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Tips on how SMEs and startups can secure venture capital funding

We have put together a couple of tips to help founders and entrepreneurs, so that the next time you pitch to a panel of Venture Capital investors, you can “kill it” and walk away with the cheque.

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venture capital

In the world today, we continue to see the rise in self-employment and entrepreneurial activities, with more people opting to “be their own bosses.” At the same time, we have seen the growth and development of the venture capital space, both as a funding source for entrepreneurs and startups and as an alternative investment medium for investors.

Note that African startups have reportedly raised between $300 million and $1.2 billion, as put forward by various reports on the basis of available funding information from the said startups.

VC funding is easily regarded as one of the riskiest investment vehicles for investors. As such, an understandably great deal of due diligence would typically be put into any prospect VC investors consider. Despite the growing level of VC participation, evidenced by the numerous funding announcements from startup founders all around the world, many entrepreneurs and startup founders still struggle to secure funding from VCs.

To this end, we have put together a couple of tips to help founders and entrepreneurs, so that the next time you pitch to a panel of VC investors or go through a VC screening process, you can “kill it” and walk away with the cheque.

Have a Viable Business Proposition 

The first step to successfully-onboarding a VC investor begins with you. The typical genesis of a VC engagement with any founder originates with a viable business proposition from the entrepreneur. VCs would hardly go further with any discussion if they do not see value in the business. Hence, the business proposition must be one that VCs see as bankable— from the idea to the execution, the marketing, and everything else. Ensure that your business can generate sufficient returns. VCs tend to pay more attention to the following kinds of businesses:

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  • Businesses that solve defined problems.
  • Businesses with high growth potentials.
  • Businesses with large market demands, because such businesses can easily generate attractive returns on their investments (if they invest).

[READ MORE: A look at some financing options for small business owners]

Know Your Business

When an investor backs a company, they are in essence backing the entrepreneur(s) just as much as the business/product. So, it behoves entrepreneurs to present themselves as “back-able” candidates. This implies convincing investors that you are capable of delivering on your claims and the potentials of your business (provided that your business is viable).

Thus, you should be an expert in your business. This goes beyond just understanding the technical aspects of the business, as it also includes having an understanding of the management aspects. Be on top of your company’s figures (both historical financial statement figures, and other important financial information). Understand the workings and intricacies of your industry, consumers, suppliers, government regulations, industry forecasts, etc. Know your business!

P.S. VCs are very much interested in the characters and identities of entrepreneurs they back; thus, some VCs may include research on the entrepreneurs as part of their due diligence process

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Validate Your Product’s Demand 

While some VCs may accept proposals from early-stage startups and take meetings with startups that are still in the ideation stage, i.e. still in the stage of crafting the idea or building/designing/fine-tuning the product or service, most VCs are more interested in startups and businesses that have proven the availability of markets for their products.

It’s a plus if the market for the product is large, as opposed to a small/niche market. So, before you approach a VC, it is advisable that you put in enough work into building & understanding your business, and garnering traction, so that you can easily demonstrate the availability of your market.

[READ ALSO: Differences between an Angel Investor and a Venture Capitalist explained!]

Know Your Venture Capital

In the finance space, there’s a lot of talk about KYC, i.e. Know Your Client. However, I’m putting a spin on this, to now relate to entrepreneurs— know Your VC. This simply implies that you on your part should carry out some due diligence on the VCs that you approach. Investment objectives and criteria differ from one VC to another. Thus, it behoves you to acquaint yourself with the investment criteria of each VC you approach.

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A VC’s investment criteria reveal important information about the VC and its vision: it reveals the VCs’ investment philosophy and the nature of businesses it seeks to invest in. For example, some VCs are sector-specific, i.e. they only invest in businesses within a particular sector or group of sectors. Knowing your VC would help you better prepare your investment pitches, and save you the stress of approaching VCs that are not a suitable fit for your business.

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Have a Defined Plan 

Another issue of serious concern to VCs is how you intend to run the company going forward. They want to know your plans for the future, if your plans will be able to steer the company on a path of growth, how exactly you intend to spend their money, etc. Thus, you have to articulate clear strategies and action points that would convince them of your management capability, going forward.

