funding

Opinion: Start-ups And The Problem of Funding

Lately I have being looking at start-ups closely and have come to realize that start-ups at large are plagued by the same major issue: ‘Funding’. In a continent like ours (Africa), funding also compete with other factors such as enabling laws and policies, enabling infrastructures  privacy & patency, talent and skill availability, and the list goes on.

Nonetheless, a lot of Start-ups have sprang up in recent years in various fields or life. From Power and Technology, to Arts & Entertainment, to Real Estates, Agriculture etc., and the reasons are not far fetched bulging with investors wanting to cash out quickly even before the Start-up matures, investors wanting a higher percentage of the Start-up to secure or reduce loss, or banks failing to trust or believe in Start-ups.

Quite recently there have being a lot write-ups on Start-ups but I found this article on-line which I think would benefit any Start-up or anyone trying to start a business.

A typical startup goes through several rounds of funding, and at each round you want to take just enough money to reach the speed where you can shift into the next gear. Few startups get it quite right. Many are underfunded. A few are overfunded, which is like trying to start driving in third gear.

Just as the writer of the article rightly stated, this article would help founders to understand funding better and also what investors are thinking as the problems faced by Startups are not competitors but investors.

There are majorly 5 sources of Startup funding:

  • Friend and Family.
  • Consulting.
  • Angle Investors.
  • Seed Funding Firms.
  • Venture Capital Funds.

If start-up founders can bring into practice these 5 sources, very soon, investors would be on the tails of start-ups, just like the likes of Microsoft, Yahoo were after Facebook, or how iROKO claims to be pursued with money these days.

A draft of How To Fund A Startup article was published in November 2005 on Paul Graham and can be read in details with each source explained.

With organisation like Venture Capital for Africa (VC4A) and what several other organisation are planning to do to help start-ups in Africa, I believe very soon Africa would be fighting in the Global market stronger than it was imagined.