Raising fund may be a tough task in Nigeria as many entrepreneurs are tirelessly looking for investors. But taking a look at the other side of the story shows that investors are also looking for viable business opportunities. So, what is the problem? And how do we resolve this? We at OTEKBITS are looking at identifying the problem and at the same time provide some tips on how to overcome the problem.
Starting from today, we will be sharing resources that can help to prepare the entrepreneurs for the right investors and bridge the gap between the investors and entrepreneurs. We will be bringing you this resources in partnership with VC4Africa which has broad number of expert investors. So, if you don’t have an account yet on VC4Africa, now is the right time to do this. It only takes you few minutes to complete the required steps.
Today, we will be sharing 5 steps on how to prepare yourself and venture for fundraising and connect with investors on VC4Africa.
Prepare your Venture
Before your venture is put into fundraising mode, it is important to post documents to your venture profile. This gives investors an opportunity to do a first assessment of your business and is required as part of your fundraising application. So, if you are thinking of raising fund for your business via VC4Africa, you need to upload a copy of your certificate of incorporation and also a pitch deck and/or summary of your business plan. The recommendation is that you should add financial projections, letters of Intent from strategic partners (if available), or contracts with existing customers to increase your chances. And most importantly add relevant media that can help to give the right impression of the company and team. Interesting thing is that you don’t have to worry as only investors registered as part of the VC4Africa Investor Network can access your documents.
Also, you need to add team members and advisors to your team page. As part of this process, you will be asked to complete the VC4Africa Quick Scan. This is a straightforward questionnaire to help you check if your venture is investor ready and to identify any points that need to be addressed before investors can take you seriously. After you have completed the Quick Scan document, upload it to the documents section of your venture profile. The VC4Africa team provides investors with a pre-assessment of your venture and it is important you provide the most relevant documentation when you apply.
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Register your Intention
Given the results of the VC4Africa Quick Scan, the next step is to register your intention to raise a round of funding. You need to indicate the financing stage – Seed, Start-up, 1st round (Series A), 2nd round (Working cap), 3rd round (Mezzanine) and 4th round (Bridge). You also need to indicate the financing type – Equity, Debt or Hybrid and your capital needs (between USD $10,000 and USD $1 million). Your registered intention is reviewed by the VC4Africa team. Once approved, your venture is added to the list of ventures fundraising on VC4Africa. The next step is to garner investor interest and secure a lead investor. Post updates and progress to your venture profile showing you are on your way to achieve the milestones indicated in your documentation. Investors who are interested in your work can express their interest to join as a possible lead investor.
Engage Potential Lead Investors
If you have done your work and your venture clearly shows traction, you will hopefully secure interest from a number of possible lead investors. You can engage them and work to understand the differences between them. It’s up to you to decide who the best investor for your business is and agree to a fair term sheet. Do not approve the lead investor until you feel confident about the terms of the deal they are offering. If they have not made the investment into your business, you can ask them to send a bank guarantee showing they have the required capital on reserve. When the lead investor is approved, you can upload the term sheet to the documents tab on your venture profile.
Once a lead investor is secured, the venture can go into “Raising Capital Mode” for 90 days. At this stage, investors registered on VC4Africa can review the term sheet and express their interest to participate. They can outline how they plan to contribute in non-financial ways and any terms or conditions they might have as part of their participation. The amount of capital pledged by each investor will appear in the progress bar indicating your venture finance goal. At the end of the 90 day period, copies of these pledges are sent to the entrepreneur and lead investor.
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Closing the deal
At the end of the 90 day period, it’s time to close the deal. You will receive copies of the registered intentions and can follow-up with the lead investor to close the financing round. Once completed, the venture is put back into building mode. Update your network on progress and make sure you maintain the foundations needed to raise additional capital in the future!
Venture Capital for Africa is the continent’s leading founder’s network, the largest and fastest growing community of entrepreneurs and investors building promising companies in Africa. Our focus is connecting people and ideas on a peer-to-peer level. We are the only open and accessible platform dedicated to the subject and our network of entrepreneurs and investors extends to more than 159 countries around the world. The community currently supports more than 1,000 ventures in more than 30 African countries. Already, entrepreneurs have been featured in mainstream media, established joint ventures and secured funding.