: Elo speaks with such conviction about his journey. And according to Andreata Muforo, at TLcom, entrepreneurs need that passion to get them through the fundraising grind.

Andreata Muforo: Many founders think that fundraising is something they do on the side. And I think it’s important that if you are going out to raise capital — capital that you’re going to use to grow your business — then for sure fundraising is part of your job description. You need to embrace it. It is emotionally exhausting. We also raise capital. So we can empathize with what it takes to bring capital into your business, but you need to have that mindset. So it’s not that investors are wasting your time. You need investors to grow your business.

Darius Teter: Can you put a little bit more on that? What does it look like to embrace your role as a fundraiser and a founder?

Andreata Muforo: It takes a bit of time. So you need to have many conversations with many investors before they invest. Investors have their process in terms of the due diligence that they do, the conversations that they need to have. So it’s also, I think, a level of patience with the process. There’s a mental fitness that you need because you get rejected. You need to be able to pick yourself up from that mental place where you’re discouraged and keep going and keep having those conversations with the same level of energy and enthusiasm to keep going. I think also for entrepreneurs, they love to build, which is great, and that’s why we back them. That’s why also fundraising can seem like it’s in the way. I think also, to prepare for fundraising, it’s also to get other people within your C-level to delegate some of the things that you used to do so that you can focus on fundraising, because it does require time to be able to do quite well.

Darius Teter: Post series A, Elo focuses efforts on growth and differentiation with Terragon forming some very important new partnerships.

Elo Umeh: We now have a customer data platform and a DMP. We’re the only African company helping Facebook solve for privacy in a cookie-less world. How much of a big deal is that? We are the only, first, and highly differentiated company helping Facebook. Without series A, we could never have been in this.

Darius Teter: Elo didn’t stop raising after series A. Terragon is currently looking to close a 20 million series B round, and it has not been easy.

Elo Umeh: We have a product, we have an MVP, we have a number of customers, but we have struggled to scale it up. And it’s also part of capital, right, money. We launched the B process, then COVID happened. So we had to go and raise a bridge. And last year, most of the external sources of capital weren’t even talking to anybody. I went back to our original investors, yes. Our investors, they of course, (the characters of whom you get money from) understood the circumstances, and they supported us in the bridge round.

Darius Teter: And was the bridge round a convertible note? Was there an evaluation cap?

Elo Umeh: It is a convertible note. It converts into the B with a discount. It’s not a qualified round. So they just get a discount on whatever the prize or whatever the valuation is at the B. Our objective right now is to make sure we hit our growth targets so that we hit a very good valuation. For some deal of the discussions, we set a minimum cap, a minimum valuation cap, which is 2X our series A valuation.

Darius Teter: Was that difficult to negotiate?

Elo Umeh: Very difficult. I just think that it’s a negotiation. And we all negotiate even in the house. With our kids, with our spouses and everybody wants what everybody wants. Everybody thinks that they have the value, right? We are raising the bridge, which in itself is not great, but many companies raise bridge rounds and companies that go on to become very big companies raise a bridge round. So it’s maybe in some way maybe-

Darius Teter: Why is it not great? It’s not great because you’re on defense. You’re on the back foot.

Elo Umeh: That’s correct. It’s not great because we don’t have a lot of time. If we had a lot of time, we could have just gone into the bridge and taken a year to do that, but we wanted to raise some chunk of it. And we’re talking to investors who typically set themselves up for these things. So there’s a market for it as well, but overall, it is a defensive position. It’s a defensive play, which is not great, but it also can also be a strategy anyway.

Darius Teter: Let’s shift to series B. What was the main purpose for it? What was the strategy that this was going to fund?

Elo Umeh: To double down our growth, increase the number of customers, increase our capacity to fulfill for our customers and extend our coverage on the continent. Our vision as a business is to intelligently connect Africans, to intelligently enable companies in Africa, connect to their customers on mobile. That is our vision for the Terragon business.

Darius Teter: Tell me though, how has series B fundraising been different from series A?

Elo Umeh: I think every fundraise is a story, every fundraise is a story.

Darius Teter: What was the effect of having these additional investors on the cap table? Did that require complex negotiations?

Elo Umeh: It did. It did. Complex negotiations, more centered on how much equity they can have in the round, maximizing their position, considering that you are also in a defensive position. Holding equity, equity, a lot of us know already, but equity is expensive. And as you build a business on a journey, you start to understand why equity is expensive. You raise a series A round, you give up 20% at $5 million, you’re raising a bridge round, they price you at a certain price and whatever multiple or multiples, you are talking about B round, and the multiple is also getting increasingly interesting. When you look at all this dynamic, you look at equity.

If we control, myself and co-founders, the employee stock options, we are currently just under 80% of the business. We can do a deal for half a million dollars. It’s maybe two point something percent of the business. But if we were controlling 40, 30, 20% of the business, it’s a different negotiation. At the beginning, as much as possible, be in a position to balance long term objectives and short term gains and understand the power of a clean cap table. It works as well for investors. It inspires investors’ confidence.

Darius Teter: Elo’s earlier fundraising journey set up the company for success in this more complicated series B round.

