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For many start-ups, finding an investor is a great achievement. There are many things that ride on finding the right funders.  

Nancy Wagi, co-founder, Lugha Ishara, a women led technology that connects deaf children to the world through animated sign language, says their project saw them shortlisted for the Women in Technology Incubator 2019, an initiative by Standard Chartered Bank and Strathmore University. 

“When we were at Strathmore, the vice chancellor said they don’t invest in ideas, but in the character of a person, because you can have an idea, but your character cannot sustain the business,” she says. 

Different opportunities

Wagi adds that there are different kind of opportunities for start-ups. For instance, some investors help founders through their ideas, resources and tools, but no with monetary input.

Then there are those that help founders who have undergone product development to scale while others help them test the product in the market.

For Wagi, her idea had already tested its validity through customer use for a year after gathering research and testing it with family. 

“It depends on the stage of your journey as there are different kinds of investors.

In the initial stages, I would advise founders to go for grant-based opportunities, where they get to use the money as they wish.

They can also go for angel investors who inject money into your business withoud demanding for a stake in it. However, angel investors will always want to  know what’s happening.

The other option is equity, where the investor wants a share of your business.

There are also others who won’t give you cash, but they will give you their expertise, love and help you build your brand,” she says.

Alex Mutivo founder of Nanasi App says another key thing investors look for is traction. 

“Has your business shown there’s an actual need for your product, by simply having customers who are willing to pay?

Once that’s evident two other things to look at are the market size and whether the founders have the required skill set to pull that business off.

It takes time to meet the right investors, but with these three things, you’ll definitely stand out from the crowd,” he says.

Entrepreneur commitment

Advocate and solicitor, Amit Gadhia, says investors will first check how deeply the entrepreneur is committed and engaged in the project. The project must be viable, there must be a strategic vision with a unique selling point.

“African start-ups are looked upon favourably by foreign investors, especially tech start-ups.

With the cost of skilled labour becoming expensive in traditional tech hubs of China and India, African countries such as Kenya, Nigeria and Ghana, and other Asian nations such as Cambodia and Vietnam are in the front of the queue in attracting foreign investment in technology sectors.

This means foreign investors are wary of the high cost of compliance and red tape of doing business in Africa.

An open, creative culture with flat hierarchy with the founder being involved at each stage is most likely to be supported,” he explains. 

Presently, start-ups are generally governed by company laws, but recently, the lawmakers have moved to introduce the Start-up Bill to govern the interactions between the government, incubators, start-ups, and investors.

“It seeks to foster a culture of innovation and entrepreneurship; and crucially, link start-ups with public and private investment, and research and development institutions among others,” Richard Muhereza, Founder and CEO, LawInsight founders “LawyeredUp App (formerly Haki App).

Business incubators

Richard says the bill establishes the Kenya National Innovation Agency to create partnerships among local and international business incubators; create online directories of start-ups and incubators; and register and certify start-ups and incubators.

Furthermore, county governments will also be able to establish their own incubation programmes.

“This will come in handy to fast track local growth of startups, but might be limiting that growth if changes are not made to promote international funding given that local funding on its own might not be sustainable in the long run,” he continues.  

When it comes to protection from the law, Richard advises start-ups to seriously consider having a lawyer from the beginning. 

“This would help them structure themselves from ground up instead of trying to hurriedly do so when investors come knocking. 

Many lawyers would be happy to be on board at the early stage and seek to flip the time spent in the future. Several options such as board seats and sweat equity would definitely assist.

Unfortunately most startups see prior legal costs as a barrier and unnecessary at the beginning only to pay a heavy price later,” he recommends. 

Racism in funding

There have been several accusations about white privilege and favouritism that has plagued the Kenya tech system.

In a recent Zoom webinar on race and entrepreneurship in Africa dubbed, “Does it matter”, various entrepreneurs discussed the issue on race and funding.

As a black and female founder, Edith Njage, Regional Director for The Alpha Group, notes this phenomenon and urges local investors to divert their funds to supporting young startups. 

“We need to see more local investors since most of them put their cash in traditional investments such as real estate, fixed deposit accounts instead of start ups.

There needs to be a mindset change where local investors also see themselves as people who can invest in start ups,” she says. 

Michael Lawal a tech entrepreneur who’s been involved in funding start ups believes it is time for locals to stop the blame game and for the government to also join in when it comes to funding startups. 

“The term equality is just a myth. We need to take ownership as Africans for our destiny from inside.

We have our leaders and big people with money stashed in Swiss accounts doing nothing instead of supporting our people.  This is a mental madness that needs to change,” he says in conclusion.