Author: David Bogonko Nyokang’i

·         The company also recorded Kes 2.08 trillion in total revenue being the second-highest first-quarter revenue in the company’s history.

·         The LG Home Appliance & Air Solution business unit recorded the highest revenues of Kes.819.04 billion with an operating profit of Kes 104.17 billion.

LG Electronics Inc. (LG) has reported a Kes153.15 billion profit for the first quarter of 2023, the third highest first-quarter profitability in the company’s history.

Revenue for the same period is reported at Kes 2.08 trillion, the second-highest first-quarter revenue in the company’s history. The record growth in revenue is attributed to improved business structure and operational efficiency despite the profitability being impacted by challenging global economic conditions.

Commenting on the results, LG Electronics Inc CEO William Cho said, “The company’s business structure improved with its continuously expanding B2B segment and non-hardware business areas, such as content and services, which are achieving significant growth.”

From a business unit perspective, the LG Home Appliance & Air Solution Company recorded the highest revenues of Kes.819.04 billion with an operating profit of Kes 104.17 billion. The business unit recorded its highest first-quarter revenues, with operating profit exceeding Kes 102.12 billion in sales for the first time.

Continuous growth was driven largely by the rapid expansion of the B2B segment, fueled by sales of energy-efficient heat pump-enabled products as well as energy storage systems. LG’s industry-leading heating, ventilation and air conditioning (HVAC) solutions for homes and businesses deliver strong performance and energy efficiency that reflect current European market trends based on tighter environmental regulations.

“The company will focus on maintaining the competitiveness of its premium appliances as well as strengthening its mass-tier appliance lineup in response to the polarization of market demand, along with managing cost structure to enhance profitability”. Said Cho.

The appliance business expects to see continued growth by focusing on the expanding B2B segment and accelerating the service segment including the rental and care service business, which has reached an average annual growth rate of 30 per cent in South Korea over the past 5 years.

The LG Home Entertainment Company recorded first-quarter sales of Kes 343.14 billion with an operating profit of Kes 20.46 billion attributed to effective management of operational costs through enhanced demand forecasting.

Despite lower global TV demand caused primarily by challenging economic conditions in Europe, the company saw increased sales of the growth of content and services businesses based on LG’s webOS smart TV platform, while strengthening operation competitiveness. Premium 2023 product launches, led by innovative products such as LG OLED evo TV models, are expected to maintain the company’s competitive edge. At the same time, the global launch of “Lifestyle Screens,” delivering differentiated designs and features, is expected to boost sales and drive the premium TV market. The LG OLED Objet Collection Posé TV will be launched in over 40 countries this year.

The LG Vehicle Component Solutions Company achieved first-quarter sales of Kes 244.08 billion with an operating profit of Kes 5.51 billion being its highest first-quarter revenues ever.

Continuing the profitability momentum from last year’s fourth quarter, continuous efforts to strengthen the global supply chain led to further increased profitability in the first quarter as the value of accumulated orders for auto parts reached Kes 8.17 trillion. Despite the cloud of uncertainty affecting the overall global automotive industry, demand for electric vehicles is forecasted to expand. The company will sustain its competitive edge based on a stable portfolio made up of in-vehicle infotainment systems, e-Powertrain, headlamps and distinctive solutions.

The LG Business Solutions Company saw improved first-quarter revenues of Kes 151.15 billion

with an operating profit of Kes 6.71 billion. Stable growth is driven by proactively responding to academic season demand with competitive products including the new Ultraslim LG gram laptop computers, while product competitiveness and operational efficiencies also improved.

The company plans to focus on expanding its information display business by developing customized solutions and discovering potential customer demand. The company also plans to accelerate the development of new business segments, especially in South Korea, as robots (LG Future Park in Gumi) and electric vehicle chargers (LG Digital Park in Pyeongtaek) are being fully integrated into LG’s production systems.