Elo Umeh: The capacity of people who are supporting you in the B round needs to be much better than the capacity of people who supported you in the A round. We already have the capacity in every part of the business, everybody we have around me now is much better than I am. That inspires confidence because raising a venture is to get to a product and have the MVP and be in a good position in the market. Reason B, is to make sure you have both the product and the people to deliver the growth. It’s very different, and that is really at the heart of the story. You have the product. How do you say that you have the product? The product is doing X, Y, Z in the market. You have the people, how do you say you have the people? These people are competent in this space. They can deliver the growth.

Darius Teter: I think you’ve actually given a ton of valuable lessons for entrepreneurs listening to this podcast who are preparing to raise money from friends and family, angels, venture, equity. I’m just curious, what are some big picture lessons learned? When should an entrepreneur start the fundraising process for any specific round?

Elo Umeh: The very first thing that comes to mind, as soon as you close a round, go on vacation, set up your strategy to execute and start raising the next round.

Darius Teter: That actually doesn’t sound like a vacation.

Elo Umeh: I think that is what you need to do. I think as soon as you close a round-

Darius Teter: Get some brains, get some brain space and work on your stretch.

Elo Umeh: Yep. That is it. Just start thinking about the next milestones for growth. Thinking through that, thinking about the people that you need to get there, thinking about runway, thinking about the investors you need, thinking about your overall strategy. Is it time for a significant liquidity event? Is it time to bring in a fund that would prepare you for an IPO? There are several things to think about. It all depends on the growth trajectory.

Darius Teter: Terragon’s own growth trajectory is impressive. They’ve emerged as a market leader and an exemplary success story in Africa. And Ido and Andreata are bullish about the prospects on the continent.

Ido Sum: While we all at times feel that we have made a very long journey in the African tech ecosystem, we are still in early days, and there is still a gigantic upside to whoever wants to join at this stage, whether it be as a founder, as a team member of any of these startups, as an investor, any investors investing in funds in the space, we are very far from saturation. I think we’re just starting that part in Africa and we are internally super excited about it. I think it is a great time for anyone to join this from whichever perspective he chooses or she chooses.

Andreata Muforo: What I would say is, I guess for the entrepreneurs who are listening, is that we celebrate you as entrepreneurs because you’re building the future. You’re solving problems that have been with us for many years and you’re taking that risk to be able to do that. We celebrate entrepreneurs, us as investors, we wouldn’t exist without you. And I think 2020 was especially hard with the pandemic, but I think there’s no other better people that can manage through this than entrepreneurs who are always solving problems. So just keep going and keep building.

Darius Teter: And if you ask Elo, keep raising. Elo didn’t start out as an entrepreneur, but he’s been on an incredible journey over the past decade. And I wanted to know what advice he could have used from the start.

Elo Umeh: I think entrepreneurs need to know that they should have confidence in their journey. Sometimes that journey is super lonely. Everybody’s going to be against you. Those long and sleepless nights, your dream and your vision is valid. Continue to chase it, doubling down on it, doing the right thing, setting up governance, making sure that you have, the structures are in place, because the community still is not where it needs to be in terms of these things, in terms of these theories. So you look out and ask the community and the community tells you, “Why should you do that? Why should they come into your business?” Your journey as an entrepreneur is going to be lonely. And most of the time you would be against the tide, but just believe that somehow it will land you very safely in the harbor.

Darius Teter: As we come to the end of today’s episode, I want to thank Elo Umeh for sharing his journey and life lessons with us. And Andreata Muforo and Ido Sum from TLcom Capital for bringing their expertise and passion as investors in Africa. Raising capital is not just about the money. Today, We’ve heard that bringing the right partners into your business doesn’t dampen your dreams, but rather it expands your horizons. It’s important to establish a relationship with clearly defined roles that will allow investors to support your vision even when those around you may not see it. Oh, and if you’re wondering whether Elo reconciled with his father, he did. Not when he raised a load of money, not when he signed an important deal, but when he had proven to himself that he could be an entrepreneur.

Elo Umeh: I just went to see him after I had a big break, after a year. It wasn’t a break that I was sure was going to change the fortunes of Terragon. But I just got a break that I knew that maybe we’re up to something. And I went to see him and I said, everything was fine, and that I’m enjoying what I’m doing, everything got going. It was not really, it was just more a case of, I needed to prove myself.

Darius Teter: This has been Grit & Growth with Stanford Graduate School of Business. And I’m your host Darius Teter. If you liked this episode, leave us a review on your podcast app. It really helps us to share the stories of these incredible entrepreneurs with as many people as possible. To learn how Stanford Graduate School of Business is partnering with entrepreneurs throughout Africa and South Asia, head over to the Stanford Seed website at

Grit & Growth is a podcast by Stanford Seed from Stanford Graduate School of Business. Laurie Fuller researched and developed content for this episode with additional research by Jeff Prickett, Kendra Gladych, she’s our production coordinator, and our executive producer is Tiffany Steeves, with writing and production from Isobel Pollard and sound design and mixing by Alex Bennett at Lower Street Media. We’ll see you next time.

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