Bootstrapping, business partners, angel investors, and accelerators are all ways to raise startup financing.
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One of the challenging challenges that entrepreneur faces is raising cash for their business idea. You need funding to make it happen in order to put your ideas into action or expand that firm.
Like you, most African business owners had to start from nothing. To demonstrate to you how they raised money for their enterprises, we profiled a few of them. These business people include Palmer Lucky, Jack Ma, Oluwatomi Solanke, Jason Njoku, Joshua Chibueze, Charles Dairo, and Dare Odumade.
It is hoped that by following in their footsteps, you will be able to raise the money your company sorely needs. Let's get started straight now.
They converted social capital to financial capital through bootstrapping, business partners, angel investors and accelerators.
Bootstrapping
Bootstrapping means using your personal resources to start and grow your startup, such as personal savings, personal computing equipment, and office space. It's an excellent funding strategy that keeps ownership in-house while limiting debt.
Charles Dairo founded CKDigital shortly after graduating from university. The company, which has been in operation for over ten years, is entirely self-funded and has served reputable brands such as FMDQ OTC Plc, Cardinal Stone Group, Royal Exchange Group, Vitafoam Plc, Red Star Plc, and others.
Business partner
Another great option to raise money is to find a business partner who will provide the required capital in exchange for a share of your company. IrokoTV was funded through this kind of fund-raising by Jason Njoku.
Sebastian Gotter, Jason's business partner and co-founder, and they both attended the University of Manchester. In 2010, Sebastian, the wealthy partner, donated a $150,000 initial seed investment for a 50% interest.
While Jason was the business owner who had a thorough understanding of the regional market and was in charge of carrying out the business plan. Iroko TV has developed into a market leader today, valued at over $40 million by foreign investors.
Angel investors
A guaranteed way to raise capital is to find angel investors. But who are angel investors? Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity.
A classic example of the impact of angel investors on a startup is the story of Piggyvest. While sharing at the first edition of Zero to scale, Joshua Chibueze, CMO and Co-founder at Piggyvest revealed how Olumide Soyombo played an instrumental role in raising their first seed of $1.1 million.
Accelerators and Incubators
If you are building a startup around an innovative idea, you should find accelerator/incubators programmes that invest in your business. Startup incubators help entrepreneurs refine business ideas and build their startups from the ground up.Startup accelerators on the other hand provide early-stage companies that already have a minimum viable product (MVP) with the education, resources and mentorship needed to promote what might otherwise be several years of slow growth into a few short months.
African startups such as Flutterwave, Cowrywise, and Bamboo are modern examples of startups that benefited from accelerators. There are many accelerators and incubators you can participate. Some of these accelerators include Y Combinator, Seedstars and Techstars.
Related Article: Getting into YCombinator as an African founder
Convert social capital to financial capital
A great source of capital many entrepreneurs fail to pay attention to is social capital. Social capital refers to the value (potential) of positive human interaction. The result of social capital may be tangible or intangible and may include financial favours, useful information, innovative ideas, and future opportunities.It usually comes from close friends, current and former work colleagues, neighbours, business partners, current and former classmates, etc. These people are much more willing to listen to your business idea because they trust your business acumen, character and expertise.
Jack Ma, the Chinese billionaire founder of Alibaba, used this strategy to start the global e-Commerce giant. In 1999, Jack Ma invited 18 of his friends to his small apartment in Hangzhou. There, he pitched his business idea and vision in 2 hours and raised $60,000 to kickstart Alibaba.By the time Alibaba became a public company in 2014, it was valued at $21.8 billion on the New York Stock Exchange to become the biggest US IPO in history — bigger than Google, Facebook, and Twitter combined.
Startups that grow very fast rarely use internal funds alone to scale their operations. So the financing options listed above should guide you as an entrepreneur depending on your situation. However, apply caution when seeking capital in order not to give too much of your startup equity.
Related article:https://www.benjamindada.com/raise-capital-startup-nigeria/
