Securing funding as a startup in Zimbabwe may seem like a daunting and even impossible task. Many entrepreneurs may hold fast to this notion for a number of reasons. Simply securing any huge financial injection into a startup is not as easy as wishing on a star. Particularly in Zimbabwe, where the startup narrative hasn’t always been understood. Traditional SME’s are more conventional and lower risk ventures and more appealing to investors. This story has begun to change however as we are seeing more angel investors putting their faith and money into innovative startups.
NeedEnergy is one of the latest startups benefitting from this culture shift. NeedEnergy, an energy tech startup closed its seed round of funding, securing a cool $100 000. This round of funding which was a culmination of well-wishers and angel investors has put the startup in a position to escalate their business operations. They can now position themselves to attract more investment, through Series A funding by working tirelessly to develop their model.
Another startup, that put in the work to attract funding is Phenomenon Technologies. Phenomenon Technologies, home of the Sciency App, has so far secured $6000 through their crowdfunding initiatives. Crowdfunding basically allows a startup to fundraise by appealing to much wider audiences through existing crowdfunding platforms. These “crowds” invest small amounts into the businesses that interest them. These small amounts add up to a much larger amount which the startup can then plough into developing their product.
What must you do to attract seed funding?
Local and international investors may be willing to invest in your initiative but you must be able to assure them that it is worth their time. Here are some simple tips, which worked for both NeedEnergy and Phenomenon, and could work for you too.
Have a good product and package it well.
The product must be so good it should be able to sell itself. Investors want to see that your product is not only innovative but that it actually works. You must be able to project clearly how well the product will perform and why they should be interested. What need is it answering and what is the likely impact. This of course must be backed up by data. Can you prove what you are talking about? Basically you must be able to talk a good game.
Articulate your vision well
Everyone loves a good story, so share your story and share it well. You must be able to express your vision in such a way that, investors can already see the future of the startup before they begin to see the financials
Prepare your finances
Other than the valuation process, (which can be tricky in Zimbabwe due to the iffy currency issues) it is vital to have your financial house in order. Sit down with your money team, perform due diligence and make sure your financial documents are sound. Clearly show the company’s financial projections in a way that will keep investors interested. This is after all about making money
Leverage on your network.
In a country where the angel investor community is not known, it pays to make use of the people around you. Generally, if you have built a strong valuable team, someone should have a contact you can leverage on. In the case of NeedEnergy, one of the team members already has vast experience in the energy industry in Zimbabwe. It was therefore easier to know which doors to knock on to look for funding.
Setup a good equity structure
What’s in it for the investors? Decide how much equity you are giving for what percentage of the company. You must have more than a good appreciation of how equity is divided. Communicate the minimum buy-in as well as clearly articulating the roles and scope of the shareholders.
Funding for companies or startups comes in different forms depending on the growth stage of the company in question. A startup can receive funding from Seed Round, Series A, B, and C. The seed round is generally the first round or type of funding injected into a startup outside of the founder’s own finances. This funding is received on the understanding that the funder will receive something in return (equity). These funds are typically used for product development and testing market ideas. It can also be used to get critical human and physical resources necessary for the startup to fully take off.
So what does this mean for Zimbabwean entrepreneurs and innovators? There is a need for a continued culture shift in how investors view the Zim startup scene. It’s no secret that startups are high-risk investments but also are potentially high reward investments as well. Zimbabwean startups need to continue to put in the work to position themselves to be appealing to any venture capitalists or angel investors.
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