An interesting question is usually asked about how, Facebook Founder, Mark Zuckerberg was able to attract investors. The question can be framed for our local context.
Do you come up with a business idea so good that investors cannot say no? Do your connection, in the end, determine whether you get that angel investor? Which is the way to attract investors? On his part, Zuckerberg attributes his success to luck – “You don’t get to be successful like this just by being hardworking or having a good idea.”
For women entrepreneurs in Kenya, this external source of funding is not easily accessible. The far majority rely on savings and retained earning to journey on.
One of the reasons for this is the bias against women entrepreneurs and women pitching. Some entrepreneurs have shared their experience that, in Kenya, one needs a token mzungu in the startup team to increase chances of a yes response.
There’s no study done on that. But from women entrepreneurs perspective, it has been found that prospective investors respond best to men. The exact finding is that investors prefer ventures pitched by attractive men.
That aside (we may write about it), there are 7 other common gaps that make it hard for you, as woman entrepreneur, to attract investors for your business:
Can you believe that 95% of all businesses in Kenya are in the informal sector? Despite representing 82.7% of employment we do not have information on them and financial institutions/ formalized investments couldn’t care less about them. What is implied is that investors are attracted to growth and informality alludes to little potential for that. For women-owned businesses that are formalized, adoption of strategic management is necessary to clearly explain your growth prospects.
This always ranks as the number 2 consideration for investors. If you’re going it alone, you’re brave. As the entrepreneur, you need to know a little bit of everything on each aspect of running a business. This is not enough. For an external investor, presence of specialists give them confidence that they are putting their money in good hands. Your staff should be more skilled than you.
Okay, innovation has become a buzzword. What I meant to say is that you need to have a clear point of differentiation. Why is your business unlike that of your competitor? If you don’t have an answer to this, you are implying you haven’t done your market research and that you have little clue about the long term viability of your business.
Banks want to know that your cash inflows can cover interest payments (collateral too, because they don’t trust you haha!). Investors want a good ROI and easy means to exit. You must value your business honestly and give attractive stake for the amount of investment you require. This is conflict with our culture of business secrecy – public servants are the richest people, we want to know how.
5. Your skills
Kenya needs a culture of business mentorship. It’s not just needed for succession of family business. Many young entrepreneurs in this country, and those who wish to indulge, want real advice like #HerDairy and not the weasel words we get from some individuals. Skill is needed to identify opportunities, manage the business and have expertise in the field you chose. The great thing is that knowledge is now free. Whatever you need a 2-hour lecture to learn is on YouTube for under 5 minutes, haha!
Small businesses are risky. They have little revenue diversity, they could be in danger of market cannibalization (see 3) and many are affected by heavily by business cycles. Reduction of risk is difficult and that is why it’s number 6 out of 7. The only chance available is to have an understanding of the biggest uncertainties your business faces and see how many of them you can come up with a response plan on – to show your prospective investor.
This is number one for banks. Investors want to know how you’ve used what you had to get from A to B and now what is needed to get to C. Your level of performance is documented by your financial records. They have to be well prepared to be considered valid.
The need to attract investors is for cultivating the long term partnerships that entrepreneurs in Kenya lack. An external investor also legitimizes your business. What is needed is a platform or method to connect all these monied Kenyans being duped in real estate with innovative entrepreneurs stranded for the next step.
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