Define your plans regarding marketing and how you intend to drive consumer patronage & loyalty, the “use of funds”  that would show how exactly you intend to spend their money and define your business operations so that they can understand how the business would run on a daily basis.

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7 Comments

7 Comments

  1. Mrs K

    May 28, 2019 at 3:44 am

    Great site! Quite useful, thanks.

  2. Mrs K

    May 28, 2019 at 3:46 am

    Please send me stuff on dairy business in Africa.

  3. Orji Stephen

    October 22, 2019 at 6:45 am

    It was helpful

  4. Project Topics

    October 22, 2019 at 4:57 pm

    Wonderful article we have

  5. Project Topics

    October 22, 2019 at 4:59 pm

    Wonderful article we have here………….Kudos

  6. Etido James

    October 23, 2019 at 2:01 am

    THE IMPACT OF VENTURE CAPITAL FINANCING ON SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA (A CASE STUDY OF UYO LOCAL GOVERNMENT AREA)

    The study looked at the Impact of Venture Capital Financing on SMEs in the Uyo Local Government area. Efforts by successive Government to improve on the performance and growth of SMEs had led to the enactment of different policies and activities including the Venture Capital Fund to assist SMEs. SMEs still in Nigeria have been faced with liquidity and financing challenges leading to business failures under production Industrial disputes and sometimes closures by regulatory authorities.

    In order to achieve the objectives for the study, 50 questionnaires were administered to Manager/SME owners operating within the Uyo Local Government area with a focus on Elsa Foods Ltd using convenience sampling techniques. It was generally observed that

    SME‟s prefer-financing and self occasionally received support from financial institutions. The findings further show that SMEs continue to rely on many financing options both at their conceptual and expansion stages. The majority of the SMEs were however not aware or had little knowledge about Venture Capital Financing as an alternative to financing. Firms that had benefited from Venture Capital Financing stated that they did not only receive capital inflow but were accompanied by monitoring, technical skills, and expertise, access to management, marketing and distribution and reputation for attracting further finance. The study recommends that SMEs need to recognize the potential advantages of seeking equity finance from venture capital. Venture capital fund managers can do much to encourage venture capital investment from corporate investors. Government and policymakers should play a dual role as both facilitators and educators in encouraging the venture capital process. Following the conclusions and recommendation, more detailed research involving SMEs from different industries and states is highly recommended

  7. Moses O. Attah

    October 25, 2019 at 10:35 pm

    This is quite informative. Pls, how can we find Ventures Capitalist? Thanks.

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Personal Finance

How to fund capital projects debt-free with high interest yielding investments

These are the four things you need to fund your capital projects debt-free.

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The one thing that will reveal to you the gaps in your current financial situation is capital projects. A capital project is any project that is beyond your current and future financial capacity to execute. For most people, capital projects lead them into debt. Debt and Capital projects go hand in hand because the income of most people is still struggling to meet basic bills. And in instances where income is high, expenses overwhelm income. So whether you are a high-income earner or a low-income earner, the chances are high that you will struggle to fund certain capital projects in your life.

To fund capital projects, you need four things to be working simultaneously in your life. The First thing is your ability to earn high incomes. The second thing is your ability to keep a major part of that income. The third thing is your ability to grow that income without losing it. And the fourth thing is your ability to build solid Passive Income that exceeds your current Active Income. These are the four things you need to fund capital projects debt-free. Unfortunately, only a few people know how to do all four things correctly. Certain people hardly thrive in one area. But, if funding capital projects debt free is important to you. You must know how to do all four things well or surround yourself with people who can help you.

Funding a capital project debt-free is a difficult task to achieve if all you have is a modest income and meager savings. The lower your income the more things become capital projects to you. This means that what is a capital project for you may not be capital projects for another person. To help us unify our definition of capital projects. Let us use an example of capital projects that we all agree is the most difficult to fund debt-free. This example is Homeownership.

