Are you in search of fundraising strategies for your SME? This post has some exciting strategies you should check out. Continue reading.
Businesses established in tech hotspots like Silicon Valley are increasingly distinguished by their incubators, accelerators, angel investors, and several social infrastructures in place. Now with this social infrastructure, raising early-stage funds in those markets is significantly easier than in other places. If you are an SME founder in Africa but have an exciting business idea, there are ways to get the funding you need to get started.
Marketing is changing, and your product no longer needs to be limited to one niche. For instance, you are probably aware that good content can increase your sales. This is critical in attracting, hiring, and training the right talent. To make fundraising easier, combine that content with trends, insights, and advice from actual investors.
Easy Fundraising Strategies for SMEs in Africa
Here are seven fundraising strategies for African SME founders:
Never put a square peg in a round hole.
The best thing you can do as an SME founder is to solve a problem in your industry. It doesn’t matter whether or not the problem is obvious. Unfortunately, this is easy to forget when you’re trying to secure funding from a crowd of SMEs also in need of aid.
Too many entrepreneurs pitch solutions in the absence of problems, attempting to fit square pegs into round holes. You must remember the fundamentals. Instead of merely providing ideas for the sake of being innovative, seek out solutions that can resonate with your actual business challenges and needs.
Show your potential investors that you can connect the dots between a problem and its solution by putting yourself in the shoes of your customers rather than simply pitching a solution that sounds cutting-edge.
Seek investors who can understand your “why”
There are various types of venture capital firms, and finding one that understands the “why” behind your idea will ensure you have an excellent long-term business partner. Find an investor who believes in the mission of your company and does not want to be hands-off.
VCs aren’t just looking to give you money. They’re entering into a serious relationship with you, and they want to make sure your business style matches theirs. Knowing your “why” and allowing it to guide your content can help you build a lasting relationship.
Controversy Can be helpful
Of all the fundraising strategies we will discuss here, this might seem like provocative advice, but don’t be afraid to create your own reality distortion when necessary. Share where you see the future going and how you plan to make it happen even if you think your stance is too bold.
Share your excitement and passion freely with your potential investors. Investors love founders who have big, ambitious goals, and they get excited about going big. Demonstrate your commitment, communicate your enthusiasm, and share the experiences that have led you to be so steadfast in creating this new reality. Without fundraising strategies such as these, you might not succeed in the world of African entrepreneurship.
Explore self-funding
If you can do it, self-funding is fantastic. You wouldn’t have to relinquish control of the company or put off product development and market entry in order to raise capital. The main disadvantage of self-funding is the lack of other investors who could be useful strategically or for future financing rounds.
A word of caution though: self-funding is only beneficial if you can do it “comfortably,” that is if a total loss of your investment has no material impact on your lifestyle. Put differently, if you have a high net worth and a great business idea that only requires 5-10% of your capital, stop reading this article and get started on bringing your product to market. If you don’t, keep reading for some detailed discussions.
Loved ones can help
Seasoned investors will tell you that they only invest in businesses if they believe in the management team. This is especially important in the SME sector where hard work, dedication, resilience, and creativity help founders to succeed.
If you believe you have what it takes, hopefully, your friends and family believe the same. If they are willing to invest, make sure you give them a fair economic deal and use counsel to document it so they sign all the standard disclosures about understanding and accepting the risks of the investment. The last thing you’ll want is a feud with your friends and family on the off-chance that your business fails.
Incubators and Accelerator Programs
While business incubators/accelerators are not a new concept, their emergence as a prominent force in the startup community is. These organizations, which are more common in major startup hubs, typically offer early-stage companies affordable workspace, mentoring, and networking opportunities. They also provide capital to selected companies in a very limited number of cases. Far too often, they simply assist with fine-tuning business plans, preparing fundraising presentations, and connecting with potential investors.
This type of assistance can be especially beneficial for first-time entrepreneurs or SME founders with limited fundraising experience. The key point to remember is that the majority of incubators provide advice rather than money. Advice without a financial stake in the outcome can be an unhelpful distraction that pulls you in different directions.
Find Angel Investors
Individual investors who are not “friends and family” are referred to as angel investors. You may also come across “super angels.” These individuals actively seek out deals in which invest significant amounts of capital. They may also invite a group of co-angel investors. Angel investors tend to know other investors who may want to invest. Also, they may have information that can be extremely beneficial to your brand. It almost never hurts to have a group of sophisticated, well-heeled investors who are invested in your company’s success.
Angel investors typically invest in areas that they are passionate about and understand.
So, how do you go about finding angel investors who are interested in your deal? The simple answer is that you must network like crazy!
While information is readily available online, actual relationships remain valuable. You must sow seeds through networking. Use content to keep yourself in the minds of investors with whom you want to build relationships. Meet for coffee to seek advice and get feedback from a funder. A strong relationship will last long after the investment. Choose one that allows you to get the most out of the partnership.
In addition to the foregoing, to attract angel investors, you must have a compelling investment opportunity that is properly presented.
Conclusion
Fundraising can be a stressful time for any company’s founder or leadership team. It can be a difficult process, but success is possible.
If you’ve identified a great opportunity or have a well-thought-out business these strategies should work for you. Meanwhile, check out other exciting business articles on SME360.