In the first instalment of “Choosing Your Next Capital Partner”, we looked closer at what you, as an African founder, need to know before you pick an accelerator. Today we will take a look at what you need to know to choose your next investor.
First of all, don’t believe the hype. I can imagine as a founder hearing about millions of dollars being raised week on week on the continent, you begin to imagine it is a simple process; It is not. Second, not all money is good money, and while I empathize with the pressure of building a startup, few things will kill your business faster than a bad investor.
Keep your head down and do the work.
Let’s jump right into it. Let’s talk about what needs to happen.
How to find your next investor:
An excellent first step is to shortlist investors based on a few key criteria, here are some of the questions you need to answer:
- Which stage do they invest in? It is sometimes difficult to find this information on an investor’s website. Here are a few ways you can use to find out.
- Leverage open platforms to find a list of relevant investors (OpenVC)
- Look at investor websites and look at their existing portfolio, some of them will be familiar to you and you can gauge if you are at the same stage. Platforms like Crunchbase and pitchbook could also be of help to determine this.
- Look at tech publications like The Baobab Insights; we will often share raises and list some investors that went into particular rounds.
- Which sectors are they keen on investing in? Look at the sectors represented in the portfolio and determine if the sectors represented are the same or similar.
- Which countries are they and have they invested in?- If there is any country specificity you can also determine this through the portfolio companies on the investor pages.
- What are their ticket size – Perhaps this is the more difficult part of the process, determining if there is a ticket size and investment vehicle fit. Most investors have minimum and maximum ticket sizes.
Despite all this, be careful not to discount yourself. Being more data-driven will save you lots of time and unnecessary rejection. However, attempting to match 1:1 100% will leave you with no investors to reach.
Once you have done your shortlisting, leverage warm introductions as much as possible. While VC will look at cold emails, I’m willing to bet most of their investments came from warm introductions.
Now, aside from the more technical fit, these are a few other things you need to look out for.
What exactly should you look for in a good investor:
- Expertise
This could come as connections to follow on funding, B2B customers, location, and industry knowledge. It’s about being conscious of what you need and making sure that your capital partner is able to provide it.
- Founder-friendly
Founder-friendly is currently a huge buzzword, it’s just something some say in the ecosystem. However, there are definitely investors that are founder-friendly and this will manifest in many ways:
- The way you are handled during due diligence – kindness and empathy will show up during interviews, in communication, and in handling the conversation in general.
- They are fully behind your vision and visibly believe in you as a founder to make the right decision to execute this.
- They share the passion for your customer.
Do you know a great way to find this out? Asking founders in their portfolio. You should run your own due diligence if you want to be in this long-term relationship.
- Reputation
I have already briefly mentioned this, but find out what kind of investors they are, and what kind of founders they back. If this is the company you want to keep, by all means, pursue them.
- Etiquette
One thing I have learned in my few years of living is, when people tell you who they are, believe them. How you are treated through your journey with a VC will absolutely be how they continue to treat you and your business. Always choose kindness, drive, collaboration, and passion.
- Speed and decisiveness
Personally, speed and decisiveness are key., This will always tell you how clear in vision and direction the investor is, and more importantly how much they respect your time.
African founders, you are the prize! You are building this continent, you are solving tough problems and we are honoured to be going on this creative journey with you. Walk into these conversations with audacity, and proof of what you can, and will, do.
That’s all for today; choose well, and be deliberate as you do. I think we should talk about what fundraising will not do for you and what to consider as you raise at every stage. Look out for more in the Founder Centre.
