Austin Okere (AO) is a renowned name in the tech ecosystem in Nigeria and indeed Africa. And that is for a number of reasons. He founded CWG Plc, an IT-solutions company of over 26 years, at a time when starting a tech company was not a trade of fancy.
His thoughts on financing come from a place of double experience. First, Mr Okere is a great salesman. He built a company that is making an annual revenue of about $130m. Second, he raised funds ($10m) for CWG in 2009, a time when raising funds was not commonplace.
Trust me, the insights are worth the time. He shared from a point of experience and class. I hope you enjoy the excerpts from our conversation below.
Conducting this interview was a bit uneasy because I am expected to understand his stand on a whole lot of issues, having been his mentee for half a decade. But I made up my mind I was going to ask questions like I knew nothing. And it yielded a lot of new learnings.
And, he gave a lot that I could not share in one post. So, the second part of this will be up tomorrow. It is equally enlightening.
Q: We know that you started CWG over 26 years ago, your first entrepreneur journey. the question is why did you take the leap? I mean you had a comfortable job…
AO: Yes, I did have a comfortable job. I was on a commission which usually is in multiples of my salary and my life was on the roll. But having done that for about four and a half years, you still get a feeling that there is a void. Something is missing and I think it has to do with whether you are operating in your passion zone or not.
If you remember, my first love was not sales, I read Computer Sciences. I had a Second class upper from Unilag and I desperately wanted to be a systems analyst or programmer. When I went for an interview I was told: “why don’t you try sales if you don’t like it”.
They didn’t even interview me for an analyst programmer. Perhaps they just saw me and thought that I fitted the profile of a salesperson. I went in and I did fantastically well. But after a while, you get a feeling that something is missing, especially if you are not in your passions zone.
If you take a look at a person like Nelson Mandela. His passion was to free his people, Obama was to make a change. He was a senator. He was quite comfortable. Usain Bolt likes to run very fast and he broke the world records. Same for Achebe, He likes to tell stories.
So when I went to start CWG ( at that time it was Computer Warehouse which later became CWG PLC) the whole point was to have the breadth to be able to express myself. How can I provide a platform that will create a means for people to be able to do their job better?
At that time it was technology.
Q: So from what you’ve said, what qualities do you think an individual needs to possess for them to be fitting to take on the entrepreneurial role?
AO: I get this question a lot where people ask me whether entrepreneurs are nurtured or made by nature i.e are entrepreneurs born or made? And my take always is that this is not the right question. I think for me the real question is who volunteers to be an entrepreneur?
If you put your hand up, then you are the right person, no matter the innate capabilities that you have. If you don’t put your hand up and you don’t go and start, then you are not the right person. If you are combat knowledgeable but you don’t volunteer to go into the army, then you are not a soldier and somebody may be less combat knowledgeable than you are and he goes to the army that is a soldier. Same as the entrepreneur.
The question is first, how do you make up your mind? Whether to go on that journey or not.
For me, you have to, in my view, take a very practical approach. I always advise people that ask me should I leave my job and go or should I continue my job? I will not make that decision for you, but I will give you the framework for making that decision. And my advice is simple: draw a T-table.
On the left hand of the table, you’re going to put all the reasons why you should stay in your current job, on the right hand, you’re going to put the reasons why you want to go and start on an entrepreneurial journey. You will put all those factors in the respective columns of the table and at the end of the day, you’ll look at which side of the skills the balance tips towards.
So if the balance tips towards staying at your job, stay. If on the other hand, the scales are tilted more towards going to set up your own enterprise, the second step will be to sit with your stakeholders (everyone who is invested or can be affected by your decision) to seek their buy-in.
Yeah, those invested party views are important, but you need to also seek the view of someone not invested, he will not benefit or lose and then you go through that tea table with them and then it sort of validates whatever decision.
Assuming you took the decision to become an entrepreneur, you may need to seek the tripod step. A tripod is a quite balanced stool to sit on. And that tripod would be to look out for people to come with you.
Maybe not in the very beginning at least but not too distant in the future of your entrepreneurial journey. Look for at least a minimum of two. Then the rest is left to how you execute that innovative idea that you have.
Q: Are you saying that not everyone is built to be an entrepreneur or not everyone can be an entrepreneur?
AO: I think you have to ask yourself that question objectively. Typically entrepreneurs are visionaries. So entrepreneurs see before anybody else sees, more than anybody else, and they see further than anybody else. Every organization needs one to thrive.
Then you also need leaders because leaders will take the vision of the entrepreneur and bring it into reality by creating a day to day execution strategy.
