Idea stage start-ups
Unless you’re Elon Musk this is the hardest time to raise capital. If you have the common problem where most of the costs are upfront and then revenue comes online later then my advice would be to find someone with capital that could benefit from your idea and approach them for funding. For example; I approached reinsurer Hannover Re with my idea, as a reinsurer they are interested in ideas that could generate premium revenues and especially new areas of insurable risk that can add to the diversification of their book. There are also plenty of VC’s looking for relevant African ideas, especially ideas that may improve living standards. They may not all be based in Africa, but they definitely exist.
Don’t worry about the trust issue and NDA’s when approaching investors – assess the people you’re meeting and divulge as much as you feel comfortable with them. Most people are too busy to copy your idea – this risk is much lower than you think. How often has someone told you an idea and you’ve copied it? Probably never. Be careful, but not so careful that your idea dies.
We found that having a balanced founding team helps – everyone has access to different networks, the more diverse your core team is the more options you’ll have.
Start-ups with a product
If you have a product that’s making sales in Africa and you have a clear path to scale you should have no issue raising money. The VC market in Africa is growing and if your product is relevant, the total addressable market is big enough and you can scale into it, you’re there already. It appears that very few ideas make it to sales stage, if you can just get here as quickly as possible it will make raising much easier!
If you can fund growth with cashflow that’s even better, go with that as long as possible as it will improve the valuation you’re able to get – but build relationships with VC’s early on so that when you decide it’s time to inject money in, you can do it quickly.
A word on the pitch deck:
Pitch decks are essential for raising, and there are 1,000’s available online. The other day I literally looked at an early AirBnB pitch deck, just google it. It should be noted that South African investors are considered to be much more conservative than in major developed markets like the US (this may be influenced by a number of factors including that their fund sizes are usually smaller so there’s less to spread around). It is therefore important that your deck clearly shows that you’ve worked your business model, shows market potential and shows a credible way you that will penetrate into that potential.
InvestSure fund raising
We’re raising our global seed round in mid-2020 and we’re super excited! We’ll be giving feedback and lessons learnt shortly after completion 😊
By: Shane Curran, CEO, co-founder of InvestSure