The Central Bank of Kenya (CBK), today, announces the issuance and implementation of the Kenya Quick Response Code Standard 2023 (KE-QR Code Standard 2023; or the Standard). The Standard will guide how Payment Service Providers and banks (institutions) that are regulated by the CBK will issue Quick Response (QR) Codes to consumers and businesses that accept digital payments.

QR Codes are machine-readable code consisting of an array of black and white squares containing information that provide an alternative option for initiating and accepting digital payments made by customers at various points of sale, such as supermarkets, general stores, shops, among other outlets. The implementation of the Standard, and use of standardised QR Code-enabled payments, will bring practical benefits to businesses and customers. Customers will now be able to make digital payments in an easy, fast, convenient, and secure manner using QR. Previously, customers had to manually input different payment codes and numbers, hence creating friction and cumbersome payment processes that are prone to errors.

The Standard will also promote inclusion by enabling institutions of various sizes and customer focus to increase adoption digital payments. In the long-term, use of standardised QR Codes will facilitate launch of innovative products and deepen the benefits already enjoyed by customers making payments across various institutions and mobile money networks (interoperability).

The Standard, which is based on the EMVCo QR Code Specification, has been developed through collaboration between CBK, Payment Service Providers, banks, card schemes, among others. The Standard will be rolled out in a phased approach as these players align their operations to requirements set out in the Standard and increase customer awareness.

Issuance of the Standard marks an important step in the implementation of the National Payments Strategy 2022 – 2025. The Strategy was launched in February 2022 to, among other things, support the adoption of key standards and align Kenya’s National Payment System to global best practice. With the launch of the QR Standard, Kenya is joining other leading markets that have implemented the standardized approach to issuing QR codes for facilitating payments. These countries include, Philippines, Jordan, South Africa, Singapore, Bahrain, Saudi Arabia, India, and China.

Mozilla Africa Mradi in collaboration with Nairobi City County Government (NCCG) have entered into a partnership to support tech-startups in Nairobi County.

This is part of a new Mozilla grant making mechanism dubbed Mozilla African Innovation Mradi, which is designed to promote innovation led by and grounded in the unique needs of users on the African continent.

The partnership is in the background of the Mozilla Africa Mradi Innovation Challenge that will be held in June 2023 in Nairobi.

Mozilla’s Africa Mradi Innovation challenge will identify and support Kenyan tech entrepreneurs/startups and tech-students through an acceleration programme that will provide; technical support, access to grants and ultimately, market access for their products.

“Exploring and developing new projects, technologies, and products grounded in open innovation that produce a meaningful impact on the African internet ecosystem is at the heart of our work at Mozilla Corporation”, said Alice Munyua, Senior Director Africa Mradi.

Mozilla Africa Mradi Innovation week that will be held on June 26th and 27th 2023 at Nairobi. The initiative is part of the Africa Mradi which aims to leverage Mozilla’s role as stewards of the open web to promote models of innovation that are grounded in the unique needs of users in the African continent.

Kenya is the regional ICT hub of East Africa, with the country being a leader in broadband connectivity, general ICT infrastructure and home to more than 300 tech start-ups.

Through the Innovation Challenge, Mozilla seeks to support this ecosystem to ensure that youth innovators across Kenya  have access to information and knowledge needed to establish and run profitable startups.

“ Nairobi City County Government will be working with Mozilla Africa Mradi in two key areas; in conducting a situation analysis of all our tech-start-ups and to build capacity of tech innovators in Nairobi City County so as to ensure they have equal opportunities and platforms to showcase their innovations, are exposed to how venture capital investments work and trained on startup accelerator opportunities available to them in Africa” said Governor Johnson Sakaja.

·       By December 2023, the group aims to have planted 20,000 trees at the park.

·       The move to rehabilitate the park has so far registered an 80 per cent success rate, visible through the natural regeneration of the site.

·       Old Mutual has so far planted approximately 200,000 trees in the Aberdare Range and other regions in Kenya.

Old Mutual Group and its subsidiary, Faulu Microfinance Bank, have committed to planting 3 million trees within the next decade (by 2033) as part of the company’s broader climate action and sustainability strategy.

