One of the most common problems faced by the fledglings is large, unexpected orders by customers. How is that a problem? Big customers don’t pay upon ordering, nor upon delivery, but typically 30 or 45 or 60 days after delivery (a.k.a. Net-30, Net-45, or Net-60).
It thus takes money to make money, as young companies can’t typically pay the same Net-30/45/60 to their vendors. The result is that an order worth $50,000 can take $35,000 of cash to fill, an order of $100,000 can require $75,000 of cash, and an order of $350,000 can take $270,000.
This is one of the Catch-22s of companies in the growth phase. Too many orders, not enough cash to fill them.
Both Fledge and Africa Eats try and fill these gaps as best we can, as banks won’t do this for young companies, and other institutions are much much too slow to be of any help. Our problem is that we have a lot of companies in this growth phase and as such, all our capital tends to get tied up filling these gaps, which means we’re often out of capital when the next order arrives.
Last week this happened again, with $270,000 needed to fill a big order in Africa.
Luckily for the company, Fledge and Africa Eats are funded by many dozens of individual and family investors. We shot an email to all of them Tuesday morning. Two hours later there were eight responses. Within three hours the terms were set, the capital committed, and the contracts sent out. By Wednesday the capital was in the bank. By Thursday a loan agreement signed and the capital wired off to Uganda to begin filling the order.
We talk a lot about the power of networks for entrepreneurs. This is a great example of how networks of investors can help as well. This is why we’re happy to have over 80 investors in the Fledge family of funds and soon to be over 100 at Africa Eats.
Thank you to all of you in the network, and if you’d like to join, simplest to join the Wefunder campaign while it is still open.