Most startups will not make it to their fifth birthday. On average, 50% of American startup businesses will fail within the first 4-5 years, according to a study by Statistic Brain. In the developing world, these failure rates are likely to be even higher due to additional challenges related to small funding pools, absent infrastructure, limited talent, and market volatility. As much as these and other similar statistics may seem grim and discouraging, they shouldn't be.
“Those of us looking to support innovators in emerging markets need to move beyond just using consulting templates and get into execution mode; we need venture building. This kind of support will differentiate companies that do well from those that never make it,” says Peter Ndichu, a Venture Building Lead in our Catalyst Fund team.
Catalyst Fund is a pre-seed venture capital (VC) fund and accelerator that invests in startups developing solutions to improve the resilience of communities most vulnerable to climate change in Africa. We announced our investment in ten exceptional African startups in January of this year. We invest in and accelerate startups via our bespoke venture building support delivered by industry and market experts.
Unlike mentors and coaches, venture builders get into the trenches with founders to help them find solutions to scale their businesses. Many founders building early-stage companies can find themselves on a lonely journey. They have many problems, from finance to product development to HR. The solution to these problems can be found in a venture-building team, which articulates the difficulties facing the founder and provides support directly or finds the right resources to solve them.
At Catalyst Fund, our venture building team initiates the journey with portfolio companies by helping identify their most significant challenges. Depending on the challenges, the startup is matched with a Catalyst Fund venture builder – an expert with experience in the solutions needed. After a bespoke technical support plan is developed, the venture builder assumes a quasi-co-founder role for a period. “I practically tackle these challenges as part of the company's team and aim to empathize with the founder, providing unwavering support,” says Peter. “Startup founders can be passionate about their ideas, and sometimes this can lead to blind spots... that is why venture builders can bring a much-needed external perspective.”
Peter recently led venture building services for Agro Supply, based in Uganda. The startup is solving capital flow problems that farmers face. Agro Supply helps smallholder farmers to access quality inputs through a save-to-buy model. One season, the farmers harvest and sell produce, earning an income they spend on various needs; soon, it's planting season, and they don't have sufficient funds to buy seeds and other inputs. Therefore, Agro Supply built a platform that enables farmers to save during the harvest season, so they are not out of pocket in the planting season. It also sells high-quality farming inputs to farmers so that they can be assured of a good harvest.
Peter and the team of venture builders helped implement solutions to solve Agro Supply's critical issues. "Through the venture building assistance we got from Catalyst Fund, we have increased our revenue by 100%. We had a very scrappy website, but now we have a very professional website because of Catalyst Fund. We were looking to get investors, but our pitch deck needed improvement, so they also helped us with that and then introduced us to 22 investors! Because of the audit, they did on the dashboard of our system, we now also have sales reports. They also helped us revamp our USSD interface, which farmers use to make input payments. Also, we are now incorporated in Delaware. We can now say we are an investment-ready company. Catalyst Fund amazingly did all of this,” says Joseph Ogwal, the founder of Agro Supply.
Alongside venture building, Catalyst Fund invests in these companies. Getting into the trenches with startups to help them move towards investment and growth is vital, as is financial support. So, Catalyst Fund provides this added ammunition to help the startups hire talent, invest in growth, and generally 'keep the lights on'. This mix of ingredients, technical support and funding, helps a company reach the next level faster.
We've supported 71 companies in the last seven years, who have raised more than US$640 million in follow-on financing. Their solutions have already benefited more than 14 million vulnerable households and small and medium-sized businesses worldwide, which is a testament to Catalyst Fund's impact.
There is enormous satisfaction in seeing how our portfolio companies scale our support. A lot of the problems they're solving don't have obvious solutions. Seeing these founders endeavor to build something that doesn't exist is inspiring. While it's undoubtedly challenging, every successful collaboration brings the world closer to a more resilient future.