Work in Progress with Samuel Fianko: Funding startups: A journey of resilience and patience
Welcome to Work in Progress, your source of unique, inspiring stories of founders of African start–ups. In this episode, I had a riveting conversation with Wisdom Anku, the Chief Executive Officer of Propartners Exchange Limited.
He shares their journey of highs and lows and the incredible resilience that has kept him and his team afloat for almost a decade of supporting small businesses through equity partnerships and investment crowdfunding. Take a deep dive into this inspiring story of grit, patience and resilience.
Samuel: Tell us about your business. How did you start and what has the journey been like?
Wisdom: Propartners Exchange Limited came up with this new concept of how we could fill the gap for small businesses and start-ups in terms of fundraising and making resources available through partnerships.
That also landed us in crowdfunding – specifically, investment crowdfunding. We started not with zero – we had some funds when we started working but we hit a roadblock. Just when we were getting overwhelmed and decided to open up our network, we were reminded that we couldn’t go on that tangent because we did not have the proper licenses.
We took off in 2016 and by 2018, we had already felt the impact of the financial sector clean-up and so the Securities and Exchange Commission (SEC) became strict on business models like ours because essentially, what we sought to do is to mop up the investment around and make that available to small businesses – so you’re either coming in as a partner to the small business with equity, funds or on some other arrangements or even debt.
At that point, we couldn’t make progress as we desired. We had to now pursue a license with the SEC. They didn’t yet have any law in place, no regulatory framework for models like ours and we were promised that the closest was the crowdfunding guidelines, which they were working on at the time. So, we were asked to hold on till those guidelines became available.
When we heard that, we were excited because we thought it would be just a couple of months. Then it turned into a year and another year and another. We spent four-plus long years waiting for the regulatory framework until last year, when the guidelines were adopted.
Now, over that period, we kept paying bills, kept our skeleton staff in place and all overheads; our money, everything went down the drain. We knew the prospect was good so we kept building the brand. We kept doing the right things, efficiently working and over time, we ended up building a very good relationship with the regulator, being the SEC.
Currently, we are not fully licensed but our application is at an advanced stage. We can tell that it’s been a blessing in disguise that we were trying to solve a problem for small businesses and then we had to go back into that problem ourselves.
As we speak, we are not as liquid as we began but one thing is certain: we have put in place the structures to be investor-ready, to be attractive to other people to even come on board. We have a very strong board in place.
Corporate governance is something we take very seriously. Even though our shareholders are still just the seven that we began with, we are currently out there speaking to a couple of persons whom we can refer to as angel investors.
We know we are attractive at this stage. Even though we are not making good revenue, we have been resilient, worked through the period doing the right things, keeping our books, filing all our statutory returns, being on good terms with SSNIT, GRA, Tier 2 and all that for our employees.
So, it’s a story we believe should be told so that the business community, especially those who want to venture or those who are also at early stages of their businesses can take inspiration out of it.
Yes, the entrepreneurship journey is not a very smooth one but if you painstakingly do the right things, however long it takes, you will achieve those goals that the organisation set for itself.
The very mission and vision that we have, we have not wavered from. We knew we had to keep going, however tough it was looking.
Samuel: What was the main motivation that kept you and your team? How did you get the conviction that made you stick to it and say that despite the challenges, you would still pursue the vision?
Wisdom: First of all, as I mentioned earlier, one thing drove us into this business. This model is about making small businesses investor-ready and profiling them to secure the much-needed capital from investors out there.
The biggest motivation is to drive employment and wealth creation through profitable MSMEs. We know one of the biggest problems for start-ups, small businesses and new entrepreneurs is capital; and we want to facilitate access to capital for innovative start-ups, especially women and youth-led ventures.
We have a model that doesn’t have to require what the traditional institutions will require. We go down, roll our sleeves and understand what exactly the need is and we do it with you.
Because that problem is still there, we know our solution remains relevant and our approach is valid. Our mission is simply to contribute to reducing the funding gap for start-ups and small businesses in this market.
Samuel: How have you sustained the business in paying bills, etc.?
Wisdom: It has not been easy but we pivoted on a couple of business support services such as our small business valuation services.
To keep us afloat, we have added a few subsidiaries as low hanging fruits. One of them provides cleaning services. We also have a restaurant services brand. These and regular shareholder injections have kept us paying the bills to date.
Samuel: How different are you from a venture capital firm?
Wisdom: Our main difference would be about scale. For a venture capital firm, we prefer to refer to them as the traditional sector, which is a very traditional way of raising capital for small businesses and start-ups.
