How to get your business funded: Capital is one of the biggest hindrances that many budding entrepreneurs face in their quest to start a business. But how business is conducted has evolved, and today, you don’t always need capital to get started. That is if you can convince an angel investor to buy into your idea. Yet, this presents another hurdle that many entrepreneurs don’t know how to go over. Today, we hear from successful entrepreneurs on how you can get the elusive capital injection from angel investors:
It’s not personal: Billionaire venture capitalist on the Shark tank show, Kevin O’Leary, says that whenever he evaluates how viable a business pitch is, he will not care about the feelings of the entrepreneur behind it. This means that when you approach an investor, the last thing you should do is to over-emphasize your feelings about your product. “If a business has no merit, it’s a bankrupt idea that is going to fall regardless of the emotional attachment the owner has on it,” says O’Leary. To separate your emotions from your business, you should carry out thorough market research. This will inform you and your potential investor whether there’s a growing, wide need for your service or product.
Execution: Rahab Mbugua, the founder of Ray Interior Décor and Ray’s Closet says you should not take an investor on a long journey when executing your pitch. “Talk about your product, not your journey. Be quick to describe the specific problems that your product or service is going to solve. If not, clearly describe the creativity or innovation behind it, and why it matters in the business world,” she says. Rahab started her business with a Sh. 500,000 capital injection from an angel investor.
Background checks: Johnni Kjelsgaard, an angel investor and founder of Growth Africa who funded Shop Soko in Kenya, says that apart from your pitch, an angel investor will always look at the skills, knowledge and commitment of the team behind you. “This team should portray an array of competence in sales, managerial and administrative capacities of the product or service they are pitching,” he says. Also, an investor will always follow up on your pitch to establish the veracity of the pitched idea before releasing cash. “If we agree to invest, we always do a follow up to ensure there won’t be any liabilities, and that the details are as exactly as they were in the original pitch,” he says. This means that you must not sugar coat your pitch. Also, you must table a realistic value to avoid getting dismissed as greedy.
The part-time: Pitching a part-time business to an angel investor might be a tricky move. This is because no one wants to place their money on an entrepreneur who is not wholly committed. Says O’Leary: “Why should I give you my money if you are not willing to give 110 per cent of your time? Things get really tough in business and you must be commitment and portray commitment.”
After getting funded: Getting funded is not a guarantee that your business will succeed. This is what Liz Simiyu, the founder and CEO of Slim Therapy, learned after getting a Sh. 3 million seed capital from angel investors. “I struggled with cash flow management due to poor book-keeping after getting funded,” she says. “This pulled me backwards due to the subsequent unplanned expenses and improper credit control.” She broke even once she started carrying out proper book-keeping that tracked income streams, costs and budgets. “Once you receive funding, you must include all the fundamentals of running an enterprise in your business,” she cautions.