Read Also: If you experience these signs then know your salary is not enough

Homeownership is a type of capital project and one of the most popular capital projects because many people want to achieve it. By the time you are an independent adult, the desire for homeownership is already burning inside of you. This desire comes from parent influences, external pressure, and the frustration of paying rent to a homeowner. Owning a home is thus one of the most universally accepted capital projects with a global desire. It is also the most expensive capital project to fund. Yet despite its expansiveness, most people want to achieve it. Every year millions of people attempt to climb the homeownership ladder. A few of them make it. Many of them are buried in debt. And many more fail to achieve it. This is because the desire for homeownership does not automatically translate to owning a home. And here is why.

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Many people are trying to own a home on the fragile back of a low income and low savings. The truth is one income, and low savings cannot fund the homeownership project. To fund your dream home you need multiple streams of income and big portion savings. Second, you need to overcome the temptation of owning a home too soon. Many people rush to own a remote and low budget home. A home where people struggle to come to due to its distance and neighborhood. Owning a home is not about being the first to own a crappy home. It is about being the first to own the dream home in a dream location and to do it debt-free. Attempting to own a home too soon is the reason most people end up with crappy homes that are way below their league. Homeownership is best achieved at a time when you are most financially capable to fund it. This is not to say you just sit and do nothing before then. But to say that you use that time to build the solid cash reserves you need to fund your dream home.

So how then do you fund your dream home?

To fund your dream home there are three paths you can take.

Read Also: Still on the FG’s $22 billion loan

The first path is the Loan path. This is where you borrow money and end up in debt. The second path is the bootstrap savings path. This is where you painstakingly save your way to homeownership. Only a few people ever achieve this. The third and most effective path is to create your own interest-free solid cash reserves and then use them to fund your dream home. This is the Path we will be dwelling on in this article.

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So how then do you create your own interest-free cash reserves?

To create your own interest-free cash reserves there are four things you must do.

The First is to develop Income security skills. The second thing is to leverage a complementary Side Hustle. The third thing is to establish a Financial defense System. And the fourth thing is to use a multipurpose, high interest yielding investment vehicle to build your cash reserves. Below I explain each of these points in detail.

Develop Income Security Skills

There is only one way to secure your income in the world. This way is not to secure your job. But to develop high-income skills that preserve your ability to earn high incomes. The truth is there is no job security out there and since homeownership is a long-term process. You need certain skills to guarantee a continuous flow of cash. There are three income security skills that can help you achieve this. The first is problem-solving or creativity skill. The second is Relationship building or Networking skills. And the third is marketing and sales skills. These are the three skills you need to secure your homeownership income. And ensure you are never recycled back into the pool of broke people. Developing income security skills is thus critical for funding your dream home. The key to success here is to invest in developing and refining these skills. And to put them to practice and perfect them. If you need help developing these skills or practicing and perfecting them send an email to [email protected]

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Get a Complimentary High Income Side Hustles

No homeownership project can be funded debt-free from a single meager source of income. Thus to fund your dream home you have to grow your main income and add another source of income to it. To grow your main income you need to rise to positions that have a direct impact on profit and revenue. Then you need to find a side hustle that complements your main income.

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The problem is most people do not know the side hustles that complements their main income. They are also concerned about whether or not they will like this side hustle or make the desired income out of it.

The key to identifying the side hustle that is right for you is to consider these three things. The first is your interest. Can you do and promote this side hustle easily? The second is the income speed. How soon before this side hustle produces the kind of income that you desire. And the third is the workload and time requirement. How much time do you have to invest to generate the kind of income that you desire? Adding a side hustle that increases workload. Consumes time. Reduces job efficiency and drains current income is a mistake. The key here is to identify side hustles that complements your main income. And ensure that your side hustle has the high-income capacity and is aligned with your area of interests

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Read Also: How PR can transform the future and profitability of a business – CEO, Mosron Communications

To find this kind of side hustle you need to identify your current area of interest. So if you are reading this article right now. Chances are high that you are interested in making more money and funding capital projects debt-free. If you can find other people within your circle who are also interested in making more money. And funding capital projects. And if you and these people are willing to invest in products and services that can help you. You can make a high-income side hustle from it. Granted that the product or service you promote solves a high-income problem. Thus to earn high incomes you need to choose side hustles that can pay you high income. Getting rich through a side hustle is thus about first solving your own problems. And then showing other people how you can help them solve the same problem. This is the fastest way to get on the High-income side hustle ladder. Every other way takes time, produce low income, and increases your workload. To fund your dream home debt-free. You must choose side hustles that require you to work less earn more and produce income in less time. This is the fastest way to fund your dream home.

