Whether you’re a founder, an early employee or an executive, the possibility of an exit offers extraordinary financial possibilities.
However, I see plenty of founders having liquidity events only to find themselves making hurried decisions with their newfound wealth, ultimately feeling frustrated when they realize they’ve paid a painful price by not having the proper advice.
Typically, I recommend breaking your planning into two separate phases to reduce overwhelm and maximize your wealth: planning before an exit and planning after an exit.
Before an exit, it’s important to coordinate planning and hammer out key details that will carry you through the sale of your business. This typically means teaming up with a financial adviser, an accountant, and an estate planning attorney. Just as you’ve built the team of your company to help your business grow and succeed, it’s important to build a team that’s coordinated and focused on your personal financial success both now and in the future.
Spending time upfront to determine your goals, objectives, and desired lifestyle can save you endless headaches on the back end of an exit, possibly save you a surprising amount in taxes and set you up for long-term success and fulfillment.
Speaking with a professional can help you determine what tax savings opportunities would be most applicable to your specific situation. For example, if you’re a startup founder, you may qualify for the QSBS exclusion (qualified small business stock). This exclusion could, if you qualify, allow you to exclude up to $10 million, and sometimes multiples of that, in federal capital gains tax after selling your stake in the company.
One of our clients whose company was being acquired did not know whether he would qualify for the QSBS exclusion when he was introduced to us. By coordinating with his corporate counsel and accountant, we determined he would. In this specific situation he had acquired the domestic C Corporation shares of his tech company, and held them for over five years by the time the acquisition happened. And when he initially obtained the shares, the gross assets of the company were less than $50 million. Needless to say, he was pleased to learn that the first $10 million of his gains were exempt from federal tax!
Requirements to qualify for QSBS include but are not limited to:
Twiga, a B2B food distribution company, will use its funds to set up a distribution center in Nairobi and deepen its conversion to offering supply chain services for both agricultural and FMCG products.
The startup is also targeting Pan-African expansion to French speaking West Africa by third quarter 2020, CEO Peter Njonjo told TechCrunch.
The venture has moved quickly on diversifying its supply-chain product mix. “We’re not just doing fruits and vegetables…I’d say we’re at 50/50 now between FMCG and fresh,” said Njonjo.
Twiga doesn’t plan to move toward entering or supplying B2C e-commerce, where it could become a competitor to other online retailers, such as Jumia.
But the company has factored for advantages in the B2C e-commerce space. “If you’re able to serve Nairobi’s 180,000 retailers, it means that the furthest customer would be less than two kilometers away from any shop. That’s the power of building a B2C business on top of a B2B platform. So definitely, the potential is there,” said Njonjo.
China is known for its relationship with Africa based on trade and infrastructure, but not so much for tech. That’s changing with a number of Chinese actors increasing the country’s digital influence across the continent’s tech markets.
This includes Africa focused mobile phone Transsion’s IPO and planned expansion in Africa and recent moves on the continent by Alibaba and Chinese owned Opera.
In an ExtraCrunch feature, TechCrunch detailed China’s growing tech ties with Africa and what they could mean for the continent’s innovation ecosystem and Africa’s relationship with China overall.
In two stories in Ocotober, TechCrunch followed Jumia’s IPO lockup expiry and volatile share-price ahead of the Jumia’s November third-quarter earnings call.
The Africa focused e-commerce company — with online verticals in 14 countries — has had a bumpy ride since becoming the first tech venture operating in Africa to list on a major exchange. Jumia saw its opening share price of $14.50 jump 70% after its NYSE IPO in April.
Then in May, Jumia’s stock tumbled when it came under assault from a short-seller, Andrew Left, who accused the company of fraud in its SEC filings.
In August, Jumia’s 2nd quarter earnings showed upside and downside: revenue growth still with big losses. Much of it may have been overshadowed by Jumia’s own admission of a fraud perpetrated by some employees and agents of its JForce sales program.
Jumia’s core investors appeared to show continued confidence in the company in October, when there wasn’t a big sell-off after the IPO lockup period expired.
It appears that what Jumia disclosed does not validate the claims in Citron Research’s May report. But the markets still seem wary of the company’s stock, which now stands at roughly half its opening IPO price.
Jumia will have a chance to clear up any lingering confusion and showcase its latest numbers on its third-quarter earnings call November 12.
TechCrunch reported additional details to two big African tech market events that happened over the last year. First, Naspers Foundry’s new leader, Phuthi Mahanyele-Dabengwa, confirmed the 1.4 billion rand (≈$100 million) VC arm of South Africa’s Naspers is accepting pitches.
Announced in late 2018, Naspers Foundry will make equity investments in various amounts, primarily from Series A up to Series B in South African ventures. Founders from other parts of Africa with startup operations in South Africa can be considered for funding, Mahanyele-Dabengwa clarified.
CcHub and iHub CEO Bosun Tijani revealed more detail about the recent merger of both names. CcHub – iHub will pursue more operating revenue from consulting and VC investing, vs. grants, according to Tijani. The new Nigeria and Kenya based innovation network will also look to bring an Africa startup tour to the U.S. and is considering opening an office in San Francisco, he said.
More Africa-related stories @TechCrunch
At the recent TechCrunch Disrupt SF, Senegalese VC investor Marieme Diop suggested that Silicon Valley’s unicorn IPO model might not be right for African startups. The is largely because the …
African tech around the ‘net
Chinese autonomous air mobility company EHang has filed with the SEC the paperwork required to go public in the U.S. on the NASDAQ exchange, with a $100 million initial public offering. The company, which has been flying demonstration flights with passengers on board for a while now, is gearing up to launch its first commercial service in Guangzhou after getting approval from local and national regulators to deploy its drones in the area.
At launch, EHang will be using its two-seater vertical take-off and landing craft (VTOL), which has room for two passengers on board. EHang doesn’t just build the aircraft, though – its goal is to build full, multi-aircraft (as many as ‘thousands,’ according to Forbes) autonomous transportation networks that it hopes will serve to alleviate and avoid congested ground traffic. Guangzhou, with an estimated population of over 13 million, suffers from considerable traffic.
EHang is also building out logistics and cargo transportation capabilities as well as passenger services. The company believes it can offers short designate cross-city transportation that can cut down on time by as much as 40 to 60 percent, and once it achieves scale, it also says that costs have the potential to be reduced by as much as 50 percent.
Founded in 2014, EHang last announced funding in 2015, when It raised $42 million in a Series B round led by GP Capital, with GGV Capital, ZhenFund, Lebox Capital, OFC and PreAngel also participating.