Clothes from our first clothing collection designed by renowned designer Masaba Gupta
Lumumba v1.0 is dead. My initial assumptions are wrong. Failure? No, a learning experience. Here are 10 points about why I fucked up Lumumba and what I learned in the process of starting up. It’s been a one year journey. I hope these humble insights might help you do better in the future, as what happened to us also happens to many other tech founders. There is no resentment. I’m only trying to convey a cold-hearted simple analysis of what happened.
(1) Be a little stingy: I took a €20K loan to fund Lumumba. The first mistake I made was to not set aside €5K as emergency reserves. The second mistake was adding recurrent monthly expenses too early in the game. I hired a great law firm to help us write contracts and more. The downside? They charged us a flat fee of €500 every month. The third mistake was hiring the wrong tech developers, who made us loose over €6K. The realization is that you need to be stingy about spending.
Your Achille’s heel is going to be the small recurrent costs that you incur every month. The office, the lawyers, the accountant, the transportation costs, government taxes…These will add up and consume all your funds a few months later. We were spending around €2500 in monthly costs and thus, after discounting tech and manufacturing investment, we ran out of funds after 6 months. Avoid laywers, accountants, incorporation, monthly fees, offices as long as possible.
Be stingy when deploying your assets: time, effort, money.
(2) All the wrong business models: We started as a crowdsourced fashion brand: we hosted competitions for fashion students and crowdsourced designs for our clothing collections. We would pay royalty fees and create clothing inspired by cultures from around the world. We then added a flagship line by collaborating with famous designers from emerging markets. I quickly closed several deals with designers in India, Vietnam and South Africa. We learned how difficult it was to work with colleges and students, therefore we decided to focus on our partnerships as it was easy to work with experienced designers.
We faced the upfront costs of manufacturing in Spain. We didn’t know the extent of the decay the garment industry in Spain has suffered. Manufacturing is costly and technically limited. We have been to workshops ran by local textile businessmen that have dubious working conditions. In some cases, workshops in India and China have better conditions. We did find a few reliable manufacturers. Each prototype costs us €200. Each manufactured item costs us €44, even though we didn’t use premium fabrics. That is way too high compared to average industry costs. Lesson: Business models that are 100% soft tech may have lower entry barriers than hardware-based models.
The upfront cost of manufacturing apparel when building a fashion brand are too high. That’s an entry barrier.
(3) The Good People: We managed to build Lumumba thanks to Mar, Isabel, Stephen, Víctor, Gisela, Krutikaa, Sagar, Aparajita, Sudeep, Keyla, Djibril, Belén, Yen, Prudence, Sherrie and more people. All these beautiful human beings believed in our mission and decided to provide a brick to build Lumumba’s home. From the start, I knew that we’d need experts in Fashion and Tech. I knew I needed to build a strong team that would be better than me. I’m happy to claim that I managed to evangelize and gather a group of Lumumba believers who made this possible.
(4) The Bad People: On the way to make Lumumba a reality, we encountered several people who tried to take advantage of us. Even though it was clearly stated to be an unpaid collaboration, a former collaborator tried to sue us and claim a high % of the business and $2500 monthly salary for each month she had been involved in the project. That made a considerable impact in my mood and motivation as the uncertainty grew 10x. It could mean the end of Lumumba as legal processes in Spain can take years. Finally, nothing happened as there was no basis for the claims. We had even paid a digital marketing course so the person could learn new skills.
We hired a tech development agency through Upwork. They outsourced their own job to some unskilled Indian developers (Note: there are great developers in India). We lost $6000, precious time and we received a nonfunctional Wordpress website, a CMS which we had established we didn’t want from the start.
Lessons learned about managing freelancers: ensure accountability, measure and keep track of their work, double-check with third parties and friends, ask industry insiders to value their work.
(5) The Responsibility is on me: I learned and discovered a great deal about myself. Becoming an entrepreneur involves a great deal of mental stuttering and self-doubt. Business is brutal and it will take you down to earth in seconds. I discovered that I was effective at business development, hiring people, building partnerships and networks and more. I learned how to manage a tech project by using tools like GitHub and Slack. I learned a great deal about business models and startup culture. I tried to lead by example, working long and hard hours.
On a critical tone, I discovered I must demand more accountability, I must have a higher command and control of costs and budgeting, I must be more decisive, focused and follow-through with plans (a consequence of being on a journey to discover product-market-fit and a profitable business model was an openness to change that startled some colleagues).
