The employment (read, unemployment) problem is as steadfast in the country as ever. In fact, our education system, criticized as it may be, continues to produce (qualified?) graduate professionals every day into a national labor market severely deprived of opportunities for growth. Unfortunately, I must reserve the discussion on just how much this situation hurts the whole country for another day.
In the meantime, Kenyan youths and all the other unemployed Kenyans are forced to seek different ways to “win bread” for their households. Of all the many (not necessarily lucrative) options available, starting small business ventures emerged as the real favorite.
In fact, it seems as though each of my age mates wants to start their businesses or at least associated with entrepreneurship. And with regards to this ambition, it is somewhat rare to see a calm evening go without having an entrepreneurs’ event in town, particularly in the many famous relaxation joints quickly developing into the convenient convergence locations for both the start-up entrepreneurs along with the would-be investors.By business model, I mean knowing how to earn from selling your products, the associated costs and what profits you expect to make from your operations over a number of years ahead Click To Tweet
Unfortunately, obstacles abound. Top of the list, however, is the question of capital, and how limiting a factor is has become. The good news is that a new entrepreneur can bring aboard partners (read investors) to help make their new venture take off.
But how do you get to know your investors? Here’s how.
1. ‘Hack’ the investor’s mind
Every new start-up is chasing after the investors’ money, and are in direct competition with you. Fact is, you all need the support to probably grow into the next big breakthrough venture in the country or even your town.
Whatever your situation and goals, you must get a firm grip on how your investors, think, what they want, how they expect your entity to run, and most importantly, how to retain their funding. You need them more. Achieving this will give you a significant edge over competing startups, or lose and struggle
this is the single most daunting obstacle the majority of entrepreneurs fail to navigate. To avoid falling victim to the pit, do not meet up with potential investors unless you have an outstanding comprehension of who they are.
Among the things to do, get to know the person intimately, including their story and path to where they are, the (perceived?) obstacles they have faced in the past and how they overcame the obstacles. Also, get to know the startups funded in the past and how these fared. Finally, can you anticipate why you got the sit down with your potential investor? You should, because it matters a great deal.
2. Take up a position of strength with a clear target market
With many startups vying for the same funding; only the strongest survive, so take the place of power.
The reality is that every investor would consider committing to a business only if three things hold: do you have a transparent target market? Do you have a viable and sustainable business model? And, how competent are you? (or your management team?)
When you identify a target market, make it as ‘targeted’ as possible. As such, avoid broad generalizations such as determining the Kenyan population as your target market is not only absurd, but very sad and shallow mindedness!
It straight away tells the investor that you have not done your market research and you are not serious about doing business. Going around this first demand from investors requires that you do a market sizing to understand who exactly will buy your products based on geography, age group, gender, social class among other market sizing criteria.
3. Sustainable business model
The second thing investors want to see is a viable business model. By business model I mean they want to know how you are going to generate money from selling your products, the costs associated with creating the revenues and what profits you are making from your operations.
On the other hand, by sustainability, I am referring to what your profit margins are and how are they grow over time. It is one thing to make good sales and profits in a year, and a different matter altogether to sustain the momentum of increasing profits and profit margins in year two going forward. Investors are keen on the latter.
4. Managerial competence
Third, investors want to see the management of the company. They are interested in who is running the company and what their qualifications are. Your expertise in the sector your business is focused on gives you leverage when negotiating with investors.
However, it is the entrepreneurial will, determination and capability to bring resources together to exploit a business opportunity that turns on most investors.
You don’t have to be an expert in your business niche to work in a corporate environment. This situation, however, is different when starting your own business, and may require that you work on things outside of your expertise to keep your venture running.
Now you know, when going out to face the investors to pitch your start-up, first work on the three most important things: Market, Model, and Management. Do not waste a lot of time cramming how you will present; yes that matters, but it counts less if you are not communicating and connecting subliminally with the investors.