How to increase your chances for raising business funds.

Given the numerous fundraising options, such as angel investment, investor capital, grants, accelerators and incubators funds, available to SMEs in Nigeria, the story seems not to change. Access to funds remains a major cause for SMEs’ failure in Nigeria. Of the 40% of SMEs that manage to transcend mere dreams to reality, only 20% survive as studies from the UN Industrial Development Organization Investment and Promotion Office in Nigeria shows.

Jenna Abdou, a FORBES contributor noted that, “the investment decision is not solely an investor’s as many would believe but the founder’s”. How, then, do you ensure the fundraising game maintains fairness — where you can, to a large extent, maximize your stakes in fundraising your business?

The following should be considered if you will bag the fund needed for your business raise:

A CLEAR UNIQUE VALUE PROPOSITION (UVP):

A clear UVP communicates to potential investors the degree to which you understand your business and industry. This in-turn indicates how serious you are as an entrepreneur and the possibility of your business’ success. What are the benefits your business offers? How do you solve your customers’ needs? What distinguishes you from every other business in the industry? What point is the industry at and what is the target? What are revenue potentials? All of these should be communicated in clear and measurable terms.

FOUNDER-INVESTOR FIT:

You can make better calculations, rather than unsure guesses, as to the outcome of your funding applications. Founder-Investor Fit relates to making research as to which investor or investing firm has interests in your line of business in the industry. Be sure to check your potential investors’ portfolio in comparison with your business type and current stage so as to be sure your business is founder-investor fit. Finding the right investors who would most likely invest in a particular business accelerates the fundraising process. Adequate research provides reliable clues as to which investor(s) to approach for business funds.

INTERNAL RATE OF RETURN (IRR):

“The IRR is a financial measure that demonstrates how a donor’s money is moving the organization toward sustainability”, David Atchley. Two words are quite notable here: demonstrate and sustainability. You must be able to demonstrate, through your IRR, the degree to which the fund you solicit will sustain your business on a long-term basis; this must as well be communicated in clear terms. Every investor will be willing to invest in a business whose sustainability is well proven.

A CLEAR MANAGEMENT STRUCTURE:

“Today, venture capitalists, those specialists who invest in new companies, look to the quality of management as the most important single factor in determining investment success”, renowned self-made millionaire”, Brian Tracy noted. One of the ways to know if a company will grow in the future is in its management. Given this fact, be sure to put a clear management structure in place if you intend to attract investors.

TIMING

Your business idea may be novel, great and viable. But the market may not be ready for it just yet. A reality check should be carried out to ascertain if the market is ready for your product or service. Be able to present your investors a proof that your product is in demand in the market at the point. With pull demand, you can verify if customers will be willing to pay in exchange for your service.

PASSIONATE TEAM:

Having a business idea is one, having a passionate team is yet another. Your potential investor wants to know if you have a passionate and an innovative team who can translate your idea into real business and a successful one. If a team is not in place, he should perhaps be convinced that the right leadership is in place to build one.

TRACTION:

Especially when you’re trying to raise an A or B round fund, an investor will be interested to know about the traction your business has been able to generate. Traction refers to a measurement of your business’ validation in the market. How frequently are customers coming for your product or service? And how frequently do they come back for it?

When put in place, the above factors will help make funds easily accessible for your business!