Build Your Own Personal Financial Defense System

The worse way to try and fund a capital project such as homeownership is to do it without a financial defense system in place. A financial defense system is a system that can provide you income in the presence or absence of a Job. This is important because homeownership is a long-term project. And you need the continuous flow of income to survive.

So how do you build a solid financial defense system that protects you throughout the homeownership process?

To build a solid financial defense system there are four things you must do. The first is to hit a big portion savings target. The second is to make your savings failure-proof. The third thing is to shield your savings from financial distractions. And the fourth is to spend in the direction of Freedom.

Read Also: What SMEs must do to survive the Coronavirus outbreak

  1. Achieve a Big Portion Savings Target
    Saving is a critical part of every investing activity. So if funding your dream home is important to you. You must save a significant part of your income. To save 50% of your income for example there are two things you can do. The first is to increase your income, to the point where it overwhelms your expenses. To do this you need high-income skills and high-income side hustles. The second thing is to reduce your expenses to the point it becomes lower than your savings. The fastest and most effective way to do this is to focus on increasing savings and not reducing expenses. And there are two ways to increase savings. The first is to increase savings by 1% every month until you hit a big portion savings target. Your expenses will adjust accordingly. The second way is to deduct a big portion of your income as savings from the source. And figure out how to live on what is left. If you survive after a month it means you can live on what is left. These are the two smart ways to increase your savings and invariably adjust your expenses.
  2. Make savings Failure Proof
    One of the abilities you must have if you want to fund your dream home debt-free is the ability to consistently save without skipping it. Skipping savings is postponing your financial freedom and homeownership dream. Thus if you want to save without fail, you must make your savings failure-proof. To make savings failure proof you need to deduct savings from the source. Use compulsory savings vehicles such as group contributions or standing orders. And be accountable to someone you trust and respect.
  3. Shield savings from Financial Distractions
    The biggest killer of all the savings in the world is financial distractions. The inability to stop unplanned events and people from stealing your savings. Financial distraction derails your saving from its original purpose. And this elongates your ability to own your own home. To own your own home you must shield your savings from financial distractions. To shield savings from distractions you need certain protective investment vehicles. You also need to assign a purpose to every idle fund. And to work with a mentor to keep idle funds tied up for the right purpose. This is the only way to fund your dream home in record time and without delays.
  4. Spend in the direction of Freedom
    There are two ways to spend money. The first is to spend in the direction of freedom and the second is to spend in the direction of poverty. To Fund a dream home debt-free you must spend in the direction of freedom. When you spend in ways that use up big portions of your income. You are facing the direction of poverty. And when you spend in ways that save up bigger portions of your income You are facing the direction of freedom. The key here is to save more than you spend and spend in the direction of where you want to go.

These are the four things to do. To build a solid Financial defense system that supports you throughout the homeownership process.

Choose a Multi-Purpose High-Interest Yielding Investment Vehicle

There are many investment vehicles in the world. But the most suited and effective investment vehicle. For funding capital projects is the multi-purpose high-interest yielding long-term investment vehicle. This is a special purpose vehicle that has been designed to fund capital projects. It is a multi-purpose vehicle because it can fund many capital projects within the same time frame. It is also safe and high interest yielding because it is a long-term investment vehicle. So if you are considering owning a home debt-free at some time in the future. This is the best investment vehicle for you. The key to investing is to never lose money, especially when building towards a capital project.. Once you choose the right investment vehicles that preserve your investment. You will fund your dream home in no time.

Read Also: FG to inject over N198 billion on capital projects in power sector in 2021

The truth is you will remain the same person year after year except for your ability to make more money. Your ability to keep more money. And your ability to grow that money without losing it. The more you master these three abilities the richer you become. And the easier it will be to fund your dream home. There is nothing as powerful as having zero cash worries when you want to fund your dream home.