Then, the strategy will be executed by managers. Managers are the people that do how. How we get from here to there. All three are required.
So one of the entrepreneur’s attributes is people management: how to find those other people, how to empower them, how to be empathetic, be resolute but also listen and be ready to make adjustments when there is a superior argument.
Q: A couple of times on social media, the younger generation has blamed the older generation for the mess in this clime. The older generation has, in turn, blamed the younger generation for not being disciplined. People talk about how opportunities abound in your time more than now. What do you think?
AO: Let’s take them one by one. My children who are Millennials (though they are younger than Millennials) always bring up this argument whenever we sit down at a dinner table and I find myself defending our generation. Then, sometimes I’m quite objective.
So my question to them is: what do you think is the problem we have today in Nigeria? You will see them come up with a whole lot of things.
I will say very good. So then what do you think is the solution? They will say ‘you people should have done this and this and that and that’.
I will also say very good. So what is your role in this solution? Then it will become a shortlist because they haven’t thought about that.
See, we can’t go back and write the beginning of the book, but you can start from now to write a better ending and that’s what I will charge millennials to do. Blaming the people in the first republic, people in the military governments that came on all that is not going to change anything.
The answer is starting from where we are now: what should be done? Not just what should be done by others. what is your role in what should be done because if everyone plays their part, then we will all do the right thing and get out of this situation?
It is not a hopeless situation.
My worry is that, even now, we have not determined the fashion of our trajectory not to talk of starting, we are still doing analysis of who to blame. And, the longer we spend on who to blame, the longer we delay.
Talking about opportunities between then and now… When I was starting CWG, it was pretty challenging. I remember that my first LPO finance was from a commercial Bank, Credit Alliance. I’ve been everywhere nobody wanted to listen, I started a company with the money I saved, the ones that I took from friends and so on.
And I got this purchase order that I needed to bring in computers and I didn’t have the money. Nobody was ready to listen to me for the simple reason that I didn’t have collateral. someone who has just worked for 4 1/2 years and starting on his way, where is he going to get a land or a house?
So, I went to a commercial bank. I have forgotten the name of the manager of the branch, but I really cherish that gentleman. He made the arguments to his boss then called Mr WIllie. And they made a concession for me. And then they gave me the loan.
I brought in the goods, supplied and paid them and then we grew together myself and that bank. I will advise many banks to do that. The business is not buildings and structures. The business is the founder, the promoter. Look for a founder that you believe in, trustworthy and work with him towards building an agile enterprise into conglomerates.
David, there are so many opportunities for attracting funds today. There’s so much information on the internet. We didn’t have that. I remember that we used to send invoices and purchase orders by the Fax machines. It will take weeks to deliver and return.
So I think things are easier today.
But for all that, we were very determined. On the corridor where we started at Adelabu in Surulere, there were about 15 other entrepreneurs that were running IT businesses. There was another corridor at Akerele and another corridor at Eric Moore. But a lot of people did not make it but we still carried on.
So let me conclude by saying that there are three things that play in this. And one of them is what I call an uncommon advantage. The uncommon advantage is basically the era of your birth. This is not in your control. You’re just an advantageous person because you find yourself in a family that can send you to school probably overseas.
When Jeff Bezos started his book store called Amazon online, the uncommon advantage he had was that the internet was just booming. It was growing at 200%. Zoom had the uncommon advantage of the pandemic.
The second one is an unmerited favour, which is when God Smiles on you or your guardian Angel is doing overtime and all the stars aligned in your favour. As the Igbo say the person who the gods have helped to palm kernel should not go about boasting about his prowess.
The last one is a natural ability. This is basically your willpower, learning as much as you can about what you want to do. Your willpower which is carrying on even when everybody thinks it is the time to stop.
And your ability to have the patience for those seeds that you planted to grow into big fruits. I see a lot of young people, they started a company three years later they’re going for series A, series B funding and at the end of the day, they own 2% of a business.
You shouldn’t be in a hurry to sell your fruits. I think you should plant your seed and let it grow, then you will have bountifully and then sell out of those fruits. And that is when you raise all those funds.
Q: So by the time you brought Finacle into the ecosystem it wasn’t like there wasn’t any other software the banks were using, how were you able to penetrate? How were you able to claim a stake at the top?
Yes Finacle was not the first one if I can recall. We had Bank Masters from Europe. We had Globus, now Terminus.
Finacle was actually the last to come in. We have offers from America but we were looking at getting a banking application that has been operating in an environment similar to ours and they have a technical horsepower to write a good application that can stand the trends of the time.
