Part 3: Raising Paga’s First Financing
“You hear all these stories of Yahoo and Google founders who started in a garage. Do you think they wanted to start in a garage? Do what you need to do to move forward!”
From the moment I started dreaming up Paga, I knew we needed to raise venture financing. The “use of cash” problem was not one that was going to be solved without significant investment. Since I had been in Venture Capital in Silicon Valley, I was very comfortable with the idea of having investors; I’d much rather own a small part of a large company, than 100% of a small company, so I had no hangups about raising money. It was the best chance we had to build the sort of massive business I imagined.
Picture this: It was the summer of 2009 and there was very little investment or support in Nigeria for startups. Yet, I was looking to raise $1 million. How did I come up with that amount? It sounded like a good round number, I had a model to support the use of funds, and my three main advisors also thought it was “about the right number”!
Again, I cannot stress enough the importance of building your network and knowing when to tap into it: I spoke to one of my Uncles and he suggested I come to South Africa to meet a wealthy Nigerian friend of his, let's call him John for ease (not his real name, obviously). John worked in the financial sector and had strong connections in Nigeria and according to my uncle, he might be interested in the opportunity. Since it was still humble beginnings, I debated the cost of a plane ticket to South Africa with Jay and Aisha. They thought it might be a good use of money, especially if I was able to successfully raise some money. So, I jumped on a plane and went to South Africa.
My uncle arranged for us to have dinner with John on a Tuesday night at a private room in a French restaurant in Johannesburg. John brought along another friend of his and we had a great dinner and conversation. Both people really bought into the Paga story and at one point John stood up, raised his voice and shot out his hands and said:
“I can hear the radio advert now, Just Paga it, Just Paga it!”
— I was elated! He got it! My pitch worked! John said he would get back to me the next day.
I heard back from John the next day as promised, and he asked for a one on one meeting with me on Thursday. At that meeting, John suggested I send him the full Paga business plan and we could go sell the idea to Mike Adenuga (Founder & CEO of Globacom) or Jim Ovie (Founder & CEO Zenith Bank). He guaranteed he could get the deal done, we would make a few million, and I would still get to run the business. I was completely shattered! I lied that I’d consider it and get back to him.
Disappointed, I went back to my uncle’s home and recounted the story. He was equally disappointed. He then asked me a profound question: “You hear all these stories of Yahoo and Google founders who started in a garage. Do you think they wanted to start in a garage? Do what you need to do to move forward!” I was stunned at the truth of his statement and he was absolutely right. If my small team had to move into my apartment that was exactly what we would do… we just had to keep moving forward.
I went back to Lagos with the disappointing news but freshly committed to double down on the fundraising. I had turned down an opportunity, and I was determined as ever to make this work.
The lesson I took away from my experience with John was that at the very start of a business you need to focus on people who understand you and your team. People who not only get the problem you are trying to solve and are excited about it, but who, most importantly, had faith in your ability to execute.
I turned to my advisors and started “passing the hat” around. The first money in the bank came as a $25k wire in November 2009 from a former boss who had been advising me as I evaluated several ideas. Another former boss sent in $15k. A friend gave me $5k and I cried. I cried because I knew his $5k was a real sacrifice for him and it showed his faith in me. I was more inspired than ever.
I was fundraising pretty much all the time until our Series A — $25k here, $50k there. At that point, I was open to any amount and I was judicious with how we spent money. Nothing came easy and there were two occasions things got really dicey and I was not sure if we would make payroll. In one of those cases, an investment came in just the day before payroll was due. In another, I walked into a business partner’s office and they asked if we could do a piece of custom work for them. I said yes and sent them an invoice asking them to pay 40% upfront. Luckily, that job covered two months of salaries. We had a runway and that was all that mattered. Jay and I didn’t take a pay sometimes to ensure everyone else got paid.
Our first big break came when Tim Draper agreed to invest in our Seed round.
Though I think he was excited about Paga from the first introduction, I believe knowing one of my former bosses who had already invested in Paga went a long way to convince him to back us. Tim’s investment demonstrated to me another lesson on my journey fundraising for a startup…
There is no better endorsement than someone who has worked closely with you backing your venture! As such, wherever you are working, do great work! Make your boss look good and always take on more and pour yourself into the work. Don’t have a side hustle that distracts your execution.
10 years later, Paga has 33 angel investors and 7 institutional investors and we have raised about $34.7 million. When I reflect back on our early day struggles, I’m eternally grateful to each and every one of them, especially the ones who took the risk early before we proved that we were worth it. We won’t be clocking this milestone without their faith in our ability to execute and their partnership through thick and thin over the years!