‘Raise money when you least need it,’ Indian tech CEO Ananth Narayanan tells Kenyan startup founders

Ananth Narayanan, the founder and CEO of Indian direct-to-consumer (D2C) company Mensa Brands, has challenged Kenyan start-up founders to build relationships with investors beyond seeking funding.

Narayanan, whose company Mensa became Asia’s fastest unicorn and the second fastest globally within 6 months of operation, said the best time for ventures to focus on knowing investors in between funding rounds when they think they don’t need them.

A unicorn is a tech company with a valuation of $1 billion (Ksh.123 billion) without being listed on the stock market.

“Let them know your company. What you should be doing when not fundraising is meeting investors,” Narayan said on Friday during an event bringing together different players in the Kenyan start-up ecosystem.

He urged founders to chase investment opportunities in advance instead of basking on the glory of successful rounds, saying “The best time to raise money for your start-up is when to least need it. Raise now in case you need it in two years.”

Founded in 2021 by the former McKinsey director who had served at the consulting firm for 15 years, Mensa is an e-commerce company that focuses on tech-led lifestyle brands across fashion and beauty.

The company acquires several D2C brands and earns from their operations and has about 25 start-ups in its fold. It attained unicorn status in November 2021.

Locally, Kenyan start-ups have in general suffered a difficult operating environment in the last three years amid rising inflation, weakening currency, and unfavourable interest rates which have seen foreign investors shift capital from emerging and frontier economies.

However, e-commerce firms have especially had a hard time with uptake due to hesitancy and last-mile delivery challenges, as well as the absence of a reliable national courier service which has forced companies to invest heavily in dispatch teams.

For instance, the NYSE-listed Jumia, which is Africa’s biggest e-commerce platform, is still not profitable since its launch in 2012 despite reports of growth in the African e-commerce scene.

Last year, Kenyan Amazon-style e-commerce platform Sky Garden was acquired by tech credit platform Lipa Later on the brink of closure following insolvency. The SaaS (Software as a Service) platform that helps retail stores digitise offline and online sales, said the overall market in 2022 has been a struggle.

Narayanan said Mensa has chosen not to invest in last-mile delivery and advised start-ups in markets where the infrastructure network is not fully developed to invest in a few pick-up points at their area of operation.

“Pick your battles and focus on that. Get four pick-up pints in Nairobi, for instance, and invest in those if the infrastructure is not developed in your market or building small warehouses around the city,” he said.

He further cited cash-on-delivery and try-and-buy methods as some of the techniques which have helped Mensa penetrate the Indian market.

Much like Kenya, Narayanan acknowledged hesitancy in the Indian market, with consumers and merchants not willing to pay before a good is received.

To this, the Mensa CEO advised ventures to ensure high standards of high-quality control in their products to win customer trust, especially for markets that are infiltrated with knock-off products.

“The customer experience is always paramount for start-ups, you need to be involved in the lookout for imitation merchandise, the quality of fabric and things like that. Delivering the wrong shoe is not as bad as selling the wrong sizing,” Narayanan noted.

The business magnate spoke at an event hosted by Push Ventures, a Kenyan-based VC firm targeting start-ups using technology to solve Africa-specific problems.

The company participated in last year’s Ksh.1.2 billion ($10 million) Series-A round by Kenyan insurtech startup Turaco.