The Fundamental Ride – Making Profits The New Investors!

The Fundamental Ride – Making Profits The New Investors!

Jumia is exiting some markets in Africa. Uber Eats has been eaten by Zomato in India. Glovo, the Spanish on-demand delivery platform is exiting Egypt. If you check these companies, one thing is clear: they are looking for a path of sustainable profitability. Businesses must make profits to be going concerns. While revenue growth is critical, a very fundamental element in business is a company’s capability to make profits. Without profit, a company dies, over time.

Oscar Pierre, the co-founder and CEO of Glovo, commenting on exits, said, “This has been a very tough decision to take but our strategy has always been to focus on markets where we can grow and establish ourselves among the top two delivery players while providing a first-class user experience and value for our Glovers, customers and partners.”

“Leaving these four markets will help us to further strengthen our leadership position in South West and Eastern Europe, LatAm and other African markets, and reach our profitability targets by early 2021. I want to place on record our thanks to all of our Glovers, customers and partners in the markets from which we’re withdrawing for their hard work, dedication, commitment, and ongoing support,” Pierre added.

I am sharing this because the playbook is changing rapidly as investors update their strategies, demanding from founders and CEOs a clear path to the desired destination: I have funded this company, now I need you to show me how you can be weaned from more outside capital and be a real business. That is a message every founder needs to hear right now. It is global and even more awakening in Africa. We need to be aware that our gestation period to profitability in Africa is long, and that requires exploring ways as early as possible to make money. When no further funding can be guaranteed, profits must become the new investors!

While you may think that raising capital may help you, most people have noticed that you can raise capital and still crash. Think of Efritin which just gave up on Nigeria. It happens daily. They think that market growth is the solution when the path to profitability is what matters [path to profitability may not matter to a U.S. founder because they have massive sources of new capital. We rarely have here].

Yes, your new business problem in Nigeria is not just capital but the long gestation period required for profitability, affected by many factors at scale.

Meanwhile, Jumia has a new boss in Nigeria. Massimiliano Spalazz takes over from Juliet Anammah who moves to Chair position of Jumia Nigeria.

Dealing with Long-Profit Gestation in Nigerian Startups

Update: You can add Lime (a scooter company) in this club of “finding profitability”.

Lime is hoping to achieve profitability this year by laying off about 14% of its workforce and ceasing operations in 12 markets, as first reported by Axios. CEO Brad Bao told us, “Financial independence is our goal for 2020, and we are confident that Lime will be the first next-generation mobility company to reach profitability (Techcrunch newsletter)

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2 thoughts on “The Fundamental Ride – Making Profits The New Investors!

  1. There are fundamentals that never change, a truth that never dies: what makes a business sustainable are CUSTOMERS, not investors!

    Nobody needs to be deceived, the most important metric isn’t how much you can raise as a business, but rather how big are your customers. That beautiful word called ‘cashflow’ doesn’t originate from investors, but customers; you must never lose sight of that.

    The craze and fanfare attached to fundraising shouldn’t make it the end, it is only the means, profit is the end; only customers guarantee that.

    What differentiates a business from charity is profit, both can raise funds, so when you are not profitable, you must reassess your purpose.

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