by Deborah B. Hamilton
Feed the Future Partnering for Innovation
True or False: “It’s a seller’s market.” “Investors are starved for good deals.”
For a business owner, it probably seems that these statements can’t possibly be true. However, David Loew of Open Capital Advisors assured us that these statements are true. Because investors in East Africa and other emerging markets are searching for companies to invest in, David and his colleagues at Open Capital Advisors spend most of their time helping companies prepare for investor funding. (Check out a Future Partnering for Innovation Tech Talk featuring Loew.
The financing process is arduous and can take a year or more. The first step is to decide what type of investor is the best match for your business, because just as business types vary, so do investors. They range from traditional venture capital investors who focus on the maximum financial return to social impact investors who focus on both social and financial returns. In addition, investors are becoming increasingly creative about how they approach deals, and they can involve a combination of equity and debt. There are also banks for loans, and foundations and government agencies for grants.
Business stage also matters. While nascent businesses may qualify for small amounts of equity finance or microloans, the earliest investments typically come from friends and family, angel investors, or colleagues. Once business owners have fully developed and tested their idea, they will most likely want to grow the business, which requires relationships with new distributors and entry into new markets.
While this process seems daunting, David is quick to point out that a company that has its ducks in a row will be in an excellent positon to receive investor funding. His suggestions for optimal preparation include:
(1) Have a demonstrated strategy. Prioritize opportunities and stage decisions.
(2) Build an effective organizational structure. What staff do you need to hire? How will you manage growth?
(3) Invest in training. This is the best long-term solution to hiring and retaining talent. Get creative in how you look for staff; for example, MBA programs can provide a pipeline of affordable talent.
(4) Know your story. How are you are going to increase revenue? What partnerships are you going to put in place to help achieve this?
(5) Have detailed financial projections. Explain the assumptions that underlie your numbers.
(6) Define your market potential. Don’t say, “There are a billion smallholder farmers, and the company aims to reach 80 percent of them.” Instead, describe your target market in specific terms.
(7) Determine your capital needs. How much funding are you asking for and why?
(8) Prepare your documentation. Have a pitch presentation and a detailed business plan in PowerPoint. Investors prefer to click through a presentation rather than sift through text.
(9) Get a good lawyer or trusted partner. You will need an ally who can negotiate on your behalf.
With all of this in place, funders can more easily assess your company’s suitability for investment, and your company can attract the right investment opportunities to help it grow.
Check out the video of David Loew's presentation at the AgAccelerator Lab in Lake Naivasha, Kenya, June 2015.