American Venture Capitalist Engaging Small Businesses & Startups In Africa
African-American Luke Chernosky, Founder and Managing Partner of Chernosky Capital LLC, cares about building stronger businesses in Africa, and through such enterprises, believes the Diaspora may improve their community with self-sustaining economic development. Chernosky believes in the power of well-run businesses to positively shape communities and provide the resources needed to solve challenges internally. However, during his tenure as a venture capitalist at Adlevo Capital in Nigeria, he was dissatisfied to find that so few businesses had access to capital and basic advice needed to efficiently grow their businesses.
A Founder’s Mission
?From 2010 to 2012, I examined around 150 businesses, invested in 3, and the vast majority of those entrepreneurs were frustrated by the lack of capital resources. Many had fantastic businesses and I knew it was a huge loss to both these entrepreneurs and investors — investors who would otherwise be interested in supplying capital if only they knew about the great things people were doing?, Chernosky said.
[themify_quote]Being an entrepreneur myself, I can empathize with the momentous task of managing a profitable business. At any given time we are juggling multiple balls in the air from team management, to developing a diverse revenue pipeline, administrative processes and keeping short term operations aligned with the long-term vision. I?ve also sat on the other side of the table and appreciate the time saved in having good opportunities recommended my way.[/themify_quote]
After working at Adlevo Capital, Chernosky returned to the United States to get his MBA at Wharton, where he conceived the idea for his firm. ?It was a great opportunity for me to setup my firm and help close the capital resource gap, supported by?a team of great mentors and colleagues.?
To address the capital resource gap, Chernosky started his company, which among other things, identifies investors in the United States, Africa and across the globe who are interested in deploying capital on the continent and works with business to get to ?investor-ready shape? as well as implement a course of action for increased revenue generation. His journey to start his firm began from one simple observation. ?I saw, met and worked with so many talented entrepreneurs in Nigeria and I knew that if they had the right guidance to move their businesses to the next level, they could get on the path to making their vision a reality rather than never fully realizing their potential.”
He went on to say ?Growing a business presents unique challenges for African entrepreneurs; they face stiff competition from foreign products and services. For example, an entrepreneur starting up a manufacturing company may first need to overcome the challenges of the local environment, and then compete with a multitude of massive foreign companies that have decades of operational experience on them. Not easy.?
Helping Small Businesses to Grow and Investors to Find Them
While initially reaching out to small business owners, he often heard the difficulty entrepreneurs? had with simultaneously managing existing operations while raising venture capital. On top of the constant demands of running their own businesses, including managing buyers, employees and suppliers, those already stretched-thin managers struggled to find time for the intensive and consuming task of seeking equity investments ? a process that can conclude very quickly in the best of circumstances or drag on for 12+ months, or worse.
?Small business investors look at numerous potential investments per year and thus are quick to disregard things that do not pass their sniff test. Which is understandable, it takes a lot of time to properly carry out due diligence on a business. Investors are happy to work with entrepreneurs, but they need to know they are looking at a good opportunity, which is not always immediately clear.?
Accordingly, businesses seeking capital have precious few chances to reach out to an investor, making it critical that they have stable internal operations, a structured plan to engage investors, a detailed vision of growth and precise financial projections that tell the story.
?Being an entrepreneur myself, I can empathize with the momentous task of managing a profitable business. At any given time we are juggling multiple balls in the air from team management, to developing a diverse revenue pipeline, administrative processes and keeping short term operations aligned with the long-term vision. I?ve also sat on the other side of the table and appreciate the time saved in having good opportunities recommended my way.?
He remarked that ?Investors are interested in working with my firm because they can quickly identify investor-ready companies to deploy capital into. I save them time and create investing opportunities that they would not otherwise have, it can take weeks or months of to cleaning up and restructuring some of these businesses.?
Chernosky also thinks that it is a straight forward matter of educating entrepreneurs on best practices like strategic planning and securing new capital. ?Every-day entrepreneurs are all over Africa. Entrepreneurship is a necessary way of life, by virtue of having relatively few large scale enterprises to rely on for employment. While living in Nigeria, it was exciting to experience sharp business acumen everywhere I went. I remember negotiating in the Lagos Marina market for fabric and experiencing how adept the vendors were at negotiating. Fortunately I had good help with me to make sure I received a fair deal. Fully applying that raw talent to structured, long term business planning and large scale enterprise development would no doubt yield tremendous results.?
Closing the resource gap
To get his firm up and running, Chernosky setup an advisory board including his former boss from Adlevo Capital, who understands the complexities of capital raising, small business development and the African business landscape. Once he had the board in place, he set out to find other great partners for various facets of his endeavor. While building his business has come with many successes, it also has come with its own set of challenges.
[themify_quote]I saw, met and worked with so many talented entrepreneurs in Nigeria and I knew that if they had the right guidance to move their businesses to the next level, they could get on the path to making their vision a reality rather than never fully realizing their potential.[/themify_quote]
?One of my biggest challenges was determining which projects and partnerships not to pursue,? Chernosky says. He initially found himself pulled in many different directions while trying to carve out a niche for his firm. Without a structured mission and vision for the firm, potential partners needed clarification in order to figure out the best way to work together. ?Some conversations ended in both parties being excited to partner but the scope needed further definition. Without a clearly defined target to work towards, getting the process started often resulted in simply, more talk.?
After some trial and error he found creative, opportunity driven ways to bring on new partnerships under his firm. ?At the end of the day it is a people business based on trust. If you have that trust and the right people, great things can people accomplished.?
With the highs and lows that come with running a startup, Chernosky stays true to his mission. ?My hope is that entrepreneurs, paired with the right investors, all over Africa are able to grow their businesses into the type of world class institutions they know they can be.?
The response to Chernosky Capital has been overwhelmingly positive and has been exciting for Chernosky. ?I am very happy with the way things are going,? he says.??Entrepreneurs are glad to have an additional resource in their community they can reach out to for advice.?
With the positive responses from entrepreneurs, and the satisfaction that comes from helping an investor build a business that is making an impact, he looks forward to new business avenues on the horizon. ?At the moment I am exploring real-estate and small business lending branches of operation ? I?m excited to partner with colleagues from West Africa on those ventures.?
Moving into the New Year, he looks forward to opportunities to build new partnerships with businesses and investors alike. ?As the firm expands, I hope to incorporate a broader range of services that further help investors identify the right businesses for their portfolios and entrepreneurs build great-investor ready companies. My inspiration comes from the outstanding individuals I?ve met throughout my career and seeing open world of opportunities first hand, living in Africa as a venture capitalist. There are many, many ways to bring investors and entrepreneurs together and create value for all involved.?
Image: Xin Wang & Ralston Smith
Olusheyi Lawoyin is the Founder & Creative Director of The Voix.