VP Blog

A note on Hacks & Lessons @ 1.

Eighteen days ago, @vplatformhub turned One!

While the party heads on the VP team planned to stage a party to celebrate the journey so far, the sombre and more serious ones on the team prevailed. : — ) We didn’t have a party. What we did do instead was individually reflect and conclude that while we had come so far, there was more work to be done.

Since we commenced operations in 2016 a lot has happened. Earlier this year we graduated our first cohort of six companies, more on that here. Happy to say; Jalo, Mobile Forms, Wesabi, Payconnect, Proteach and Lizzies Creations are all kicking ass and taking names.

We also restructured the business; spinning off our co-working/co-living infrastructure operation — and essentially became a rent paying tenant at Ventures Park. Additionally, we began laying the foundation to enable us to make more social impact and do non-profit work. All of this further helping us hyper focus Ventures Platform on funding and supporting early stage companies.

More recently, on May 15th we commenced the second cycle of the Ventures Platform acceleration program with six exciting companies in the batch.

It being an amazing learning experience and we keep experimenting, remembering we are but a start-up, helping start-ups’.

. . .

Here are some hacks we recently implemented.

  1. To further support our alumni we began offering quarterly business review sessions that allow us to spend periodic time with alumni founders, review progress, play devil’s advocate or simply just catch up.
  2. We standardized reporting expectations from all current and alumni companies to ensure accountability and measure progress. We are in this for a “haul”.
  3. We developed and shared with our founders a useful but simple start up corporate governance framework. Please share your comments below, we would love to hear what we have left out.

. . .

We also learnt a few lessons.

  1. While there are legit reasons for employed people or entrepreneurs to pursue projects as side hustles, we have learnt for a fact that the ideal VP founding team need to be completely sold out to the idea and work full time on it.
  2. Getting all companies in a batch to grow at a similar pace towards a showcase like demo day is not necessarily practical. Some ideas just take more time.
  3. Build a process and trust the process. In doing this we have since incorporated a very strict investment selection committee constituting of our investors, board and core team to make the final call on the selection of accelerator companies as well as outside accelerator investments.
  4. We also learnt to trust our instincts and that investing really is an art not much of a science.
  5. The chemistry and health of the founding team is superior to the idea.
  6. There are more people talking about investing / angel investing / start up investing and the likes — than there are people writing checks. Sad!

. . .

In the coming months, we look forward to learning and sharing more.

To the future. ✊

Kola Aina

Originally published at Ventures Platform.

VP Blog

How to think through your Business (Unit Economics)

(Unit Economics)

Unit economics is extremely critical to the survival of any business, I would attempt to keep this as simple as I can, I hope it passes the “Moms test”.

One of the biggest lies startups can ever tell themselves is “we will lose a little money on every customer, but we will make it up in volumes”, it’s as good as pouring more water into a leaking bucket hoping it would hold, cos now we have poured a lot of water into it. If you are losing money at a smaller stage it just amplifies when you are bigger if the holes are not fixed.

Unit economics is the method used to determine whether a business model can be successful or profitable. It looks at the direct revenues and costs associated with that revenue acquisition.

2 questions at the core of understanding unit economics are:

i- How much does it cost to acquire a customer?

E.g. If Accounteer provides accounting services to companies on a subscription basis, let’s assume companies pay N10,000 annually for access to this service, sounds good? But for them to get companies to pay N10,000, the companies need to have heard about them, so they do several ads on facebook, google and maybe newspapers, they spent N250,000 doing all that. They got 20 companies from this exercise, in essence their CAC (customer acquisition cost) is N250,000/20 customers =N12,500.

ii- How much is a customer worth?

Here, there is a concept called LTV (life time value), simply put, it means how much can you make from that customer over the life time of their relationship with your product.

Bullshit Alert: Startups are usually quick to say the customer is going to use their product forever, that’s not true, as there would be competing options, the company might go out of business, or they build the same solution internally the list goes on and on.

So let’s assume each customer stays for 2 years here. So you make N10,000(annual subscription fee) x 2years= N20,000, whereas you spent N12,500 to acquire them. So in actual sense you are making N7,500 from the customer.

This is a simple way to understand Unit Economics. As long as the customer gives you more money than what you spent on getting that customer you have a deal (LTV > CAC), if your CAC is higher than your LTV that’s death alert, you need to stop whatever you are doing and head for your war room and figure out a way to acquiring customers for cheaper or maybe charge customers more (this works if customers really want your product) or both.

General advice, you should be making at least 3 times what it cost you to acquire a customer.

Originally published at Ventures Platform.