In Conversation: Clive Butkow (Founder & ex-CEO, Kalon Venture Partners)

Clive Butkow is the founder and ex-CEO of South African venture capital firm Kalon Ventures which invests in post-revenue start-ups with high growth and high impact potential. The firm has so far backed high-flying South African startups such as Sendmarc, Mobiz, and Flow. In total, it has invested in 11 companies since 2016.

With decades of experience in building high-growth technology businesses, Butkow states that he got into VC to leverage this experience to help upcoming entrepreneurs also build scalable technology businesses. In this interview, he touches on various aspects of VC including how it has evolved, and what he looks for in potential portfolio companies and offers advice to upcoming technology entrepreneurs in Botswana.

How would you say the VC landscape has evolved over the last 10 years?

For one, there's a lot more capital compared to when I started in the industry. So for innovators building life-changing products, there are definitely more opportunities to access capital compared to 10 years ago.

Conversely, I would also say that there are a lot more innovators for investors to invest in compared to 10 years ago. This presents an opportunity for investors to back businesses that would make them decent returns in a couple of years.

Those are the two main aspects which I would say have changed quite significantly in the VC industry over the last decade.

What advice would you give to startups currently in the market for venture capital?

One of the most underrated qualities of building a venture-backable company is surrounding oneself with people who have done it before. This can be in the form of the team itself as well as advisors and other parties. By doing this, entrepreneurs can learn to not make the same mistakes that other founders in the past have done. I think that's very important. Additionally, I would advise founders to take smart capital from investors who, beyond just signing cheques, would also bring more value such as expertise and a strong network.

Beyond those two points, I would also advise founders to make sure that they are building businesses which are addressing real problems and also have strong unit economics because as we have seen over the last year, only those types of businesses are going to survive in the current economic climate. Your business has to be capital efficient with enough free cash flow to weather the storms and also have a clear path to profitability.

From my experience, even in a funding crunch, investors will always be willing to put money into businesses which can make a return. Startups have to ensure that they are those types of businesses and I can promise that raising capital will be an achievable feat.

As a seasoned investor, what are the three most important factors you look for in a startup that pitches you?

First, experience because I believe this is invaluable as it prevents founders from either trying to reinvent the wheel or making avoidable mistakes. Secondly, a strong founding team whose sum of expertise can drive the creation of a product that is at least ten times better than what is currently available on the market. Thirdly, the product being built has to have a strong moat so that it can't be easily replicated by another startup.

So those are the top three most important factors to me that I consider when looking at a startup. Additionally, a startup has to have all of those on lock. It's not good enough to have a good team but a not-so-good product or vice versa. I also believe in investing in startups that already have some traction so that by the time they get an investment from me, they are building from something and not just starting from scratch. 

Botswana is a relatively small market with only about 2.4 million people. For startups from here, how should they think about scaling taking into consideration this limitation?

I think anyone who is in a very small market should think from day one about cross-border scaling. For Botswana startups, I would say they should strategise on how they are going to enter not just South Africa or other neighbouring countries but the SADC region as a whole. Growth-oriented founders will always figure out how to scale sustainably.

This kind of scaling does not always have to mean substantial capital investment which would be hard to come by for an early-stage startup. Founders can do this via strategic partnerships with other parties as well as distribution networks to distribute your product to these cross-border markets.  It is also important to note that what worked in Botswana won't automatically work in Zambia or Namibia and that's why it's important for startups to leverage partnerships to achieve product-market fit in these expansion markets.

Beyond the region, startups should also think about scaling continentally as well as globally too. The goal is to grow exponentially but also sustainably.  

What's next for you after your time at Kalon?

Raising another fund that will be focused on South Africa and Africa as a whole. It will be a bigger fund investing in late-stage and growth-stage technology startups on the continent.  That's all I can share at the moment and for more info, definitely watch this space.

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