Today for fundraising for your startup, the term around entrepreneurship is, so to speak, well known and well oiled. Two elements come up regularly when talking about startups: pitch and funding. For the last point, one of the most “fashionable” means is obviously fundraising.
It often happens that equity financing does not allow you to go as fast as you want for your business. Fundraising therefore appears to be the “Holy Grail”, an almost compulsory step in the journey of any startup.
The success of this exercise is obviously not guaranteed, but knowing a few elements that we will share below may be very useful for you to achieve this.
Let’s go!
The basics of fundraising for a startup
What is that ?
It is the obtaining of financing by bodies other than credit institutions. The current mechanism here is equity participation. In this system, natural and legal persons make a financial contribution to the project which requests the funds.
Where to get it?
Thanks to the expansion of digital, so-called crowdfunding sites are growing on both sides, thus promoting specific investment. These platforms can be very useful for your project. You can also participate in dedicated events, during which you will have to go through the pitch exercise to present your project to potential investors.
When?
Raising funds for your startup is worth both at start-up and during the development of the business. At start-up we talk about seed capital, generally these funds allow young start-ups to get started. In development, it is a set of means that finance the growth of the activity.
In either case, the goal is to find investors who believe in you, in your project, and who are ready to invest.
The 5 phases for an effective fundraising for your startup
1. Preparation:
Good preparation considerably increases your chances of attracting and reassuring investors. Your “management summary” and Business plan will serve as support for your pitch. You will have to sell your project following the investment. You can also be accompanied by experts who will know how to “sell your project” or guide you as it should.
2. The approach:
- Target and contact
Establish the list of your likely investors after careful selection. Old journals and directories will be very useful. You’ll be the one to present your business plan to them.
- Meet investors
Entrepreneurship projects in Africa are increasingly on the rise. And the pitch competitions and various tenders are opportunities to seize to position your investment project on the continent.
- Organize meetings with these likely investors;
Be pragmatic. Once you’ve been spotted, everything accelerates
3. The duty of care:
Investors comb through all the elements of your file in order to minimize the risks, through:
– The market :
Analysis of the macro and micro-economic environments of the company. With the SWOT matrix (strengths, weaknesses, opportunities, threats).
– Financial analysis:
Is the project reliable? Profitable in the medium or long term?
– Technical analysis :
Is it doable? Achievable? Expert advice.
– Legal expertise:
Is it legal? Are the laws respected? Is the business climate favorable or unfavorable?
The answers to these questions will allow investors to continue or stop dead.
At this point in the negotiations, as an entrepreneur, you should be available and willing.
4. Negotiation:
It can last for months because it involves the future of the start-up, but also that of its owners.
Financial negotiations:
– Development of the start-up:
What is the start-up worth at the time of negotiation? Taking into account here its history according to the expected forecasts. Investor pessimism and entrepreneur optimism often give way to reality.
– The capitalization table:
It gathers information on shares relating to partners, the company’s stock market value in real time.
– Departure conditions:
It is a question of framing the conditions of active transfer of the shareholders.
Legal negotiations:
Here, it is essentially a question of the elaboration of the texts defining statutes and qualities of the associate members.
5. The closing:
It marks the end of the mechanism through the signing of the various legal documents, the actual payment of funds (and the festivities), all at an extraordinary general meeting (AGE).
Some advantages of fundraising
- It does not constitute a debt of the company towards the investors.
- Investors are remunerated on the gain from the sale of their equity securities.
- Investors offer know-how, skills, an address book (therefore, a network which often turns out to be more than useful for the return on invested funds, via the development of the startup).
Some successful fundraisers by startups on the African continent
- Streaming: Quilo, The exclusively mobile ix Netflix avec, with $ 750 million.
- Interswitch, unicorn of the African continent: $ 200 million dollars obtained from VISA.
- Kiro’o games specializing in video games: 290 million FCFA.
What do you think of the ingredients in this recipe? Do you have others under your elbow? Please share them with us in comments. In the meantime, dare!
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