Becoming an entrepreneur involves a great deal of mental stuttering and self-doubt. Business is brutal and it will take you down to earth in seconds.
(6) Think twice before incorporating in Spain: When we set up Lumumba Technologies Ltd., we already knew that incorporating in Spain wasn’t the best outcome possible. As a director of the company, I am required to pay the government a monthly fee of around €380. The accountant charges us €130. Summary? Whatever you do, the cost of maintaining a business in Spain is at least €500 per month.
Accountancy is not as lenient as it would be, for example, in Hong Kong. All paper receipts and small details must be kept in check, otherwise, calamity might ensue. The law doesn’t allow the existence of vesting schemes and each time you do a change in the ownership of the business, you must pay taxes and fees well over €1000. Too complex for an early-stage startup without revenue.
(7) Beware of Incubators: Each passing day, there are more and more incubators, accelerators, venture builders and such. All these “ecosystem boosters” are popping up without much accountability and analysis. In our case, it’s the Founder Institute. The experience was great because I’ve got exposure to successful local entrepreneurs and received feedback from them. However, a high percentage of participants left midway when we were required to incorporate the startup and sign an option giving away 3.5% in future returns from a successful exit. If we had over $100.000 in investment, the Founder Institute would also take a cut from that amount. There was also a program fee that we paid at the start. After our graduation day, we were pretty much left alone. I feel blessed that our small group of graduates stuck together and kept helping each other.
(8) Tech Development must be in-house: Are you a tech company? Then why do you hire freelancers or an external firm to develop your tech? Tech is supposed to be the core of your existence. If Tech is outsourced, you’re showing everybody that tech is not important enough to you. Tech is core, therefore must be in-house. I’ve seen multiple founders in Europe doing this mistake again and again, including myself. It might be an understandable situation if you want to develop an MVP and have proof-of-concept but definitely not suitable beyond MVP-stage.
If Tech is outsourced, you’re showing everybody that tech is not important enough to you.
(9) Venture Capital firms have their own agenda: VCs have a clear mandate: “Give us at least 5x returns on our money. We give you 8 years to do so”. Keep this in mind whenever you talk to a VC. VC firms in Spain won’t invest if you don’t have recurrent revenue. They look for businesses that are clearly in a growth phase. A seed round in Spain is no more than €100.000, which provides little room for exploration. Convertible notes are uncommon. Therefore, product market fit is a must have when you approach Spanish VCs, unless your team comes from Google or Harvard (which rarely happens here). Simply, keep that in mind.
(10) Listen to all opinions: Be open to feedback. Ask as many people as you can. Listen. Listen. Listen. Open your mind to people who have more experience than you do. Be the least knowledgeable person in the room. Aggregate all the information, digest it and generate insights and actions. At the same time, listen to your intuition. I felt Spain wasn’t multicultural enough to build a team that hailed from multiple places in the world (another controversial way to put it: in a multicultural, diverse startup, I want to be the token white dude). I felt Spain isn’t ready for African or Asian fashion. We ratified these intuitions later on. The US is ready and has the necessary pool of talent. I didn’t act quickly enough based on these intuitions.
Be the least knowledgeable person in the room.
We now have learned that a there is an opportunity to build an online store that aggregates multicultural clothing from all over the world. The long tail of small clothing brands that do cultural clothing and aren’t retailed by major e-commerce players. Zuvaa.com has successfully done this for African fashion. Why not brands from the rest of the world? Why are e-commerce models white and thin? Why not display multiple models that suit multiple kinds of customers? Logistics remain an issue. Stripe Atlas selected us to be part of their Beta program. We could incorporate in the US, have an SVB account in a week and begin from scratch again.
I am in debt. Debt is another form of slavery. I knew it was risky to ask my bank for a €20k loan to start the business. I fully accept the consequences. You could say that I’d lost a year of my life. I’d say that the learning experience is priceless and I am now 10x better prepared to do business. I’d like to help other entrepreneurs avoid the same mistakes. I’d like to apply all that I’ve learned in Spain, Ghana, India, China, Vietnam and other countries. Lumumba’s mission of bringing multiculturalism, diversity to the consumer clothing market remains valid. Lumumba v1.0 is Dead. Long Live Lumumba v2.0.
Lumumba’s promotional video, edited by myself with Final Cut.