However, we like to refer to what we do as alternative investment/alternative capital. That is, we understand that very few businesses in our system will be able to meet their requirements. So, we have a watered-down version of the venture capital, where we’re looking at it from a point of partnerships.
So, for instance, someone may want to build a business that requires GH¢1million injection and that person only has 35 percent of that while there are 10 other persons who can raise the remaining capital. These people may either join you as active partners or silent partners. We currently have two main service offerings – equity partnership and investment crowdfunding.
The equity partnership is solely based on partnership building. It’s about people coming together and pooling their resources together to finance a new or existing business.
In our part of the world, since partnerships seemingly don’t work well, we play an intermediary role so that when we put the people together, we don’t leave them to fare anyhow on their own.
We’re still in there to make sure everyone’s interest is protected. So, much as we see it as an opportunity to invest in a viable business, we equally want to play with you as though every single one of you owns that business and your interest remains paramount; and that’s what we – the intermediary- would want to do.
On the investment crowdfunding side, it’s very similar, except that the crowdfunding looks like the sTOCK eXCHange rather than a venture capital. Thus, the investment crowdfunding is where you have the business already existing and this business issues securities. The securities could be debt or equity. We then profile them on our platform for interested investors to buy into it, either the debt securities or equity securities.
Our service offerings have the semblance of a miniature stock exchange and venture capital. We, the intermediary, are there to protect all the parties, especially the silent partners. It will interest you to know that we have both long-term and short-term partnerships.
For the short-term ones, they’re strictly based on profit-sharing arrangements so no shareholding is involved. It is the long-term one that involves shareholding. The common thread between us and venture capital firms is that we both deal with early stage businesses.
Samuel: What is your vision for the next 10 years?
Wisdom: We want to build a formidable brand and we would want some good level of consistency in providing these services. However, we also want to be very agile, responding to changing market dynamics and technology disruptions.
To serve a wider spectrum of the ecosystem, we may add differentiated service offerings typical of traditional institutions. Both equity partnership and investment crowdfunding currently fall under alternatives. They are currently not the mainstream start-up fundraising institutions.
This is because businesses play at different stages so depending on the stage of the business, the capital source differs so much. At our current stage, our business may not qualify for venture capital and private equity.
Nevertheless, growth will eventually take us there, where we would want to broaden our spectrum so that we can deal with small and big tickets. We will definitely add to what we are currently doing.
Samuel: What thoughts would you like to share with people who want to venture into your industry? What experiences have you had that have made you suited for this industry?
Wisdom: Business has always been in my blood. I came to meet my parents running small businesses. Even with my training as a civil engineer, after a while, I ventured into construction as a business. Largely, we ended up doing this out of the passion to meet a very crucial need for young people who venture into entrepreneurship.
My background in terms of study, may not look like it but for the last 25 years after school that I’ve been working, the exposure has always been there, seeing how small businesses are run and trying a couple of them myself. We did well with some of them and failed with others.
We believe that it gives us a good base to even guide new entrants into this area. For instance, when you look at the services of Propartners Exchange Limited, you would notice that we work with two categories of ‘customers’: equity partners/investors on one hand and businesses/start-ups/entrepreneurs on the other hand.
When you examine the investor side, one of the key value propositions we give to people when we speak to them is that you can ordinarily leave your money in treasury bills. However, does that make you feel you’re making as much impact?
If the government borrows your money and you see government officials misusing it, do you feel like you’re making an impact? Compare that to identifying with a small business and investing in it.
Wouldn’t that feel much more fulfilling than merely locking your money in an investment instrument that you’re not sure what the money is even doing? These are the things that drive us to do what we’re doing. We believe as we play our little role – and others in the space do likewise, there will be a renewed spirit of young people taking up entrepreneurship.
I believe that will result in the good of the economy and curb the unemployment problems. We are not simply doing this to make a few bucks. Capital plays a very crucial role in businesses becoming profitable.
We have seen too many people whose idea of business is merely going out there and making a few bucks, so ethics don’t matter to them – they can cheat and steal. For such people, we advise them to desist from entrepreneurship. There’s a world of difference between an entrepreneur and a businessman.
For a businessman, anything goes. That’s not entrepreneurship. When venturing into entrepreneurship, two key things you need are patience and resilience. You will come to realise, sooner or later, that money does not flow that quickly, especially if you want to make the right impact.
This episode was adapted from an interview with Wisdom Anku. The author is a seasoned writer who specialises in telling stories of African businesses and business owners. He can be reached via fiankosamuel@gmail.com.
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