Allon Raiz 

Founder and CEO of Raizcorp, the largest private, unfunded incubator on the African continent.

Elevator Pitch: Who is Allon Raiz?

Allon is the founder and CEO of Raizcorp, the largest private, unfunded incubator on the African continent. They “look after” about 500 businesses across Africa at the moment; in South Africa, Angola and Tanzania. Allon has been in the business for 17 years. He teaches at Wits Business School as well as Oxford, where they are educated on the Raizcorp business model.

Incubation

When a business is in its post-revenue growth phase, you create an environment around that business that enables it to thrive. When you supply entrepreneurs with a support structure – physical infrastructure, like boardrooms and discounted or free services, staff training and mentorship, you contribute to the flourishing of that business. Allon doesn’t use the word “incubator” when talking about Raizcorp. He feels that the term connotes weakness and illness. That is why they coined and trademarked the term “Prosperator”.

Starting Out

In his early twenties, Allon worked for a friend in the clothing retail space. After he helped turn the business around, he was featured in a newspaper article. That very same day Allon received a call from a very wealthy man who offered to fund any business he ever wanted to start. He started a fast food shop which failed dismally. His benefactor and mentor wouldn’t allow him to throw in the towel. The second time around, Allon’s mentor surrounded him with a whole team to support him in the business and this resulted in great success. Raizcorp was founded to pay-it-forward.

Making Mistakes and Learning from Them

Allon feels the biggest mistake made by entrepreneurs is miscalculating break-even. They tend to forget about all sorts of hidden expenses and at the same time inflate their income in the planning phase. He suggests you put buffers into your plans that allow for these over- and underestimations. Margin is another thing that people don’t understand all that well.

When to Pull the Plug

From the entrepreneur’s side, Allon suggest you keep asking yourself different questions. If you keep getting different answers, you should keep going, keep trying to save the business. But this can only work if your business model is structured correctly.

From the incubator’s perspective it’s similar. Allon insists that he backs entrepreneurs and not businesses. He looks for a certain attitude and energy in an entrepreneur. If the business model is structured correctly, or if he can help fix it, he will continue to support the business.

Characteristics of an Entrepreneur

The academic qualifications of a “jockey” are not relevant to Allon when he considers a business to invest in. He concurs that some form of qualification is useful, but when you join the entrepreneurial programme at Raizcorp you are taught all you need to know. Allon looks at character, resilience, flexibility, ability to learn – a list of 17 different characteristics. From their Partner Elite division’s side they look at the scalability of a business.

Differentiate Yourself from your Competitors

Allon has been in the business for 17 years and Raizcorp has had 10 200 businesses through the various programmes that they run. Their original equity partner from 17 years ago is still their partner today. Raizcorp has a massive infrastructure of resources and an elite team of 130 people.

The Business Model

Partner Elite (the equity deals division) is very low profile, it doesn’t even have a website at the moment. You contact them through their network after which they will meet with you for discussions. They charge a small fee every month, but really only make money once the business gets profitable. It’s the prerogative of the entrepreneur in question whether they want to buy out the equity after a certain amount of time or have Partner Elite remain. For each deal there is a hurdle rate in place and a guarantee for growth. They never take a controlling stake in the business, but anywhere between 30% and 50% is the norm.

The second division of the business is called Arise and here they focus on enterprise and supply development on behalf of big corporates. Arise was founded to create bursaries specifically for black-owned businesses. This is a fee-based business model.

The final division is their African division.

Growing Ideas

Allon mentions that Raizcorp’s main focus is not the funding of ideas, but they have in the past had great success with these types of deals. They are much better geared for the stage right after that, where the entrepreneur already launched the idea, started the business, but is battling to take it to the next level. They don’t require the business to be profitable at this stage.

Built to Sell vs. Built for Legacy

Allon has personally never started a business with the intention to sell it but concurs that the way you build your business would be subtly different when your aim is to eventually sell it. Strangely, it may require more discipline from an entrepreneur when he intends to sell the business at a later stage, because the timeline may be shorter.

Reset Button: If you had to start over in a different industry, what would it be and why?

He thinks about this a lot and calls it the Renewal Fantasy – would he survive if it all went sour. Allon is not entirely sure which business he would go in if he had to start over, but he is sure of the group of people he would want to take with him. He is certain of success in any field with this team. He would, however, want to have an impact on people’s lives.

Last Words

Value should be at the core of everything your business does, whether it’s in your interactions with your clients or your staff. After you have identified your value you can focus on selling that value.

Allon feels that many entrepreneurs are reluctant to knock on people’s doors and sell themselves. This stems from their fear of rejection and it ultimately holds them back.

Entrepreneurs should remember that they are seeds of positivity in the economy. Don’t fear failure – failure is not the end, just the beginning of a new curve.