I want to see African founders win.

$5B African VC in 2021. 🚀🚀🚀

But as Africa gets “hotter”, I think we’ll see more problems with broken early-stage cap tables given the volume of pre-seed (~80%) and number of first-time founders.

Here are some signs of a broken cap table:

1. Excessive founder dilution.

You’ve given up too much equity too soon. You’re on track to be a minority shareholder by Series A and successive rounds make you nervous. But your startup needs capital.

Series B/C/D investors worry that you’re too diluted to stay motivated.

2. Passive investors own meaningful chunks of your equity.

They’re possibly opportunistic angels or advisors that came in early. They’re free riders - adding little value to your journey but taking up space on the cap table. They’re not very helpful or responsive.

3. Misaligned investors own meaningful chunks of your equity.

They’re probably institutions but they don’t necessarily share your vision. They were aligned, engaged and responsive to start with. But they may have shifted focus along the way…maybe Africa became less “hot”.

4. Your institutional investors are not a stage fit.

They’re PE/SME not VC and own 50% (or close enough to that) of your equity. They place demands on you that are more suited to later-stage startups. Like audited financials or quarterly boards at the pre-seed stage.

As a first-time founder, how do you know:

- When to raise?
- How much to raise?

Milestones are a good tool to plan, size, and time your raise to investors and to sound smarter talking to investors.

Here's how: 🧵

The general idea is this:

- Think of your startup's journey as a timeline with a series of "signposts"
- When you’re operating in between two signposts, focus on driving progress to the next one
- Raise capital at signposts
- Communicate your plans to investors using signposts

First, what are startup milestones?

-- Milestones are specific, quantifiable, time-bound achievements that mark future targets on your startup's planned growth journey ("timeline").

*Not* a list of strategically-neutral, unrelated events happening in a vague future.

Milestones are critical for startups because they're important valuation "inflection points".

As you hit them, your startup's valuation floor goes up.

Early-stage investors are heavily influenced by patterns, and thinking in milestones is a great way to use that in your favour.

Investors care about 4 broad types of milestones:

1. Hiring (or attracting) key people
2. Product launches/upgrades (driving an increase in the rate of customer acquisition)
3. Market validation (customer/revenue thresholds)
4. Fundraising momentum (commitments during a round)