This year, the Group intends to plant a minimum of 20,000 trees in the Aberdare National Park and monitor their progress, which will contribute to rehabilitating 60 hectares of the park through a partnership with the Kenya Wildlife Service that dates back to 2017.

To date, the Old Mutual has planted over 40,000 seedlings covering about 36ha of the park. The park has a significant role in providing water to the 80% of the Kenyan capital city, including other counties such as Nyeri and Nyandarua and is also a habitat for wildlife.

Speaking during the tree planting exercise at the park, Old Mutual Group EA CEO Arthur Oginga noted that the move to rehabilitate the park has so far registered an 80 per cent success rate, visible through the natural regeneration of the site.

“As a responsible business, we are committed to promoting environmental sustainability and conservation efforts in Kenya. Our partnership with Kenya Wildlife Services to rehabilitate Aberdare National Park is a demonstration of our dedication to creating a better world for future generations. Through this tree planting exercise, we hope to restore the park’s ecosystem and preserve its biodiversity, making it a vibrant natural habitat for wildlife and a source of livelihood for surrounding communities.” said Mr. Oginga

Old Mutuals’ targets are guided by the Group’s Climate Change Action Strategy which considers the social and economic implications of initiatives taken, the urgency articulated through the science of climate change, as well as responsibility toward appropriate risk and opportunity management.

Arthur also reiterated that “Old Mutual’s response to sustainability is shaped by our core business activities and competencies, the ESG issues impacting our business and stakeholders, and a deep commitment to acting responsibly and treating all stakeholders fairly. Here in East Africa, we aim to achieve our climate action commitments through key areas of action that are in our direct control: reducing the carbon footprint, seeking to invest in a more diverse energy mix, providing products and services and partnering with key stakeholders to hasten the development of investment-grade climate policy and adaptation strategies”.

Speaking during the tree planting exercise, Dickson Ritan, KWS Director Wildlife and Community Services noted that this partnership is a testament to the power of collaboration in achieving shared goals of a sustainable future for Kenya.

“As partners in this tree-planting exercise, we at KWS are committed to ensuring that these trees are not only planted but are also monitored and maintained to guarantee their long-term survival. We recognize the critical role that these trees play in preserving the environment and conserving our wildlife, and we will work closely with Old Mutual Group and other stakeholders to ensure that they are well taken care of. Through this initiative, we hope to contribute to the rehabilitation of degraded areas within our national parks, and to create a more sustainable future for generations to come.” he noted.

Besides having a great impact on the environment, the exercise is set to positively impact Old Mutual’s entire business value chain from customers, shareholders communities and all the countries in which the company has presence.

Giving her remarks, Old Mutual Foundation Chairperson Susan Omanga said the tree planting exercises is an example of the Foundation’s efforts to make a positive impact on the environment and help mitigate the effects of climate change.

“In support of the Old Mutual climate action strategy, the Foundation has framed its environmental pillar to support our carbon offsetting and conservation efforts. Particularly, we are proud to be part of the future-focused leading organisations investing in water tower protection. We hope to leverage this exercise to contribute to the restoration of degraded land, the protection of biodiversity, and the reduction of greenhouse gas emissions. We are proud to be leading this effort and look forward to working with our partners and stakeholders to achieve our goals.” said Ms. Omanga.

As part of its broader climate action strategy, Old Mutual has so far planted approximately 200,000 trees not just in the Aberdare Range, but as well in other regions across Kenya.

By Philani Mzila, Investment Manager, Founders Factory Africa
In the startup universe, one of the most valuable (if not the most valuable) finite resources you have at your disposal, as a founder,  is equity. This is because startups generally don’t have the capital to scale in market or products developed significantly enough to leverage in order to fund ongoing enterprise growth.

This makes your startup’s capitalisation table (cap table)  an integral representation of how your venture is funded from an equity perspective (including convertible notes, warrants, and equity ownership grants). The cap table represents how much of a claim each party has on the value created by the business and what they paid for their ownership stake.  Managing the cap table well is therefore  a strategic imperative for any startup founder. As a startup scales, the evolution of its cap table has serious implications on how easily the venture can attract and raise new investment.

