Johnni Kjelsgaard has spent over 15 years advising and mentoring entrepreneurs in East Africa. He is the founder of GrowthAfrica, an organisation that helps mid-stage companies overcome growth barriers and source investment.
Here are his general tips on how mid-size organisations can improve their chances of attracting investment.
1. Be relatable
According Kjelsgaard, it is often easier for foreign entrepreneurs operating in African markets to access funding than it is for local business owners. This is not necessarily because they have better ideas or business acumen – but rather because they are more relatable to the end investor. He noted that the source of much investment comes from overseas.
To better their chances of getting investment, entrepreneurs need to know who they are pitching to, as well as the objectives of the investors. This understanding can help them better align their business (and themselves) with the fund’s core purpose.
“It is around ‘relatablity’. And I think entrepreneurs have to keep this in mind when they are fundraising – that they need to be able to appeal to, and relate to, the people across the table,” he explains.
2. Understand your business holistically
A common weakness for many entrepreneurs, says Kjelsgaard, is that they are experts in one facet of their business, but have very little understanding of other key parts of day-to-day operations.
“We see this a lot with entrepreneurs that are typically very technical focused. They know their product very well and all of its features, but they don’t necessarily know the market or the customer that they are trying to approach,” he adds.
“So they can speak with great confidence [during a pitch to investors] on the technical and feature aspects of their products. But when it comes to other aspects of the business – most notably around the customer and what benefits the customer experience (and not just their expectation of what benefits the customer) – they are typically unable to speak with great confidence about that.”
He adds entrepreneurs are usually aware of these limitations, but often do not deal with them constructively. For instance, rather than spending time within product sales to gain a better understanding of what the customer is looking for, they employ someone else to do it for them instead.
“They hire consultants to get around these sorts of things, and that is not a good thing from an investor’s point of view because that means you don’t necessarily understand, intimately, all aspects of your business. You [have to] invest time to understand all aspects of your business.”
3. Know how to scale
Investors are looking to make returns, and so they want to invest in businesses with the ability to grow their operations and customers – for example, across geographic locations. If entrepreneurs can convince investors their company can do this, it considerably improves their chances of getting funding.
“You might be extremely good at understanding the product, the market and your customer, and you might already have some basic traction in the market to show investors. But even if you are performing well on all of those aspects, if you don’t have answers (in the eyes of investors) on how you are practically going to scale it… then that would be another thing that investors would pick on.”