Africa · Angel investing

First time founder with successful startup in Africa but 0 experience raising funding - Advise please

Carl Davis CEO

Last updated on January 11th, 2018

Hello all,
I just found this forum just recently, not sure how long it's been around but it's absolutely great having a forum for discussion for investors and entrepreneurs! As my title mentions, I'm completely and utterly new when it comes to fundraising or dealing with VCs/Angels. The only experience I have comes from being a fan of the show Shark Tank :) But what I do have though is a company that I've started in East Africa that has grown quite well from an original seed money investment. It's a retail restaurant that has expanded to quite a few locations in just 3 years and I believe has good potential to grow much more if I had proper funding to expand into some of the bigger markets of Africa. Our current financial situation is that the company's EBITDA is almost equal to the original seed investment.

But my question is really just about how realistic it is for company's in East Africa to be able to also raise funding for expansion or to get the interest of Angels. I want to know realistically whether VCs/Angels pay any attention to Africa or if it's too risky, and what my best path should be for trying to raise funding. Is the approach different? Should I try crowdfunding? I've reached the point now where we've demonstrated a scalable business model, growth, and profitability, but could move a lot faster with help and additional resources. I'm aware that I would need to create an investor deck and probably start just pitching it to various investors, but if I could get pointed in the right direction to get somewhat of a roadmap that would be excellent and I can take it from there.

The options I've had currently recommended to me to consider are trying to get financing from an investor VC/Angel, complete sell to a buyer, OPIC financing for Americans overseas, bank loan, etc.

Shamie Spencer CEO of S&E -Easylife Concierge Services

January 14th, 2018

I own and operate a Concierge Business.....I new at this and would like some advice how start attracting clients?

John Kilonzi Entrepreneur | Founder @NIOJI.COM

January 12th, 2018

You are not alone in this struggle. I have found that finding your way to a accelerator is better and can really help in your fundraising. If you are in East Africa then send me a message and I will put you through to some 2 accelerators for your ideas to be considered.

Mich M Marketing and product professional with an entrepreneurial problem.

January 16th, 2018

Carl, you failed to mention what your long-term goals are for the company. Do you want to sell it or go public in 5-7 years, grow the business over time and sell it when you retire, grow quickly but maintain control, grow through franchising, or some other strategy? The answer to that will drive your best option for financing.

If you choose to use venture investment then the expectation is typically realizing a return in 5-7 years while giving up significant ownership. That means selling the business at a significant profit or going public. Choosing this route means all decisions will be made with that end goal in mind and answering to a board. If you choose OPIC financing or other loan source then you maintain greater control over the direction of your company but could be difficult to obtain. Franchising, either under a corporate umbrella or selling licenses, is another option for expansion but does require an investment to set-up.

Bottom line is to take time to contemplate what's right for you and the business long-term. Also, since you already have an investor(s) that contributed seed money, you need to consider how that will be paid back and if there are any ownership rights held. If that hasn't been spelled out then the first step is to formalize that obligation before moving forward. Hope this helps and good luck!

Mondjo Mimongo Moe mimongo Hi! the, way i can describe myself is am eager and curious, i like learning new things, challaging.

April 20th, 2018

Hello Carl Davis!

This is very intesting question, to wonder whether VCs/Angels pay any attention to Africa or if it's too risky! In many countries in Africa, people want to invest, but, its too diffuclt for many entrepreunrs to find funding. Therefore greats ideas remain in laptops or in mind without being explored.

George Omedo Social entrepreneur and mentor

January 12th, 2018

There are investors operating in Africa with certain regions or hubs having higher activity than others i.e. Nigeria, Kenya, South Africa etc leading. Raising funds is a challenge in Africa due to various factors including lengthy due diligence timelines, risks etc.

In Kenya for example the Java franchise has been able to attract substantial funding and has currently has a steep growth curve.

You will need to focus on all available funding avenues; VC's, Angels, Banks, crowdsourcing and impact investors. Good luck.

Marton Steier Cofoounder

January 11th, 2018

Hi Carl,

I would say African fundraising can be challenging as the business angel / VC community is not quite developed and more opportunistic there however there are ways. I would definitely look for main investors in the region and the industry especially (Chinese or Arab investors?) as the first step. the food/restaurant/hospitality business is not an easy one although we know that banks are getting more active in the African region year by year and if you have a proven business concept (franchise?) you might have a substantial chance to get a loan for business development. You would need to build up a strong pitch/business case with solid statistics and future plans focusing on revenue generation and use of the requested funds. Alternatively you may try a fundraising portal to gather the desired investment from the community, the people has very close connection to the food itself so I would emphasise the quality of the food (if this is the case) you serve and the restaurants growing popularity in the particular area. Some Client reviews might do the trick if this is the case.