Cap tables and investor risk tolerance
At the beginning of a startup’s journey, the founding team owns 100% of the company. Depending on the resources they have available, founders tend to self-fund the venture as much as possible (called bootstrapping) up to, and including, the pre-seed stage in order to protect their equity value. At some point, however, the resources they have can only take them so far and they need to raise external capital.

At the pre-seed stage, a startup hasn’t necessarily found product-market fit and its revenue is often not the best measure of its potential because founders are honing their minimum viable product. At best, the venture has signals of product market fit, i.e. user growth, engagement and active usage and retention. The lack of product market fit, and bankable recurring revenue is typically a deterrent for investment by later-stage investors due to their inherently lower risk tolerance.

This is where angel investors and early-stage venture capital (VC) firms step in. Angel investors are high-net-worth individuals who are highly risk-tolerant and have the financial means to invest in startups and their potential future returns, at the right price. That “right price” is usually an ownership stake in the business, ranging anywhere between 5 and 15%, with that percentage being a symbol of the risk angel investors accept in return for their capital and operational expertise. Early-stage VC firms, on their end, typically provide additional institutional capital, operational and governance support as well as credibility to ventures.

Angels and other types of early-stage investors, like Founders Factory Africa, play a vital role in the VC ecosystem. Without the high-risk tolerance these investors bring to the table, most early-stage startups would not break out of the pre-seed stage due to a lack of funding.

The role of a term sheet at the point of investment
Given the importance of a startup’s cap table in its future trajectory, it’s worth highlighting the vital role a VC term sheet performs at the point of investment. A VC term sheet is a document that outlines the terms and conditions of a VC investment. It includes details on the amount of money to be invested, the equity being granted to investors, the timing of investor liquidity, and investors’ rights in the venture.

Some of the key terms founders and investors must be familiar with when reviewing this document include:

• Valuation – The value of the company which is being used as the basis for the investment.
• Pre- and post-money valuation – The pre-money valuation is the value of the company prior to the investment, with post-money valuation the value of the company after the investment.
• Voting rights – A representation of how much say investors have in the future strategic direction of the business.
• Liquidation preference – This is a clause that determines the order in which investors and founders  are paid back in case of a liquidation or bankruptcy. Be aware: liquidation preference typically relates to any liquidity event, not just a liquidation.
• Anti-dilution-provisions – These clauses can help protect investors from dilution because of a future financing round of financing. They can have the effect of decreasing a founder’s shareholder value.

An alignment of interest with the future in mind
As both an investor and a venture builder that helps startups improve their product and find product market fit, at Founders Factory Africa, we often advise founders to be extremely careful when exchanging equity for capital. When an investor decides to invest in a startup, they are looking for an alignment of interests where the founders can make a meaningful return for starting and scaling the venture, thereby providing a higher chance of a successful exit for the investor.

Some of the errors we typically see include founders raising their initial funding at too high a valuation. This creates unrealistic expectations for future funding rounds. At times, founders ask for too much capital without deep thought into what metrics and milestones they would like to achieve with the capital, leading them to give up too much equity very early on without considering the need for future funding rounds. These scenarios, in turn, stunt the venture’s ability to raise funding and scale, due to the lack of alignment of financial interests with investors.

As a startup matures and goes through its different funding rounds, the equity allocated to founders is diluted as larger sums of investment are raised at Series A, B, or C. If the cap table is not thoughtfully constructed, the startup may find it increasingly difficult to raise capital as questions around incentives for later-stage investors increase.

The startup ecosystem is binary. Either a business grows and succeeds, or it fails. There is no in-between. The value that a startup places on its equity, the partners they choose on its journey and collectively creates is the golden thread that runs through every startup’s success or failure. A thoughtful cap ensures that a startup can become successful. A badly designed cap table can do the exact opposite.