In the #YALICHAT “What Does It Take to Be a Successful Entrepreneur?”, Glory Oguegbu, a 2015 Mandela Washington Fellow and founder of the Glow Initiative for Economic Empowerment and the Renewable Energy Technology Training Institute, explored how young entrepreneurs can secure funding for their new ventures. In the article below, Glory summarizes her advice for aspiring entrepreneurs.
Create a Business Plan
This is a key step to being investment-ready. Many young people with ideas think making a business plan is very difficult, but it’s really simple. A business plan helps you bring your idea out of your head and onto paper. The process of creating this document enables you think through your idea properly and helps you fine tune it. It also helps an investor to understand your business structure and the need to invest. See our Writing Your Business Plan workbook for more on outlining your business strategy.
Funding your business can start with your savings or through help from family and friends. Self-funding shows investors that you are confident enough in your idea to risk your own money. It works best if the initial funding requirement is small. If you have no access to self-funding, you could decide to work for a while to save up the money that you need.
Register Your Business
You could incorporate your business or sole proprietorship, as a registered business has a better chance of accessing capital. Registering your business allows you to get a business bank account number and ultimately signals to investors that you really “mean business.” In Nigeria, the Corporate Affairs Commission has made it easy and affordable for you to register your small businesses.
Find a Co-Founder
Finding a co-founder sends the message to investors that someone believes in your idea. That is a strong signal to an investor that you’re working on something worthwhile. Bringing on a co-founder can help you mitigate risk, consider new ideas and support your business for years to come.
Practice Your Pitch and Leverage Your Network
Take time to share your business idea with your family, colleagues and friends. Attend meetings, seminars and workshops to find potential funders. Before attending these events, you must master your pitch. See our workbook Pitching Your Business Idea for more presentation tips.
Funding Sources to Consider
Crowdfunding is the process of raising money online for your business. In addition to raising money, it helps you validate your idea by learning if people really want to support it or not. Before you launch a crowdfunding campaign, be sure your product or service solves a real problem, then tell your story in a compelling way that moves people to support you. Some crowdfunding platforms available to African entrepreneurs are Afrikstart, Kickstarter, and Indiegogo.
Venture Capitalists (VCs)
VCs are firms that invest other people’s money into businesses that are still in their early stages. VCs want to invest in companies with the potential to turn a profit. Companies that have a team and a growing customer base are especially attractive to VCs. You can sign up at Venture Capital for Africa (VC4A) to receive information about venture funding opportunities on the continent. Venture Platform is another VC firm in Africa to which young entrepreneurs can apply. And don’t forget to familiarize yourself with what venture capitalists are looking for in a new business.
Business Incubators or Hubs
Business incubators or hubs are organizations that work with new entrepreneurs, offering access to mentorship, investors and other support to help new businesses get established. These hubs help bring together angel investors and state governments to invest in new businesses. If your startup or business idea is related to clean technology or climate innovation, consider the Clean Technology Hub. You also can find other incubators for your business in the 2016 Abiya article “Africa’s Top Business Incubators.”
Business accelerators are organizations that offer support and funding opportunities for developing companies. They offer access to capital and investment in return for equity. Startups that have moved beyond the earliest stages of development usually qualify for business accelerators. If your startup is in the tech industry, you can check out organizations like TechStars, which works with companies to find seed capital. This article profiles some business accelerators funding ventures in Africa.
One way to access funding as a small business is through grants. Grants are small amounts of seed money provided by international agencies or government institutions to further the goals of a small business or nonprofit. Unlike a loan, you don’t have to repay a grant. But you do have to prove you can achieve the goal you outline in your grant proposal through a rigorous application system. Most business grants are offered to projects focusing on a specific issue area and aren’t readily available like loans or other funding opportunities. See this list of business grants in Africa for more information. And take our Fundamentals of Grant Writing course to learn how you can craft a winning grant proposal.
Looking for more funding tips? Visit our YALIEntrepreneurs page to learn how you can create, innovate and prosper with your business idea.