Sustainability of SMEs is in becoming better not bigger

There is an emerging school of thought in Kenya and most probably in Africa that for one especially startups to be successful or to make a lot of money one must be able to scale their business as fast as possible.

Granted that Kenya needs SMEs and startups to grow underpinned on their importance to the economy, blind focus on growth cannot be sustained in the long run and even worse still big companies are not immune to failure.

The school of thought has made Kenya’s young entrepreneurs and innovators focus on developing a convincing enough product focused on possibility of rapid growth and scalability with the aim of securing investment or sale for a huge profit.

Part of the reasons on the sole focus on growth is that it forms part of the requirements of funding institutions such as venture capital. A company can get funding from a venture capitalist but as they say he who pays the piper determines the tune of the music.

Chances of having a shared vision or interest with a VC are very minimal with VC having very little interest in the end customer of the company who are the reasons the business is in existence. The funding shifts business focus from customers being King to customers being revenue target pawns.

According to a study by Kauffman Foundation 86 per cent of companies that succeed in the long term never take money from VCs or other external investors.

The emergence of alternative financing in Kenya has had the cause effect to entrepreneurs who have a blind focus on growth, buyouts, unnecessary teams or employees, expensive offices all in anticipation that revenue will catch up with these cost gambling with investor money while at it.

Entrepreneurs and innovators in Kenya must focus on developing businesses focused on solving problems customers are facing which will lead to sustained organic growth without the need for outside investment.

It’s against this backdrop and with the value proposition of creating safe spaces for entrepreneurs in Kenya that Viffa collaborated with Ihub to establish ANGA incubation a program where entrepreneurs can validate customer problems, develop customer focused products, develop appropriate systems and structures and become better at solving such challenges with sustained growth a byproduct of the combined effort.