At that time India had started to become the tech centre of the world. Their environment was not so different from ours as well. So anything that works there will work here too given that we have common challenges. The next question then is who and what?
We did some research about companies in India and found out that Infosys had not just been a successful company, but the company of big governance with a track record and the kind of values we share. So we approach Infosys. They came to Nigeria to do a sort of check to determine who they will be partnering with. We were not on the top of the list.
They had gone to supposedly other companies that were more mature and I don’t think they got the kind of reception that they deserve, they were on their way to the airport, and they just thought they would stop at Adelabu.
Because we knew exactly what we were looking for, we rolled out the red carpets. We just required that they trained our team so they won’t have to be flying back and put so much pressure on their own support team. I think that resonated with them.
That precisely was so successful because we understood the system as well as a day we could customize it to what the customer wanted. On the other side, the other banking software users had to then write to the company overseas and then they will have to pass the papers back and forth about identifying the need and then documenting change management.
Within the same time frame, we would have put in the requirements and the software will be running based on the new requirement.
Of course, because we had so many banks using it we had an academy here that was training personnel in dozens therefore the banks didn’t struggle to find people. So a correlation of all this meant that when a bank was going to buy software the first choice will be Finacle.
That’s why we came from virtually nowhere to the point where at some point in time and probably now, 75% of banking transactions in Nigeria are done on Finacle. UBA is on Finacle, First Bank, FCMB and a lot of other banks.
Q: You talked about being patient and not eating your seed. But you raised fund. So, what would you advise on raising funds?
AO: I think the issue about fundraising is that it should not be an end in itself, it should be a means to an end. I will say you should tick as many of the boxes as possible because the people that are giving you money are not philanthropists.
They are actually astute businessmen not happy with the normal rate of returns on their funds. That is why they go into something as risky as venture capital or private equity.
If they give you a million dollars today, in five years they want 3 million dollars back no stories. They don’t want to hear that the exchange rate went up or came down if there is COVID or not. If they give you a million dollars today, 5 years down the line they want 3 million dollars back. In addition to that, you may be paying what they call “coupon”.
So these people are not teddy bears that you cuddle. You should be eating with a very long spoon. I’m not saying that they’re bad I’m just saying it the way it is, having been on that road myself.
Now, my advice is that you try to do the things that will initially knock you down in value. So have a board, have board minutes and get the other things that they will tick off as valuation. Merely not having a board or not maintaining board minutes will drop significant valuation for you. The best thing that can help you is to do something like an ISO certification because then you begin to see what you need.
Also, study that term sheet and look at the things that typically are pitfalls. I will point you to one of the dangerous ones. They call it the Golden share: no matter the amount of equity they own, you cannot take any decision at the board if they do not agree. Essentially every decision is passed through them.
Here is where it gets tricky. Let’s say that I took a million dollars in 2014 from a bank and let’s do this arithmetic very carefully. At that time, the FX rate was 191 naira to $1. Let us even say 200
That 1 million dollars I took from the bank will be N200m Naira at 20% interest rate. We are in 2020. That makes 6 years now. 20% in 6 years is 120% per cent. 120% of that million is $1. 2m. It means that I will pay back N440m for a loan of N200m in 6 years.
Let us keep that figure aside.
Now let’s do the arithmetic. If we took $1m from a venture capitalist in 5 years they want 3X so that means that by 2019 they will want $3m. And, $3m in 2020 (at an FX rate of 440) can you calculate it? That is about N1.2bn
So the entrepreneur that went to a local bank is returning N440m and the entrepreneur that took money from the venture capitalist is going to return N1.2bn.
Can you see my point?
So if your business hasn’t reached an inflection point I don’t think the venture capitalist money is for you. Maybe you should just borrow in Naira and pay the interest rate.
What do I mean by ‘inflection point’?
There is a point where you have assimilated all the cost of building that business. Any additional customer you get after this is pure profit contribution margin.
After you reach this point, you can bring in investors that will merely share in your profits.
The CWG Example
In our case, CWG raised 10 million dollars in 2009 from a PE firm. This is because we were investing in clouds computing under our CWG 2.0 strategy. We listed on the stock market after 5 years and that broke the golden share rule, all shares became equal and the Investor is still in the business.
This was one of the good stories but I know some other stories where the owners of the company seeded over 70% to the PE or the VC because they couldn’t make the 3X amount in 5 years which is stipulated in the term sheet signed.
The concluding part of the interview will be published by 12 pm tomorrow. Please lookout for it.
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