If you want to own your own home, make extra income, or fund capital projects debt free we can help you. Send an email to [email protected]


About author

Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an author, and column contributor in six national newspapers. She is a contributor at BellaNaija, Nairametrics and Proshare and she is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you send an email to [email protected]

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Business

The FG in partnership with the private sector will continue to support MSMEs – Osinbajo

Osinbajo has stated that the FG in partnership with the private sector would continue to provide interventions to boost the growth of small businesses.

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Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

Nigeria’s Vice-president Prof. Yemi Osinbajo during an MSME stakeholders’ meeting, disclosed that the Federal Government in partnership with the private sector would continue to provide interventions to boost the growth of small businesses across the country.

According to a press statement issued by Laolu Akande, the VP made this statement on Monday at the first meeting of MSMEs stakeholders for the year 2021.

Prof. Osinbajo said the Government would continue to support innovation and interventions to deepen the involvement of new and existing MSMEs in the nation, this he said would help to improve the economy and create more employment opportunities for Nigerians.

He stressed further that the implementation of the Economic Sustainability Plan Survival Funds has sent positive economic signals. In a bid to complement the gains in this space, the Government needs to scale up interventions in the MSMEs sector.

In this vein, Osinbajo urged stakeholders in the public and private sectors at the virtual meeting to be innovative in the interventions planned for small businesses across the country, so as to consolidate on the gains recorded in the MSMEs space in the past few years.

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What they are saying

Prof. Yemi Osinbajo, during the MSME stakeholders’ meeting, said:

“We must continue to be innovative in the interventions that we plan for MSMEs because small businesses are the engines of growth of any economy, in the areas of wealth creation and employment opportunities, MSMEs are very important.”

Continuing, Prof. Osinbajo said:

“We really have to think out of the box in our engagements going forward. We need to change the way we do many things, we need to look for ways of multiplying our efforts because the challenges in this space are greater than what we have been able to achieve so far. Of course, we have done a lot, but looking at the numbers in need, you will find out that there is a lot more to be done.”

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What you should know

  • The Federal Government’s MSMEs Survival Fund grant scheme, which includes Payroll Support, Artisans and Transport support tracks, is a component under the Nigerian Economic Sustainability Plan, NESP.
  • The Survival Fund scheme was designed to cushion the economic effects of the COVID-19 pandemic especially on the most vulnerable small businesses, is a conditional grant to support vulnerable MSMEs in meeting their payroll obligations and safeguard jobs in the MSMEs sector.
  • The scheme is estimated to save not less than 1.3 million jobs across the country. However, 283,023 Nigerians employed by MSMEs across the country have benefited from the Payroll Support Scheme. This leaves millions of Nigerians out of the consideration of the scheme.

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MSME

283,023 Nigerians employed by MSMEs have benefited from FG Payroll Support Scheme

The FG has revealed that over 200,000 persons have so far benefited from its Payroll Support Program.

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Nigerian MSMEs suffer negative impact of COVID-19

The Federal Government of Nigeria has disclosed that 283,032 Nigerians employed by MSMEs across the country have so far benefited from the Payroll Support Scheme of the Federal Government.

This disclosure was made in a tweet shared via FG Survival Fund’s official Twitter account.

What you should know

  • The Payroll Support Program by FG under the Survival Fund initiative was created to provide an adequate buffer against the impact of the COVID-19 on the stream of income of MSMEs.
  • This, however, is an offshoot of the Survival Fund initiative, established to support and protect small businesses from potential vulnerabilities brought about by the COVID-19 pandemic.
  • In line with the mandate of the programme, the government will support MSMEs with staff salaries for 3 months.
  • It is important to note that the COVID-19 pandemic and other regulatory actions of the Federal Government affected the core segments of SMEs, as well as the revenue and income vehicles of Small businesses in Nigeria.
  • According to a survey by NBS, it became public knowledge that the total number of Micro, Small and Medium Enterprises in the country was about 41.5 million, as of December 2017, with significant employment contribution running to millions.
  • In the light of this, it is plausible to say that the Payroll support programme is not inclusive enough, as the recent move by FG to support MSMEs leaves millions of MSMEs and their employees out of the radar.

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