Research has shown that in Nigeria, 80% of businesses fail within the first 5 years, and out of the 20% that make it past 5 years, just 25% of them make it to the 10-year mark. 

Being an entrepreneur in Nigeria myself, I can list out many different factors that affect the success of a business but one of the most important ones in our climate is access to funds. Having little capital is difficult to build scalable and sustainable businesses. 

But another challenge could be not having the right network to help scale your business. Both these reasons are why entrepreneurs seek investors. Investors provide the expertise, network, and investment to help grow sustainable businesses and help scale these businesses. 

Seeking investors, however, is very challenging and overwhelming for many. You have to first off know the type of investor you are looking for (for example, a banker, angel investor, crowd funder, venture capitalist), the profile of the investors you are seeking, and what these investors are looking for. With this understanding out of the way, you can then work on ensuring your business is investment-ready before you approach them. 

In this article, I will share with you some tips on how to be investment-ready

  1. Solid Financial Analysis: you have to show your investors that you understand your numbers. Understand your past performance, your current performance, and your future projected performance (at least for the next 3 years). Show that your assumption is justified and your projected performance model is flexible and dynamic enough to account for changes in your assumptions. You should also create a solid revenue model that shows investors the path your business will take to make money.
  2. Market Strategy: no investor wants to invest in a company that is targetting a very small group of people who do not have strong purchasing power. You will need to show your investors that you have researched the market size of your business and you have a clear go-to-market strategy. You also need to show them that you have created some kind of traction within the market.
  3. Exit Strategy: as you have seen within the start-up world, people do not start a business without an end goal in mind. You need to identify your end goal; is it a merger or an acquisition or an IPO. Identify your end goal and be able to justify why you want this goal. 
  4. Strong Team: investors are less likely to invest in a one-man business (nor a sole proprietorship). Ensure you have people that believe in your vision and are inspired to join your team in the role of a co-founder or partner. Be careful when picking your co-founders or partners, ensure they have the same values, goals, and vision as you for the business. 
  5. Clear Ask: you have to know and be very clear on what you are asking the investors for, it could be one or more things but be clear. Is it money, access to their suppliers, distributors, network, and so on? Be able to clearly tell investors what the valuation of your company is. The tricky part about valuations is that there are different ways to calculate your business’s valuation, choose the best way, and be able to justify it. 

Once all these 5 pointers are clearly defined and understood, you can now create an investment teaser deck, which is a deck (presentation) you send to investors explaining to them the above and why they need to invest in your business. You need to also have supporting documents and evidence. And most importantly you need to be proactive and prepared. 

Contact Versa Research your trusted data, research & consulting partner!

References

https://www.mentornigeria.com/blog/why-businesses-fail/

https://www.investopedia.com/financial-edge/1010/top-6-reasons-new-businesses-fail.aspx

https://www.envestors.co.uk/investment-ready-checklist/