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Funding in different contexts: Landing international & local investors

 In a bid to explore different funding contexts, we had a chat with an investor operating in North Africa who shared abo...

Funding in different contexts: Landing international & local investors

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 In a bid to explore different funding contexts, we had a chat with an investor operating in North Africa who shared about their plans and what they look for in startups as well as a US-based investor who is venturing into the African startup ecosystem. 

Discussions with Players in the Ecosystem

 

  • We spoke to Jerome Curry who is the CEO of the US-based venture capital firm, Platform Capital Group. He has over a decade of experience in investing, coaching and training and is passionate about helping entrepreneurs move forward. He has also worked with multiple Fortune 500 organizations on leadership, change management and business strategy. 
  • We also spoke to Tamer Azer, Partner @Shorooq Partners. Tamer is a venture capitalist investor, an entrepreneur and business builder. He co-founded startups and worked closely with entrepreneurs in several different countries across 8 industries. He had served as Principal at Sawari Ventures as well, an Egypt-based venture capital firm. well.

     
    In this article: 
  • An international context
    1. Striking a balance between product and business 
    2. What are you doing as you fundraise and wait for the money to come in? 
    3. Determine your wow factor 
    4. Know your target investor 
    5. Find an experienced team member to sit on your board 
    6. Remember, investing is a relationship business
  • From the African investor 
    1. Shorooq Partners on investing in Egypt and adjacent markets 
    2. What does Shorooq Partners look for in startups to invest in?
        2a. Working with intention
        2b. Be keen on operational excellence 



    An international context 
     

     

    1. Striking a balance between product and business

    This is something that stood out in our conversation with Jerome Curry of Platform Capital. African startups have put up a good game when it comes to innovation and showcasing solutions for various challenges on the continent. The current health crisis arguably spurred more innovation and adoption of technology as entrepreneurs found ways to maneuver around a digital world. There are plenty of modern solutions to solve some of the existing challenges in major industries. 

    Selling the product is key. The product after all is what is of value to the target customer base. Without a good product that’s actually relevant to the target market, the startup is most likely to fail. Most of the time, a good product will sell itself but it isn’t the only component that will keep the startup going.

    As much as the product is key, it will have to transform and undergo modification with time to suit client needs and even as the startup enters other geographies. This is how it lasts and this feature of being able to last is attractive to the investor. Keeping this in mind, the founders should be able to have a hold on other parts of the business as with how they place emphasis on their product. 

    However, founders sometimes are heavily focused on the product and don’t give as much attention to other elements of the business.

    At the same time, investors are after two key things: impact and return. As much as the product is exciting, the investor should be able to see how they can exit.

    Jerome advices that it is important for startups to strike a balance between evangelizing their vision and having the same confidence with their numbers. They should want to keep the passion for the business and the passion for the vision, but also marry that to understanding their numbers and understanding where their organization is headed financially.

    Some of the founders that I've been the most impressed with really understand their numbers and they really understand their business. And that's something that founders sometimes miss because they are very heavy into the product.”

     

    2. What are you doing as you fundraise and wait for the money to come in?

    “While waiting, really look at how far can you take your project and you'll be surprised how far you can take it.”

    Fundraising is a time consuming process. It is during this time that startups might risk being stagnant as they focus on raising funding. Founders should be able to look at what they can do to grow their business using the resources they currently have even as they are fundraising. 

    Jerome advices that it is important for founders to have a resilience strategy even as they go through the fundraising process.

    It is impressive to investors for founders to be able to show the traction and how much they have improved their product and propelled the business forward without having received financial backing yet. Resources could include their customer or user base, their professional network, their human capital etc. They could also do further research and develop their product more. Eventually as they pitch the startup to investors, the founders can show their recent developments. By the time the money comes in, the startup is able to go to the next level.

     

    3. Determine you ‘wow’ factor.

    When it comes to creative and innovative solutions, the market is nothing short of products that suit that description. With rapid adoption of tech and increasing competition in the market, entrepreneurs are rising to the challenge to provide efficient products and services.

    Now more than ever is it more important to find what distinguishes a startup from another.

    Jerome advices that startups need to find what makes them unique and spend time amplifying it. Whether the founders are seeking backing from local or international investors, there are multiple other projects that these investors are looking into. This means competition is stark and startups need to have that quality that will capture the investor’s interest and make them want to take the project further.

     

    4. Know your target investor

    Is the pitch deck presented tailored to suit the investor? Usually in the job-seeking market, individuals have to tailor different resumes to fit different roles and companies that they are applying to. Similarly, founders have to tailor their pitches to the investors they are approaching, keeping in mind the industry match.

    According to Jerome, some of the pitches he has received do not have industry alignment that is; startups are pitching to investors that are not necessarily involved in the startup’s specific sector.

    Apart from the industry match, the stage of investment also matters. Investors usually stipulate the stages at which they are willing to come in and invest in a startup. It is therefore beneficial to both parties if pitching was done to the investor who would most likely come in at that stage.

    A great way to evaluate the pitch deck is for founders to actually put themselves in the investor’s shoes and question whether they would invest in the startup from an investor’s standpoint. If they are pitching to a certain industry-focused investor, what would they want to see it? What would impress them? What this does is that it helps the founder really zero in on what would make them lose out on the opportunity and take it out, while also highlighting what could better their chances at receiving the investment and magnify that. 

    “If you were at work and it was your job to invest say $500,000 into a company and your job absolutely depended on those companies being able to win, how would you position your company? What companies would you look for? What would you look for in those companies?”

     

    5. Find an experienced team member to sit on the board

    Investors often iterate that one of the major things they look at while making investment decisions is the team steering the startup. Further, finding the right people whose experience can be leveraged for instance people who have experience exiting, impacts whether you receive funding or not. Having them is a great value add that gives the startup an upper hand during pitching.

    ” When they say that they have somebody who has experience exiting, we automatically know it's not a matter of if they're going to get the money, it's a matter of when.”

    Of course having such a team member takes time, effort and even a stake in the business perhaps but such a member hugely differentiates a startup seeking financial backing from the others. Investing is a trust game and having such a team member shows that they have an asset who is able to carry the project through to exiting.

     

    6. Investing is a relationship business

    Countless players in the ecosystem can attest to how crucial their network has been in this ecosystem. People invest in and refer who they trust. It is therefore important for founders to maximize their relationships especially with people who show they have a heart for their ecosystem. Investment decisions are made over time and this comes with also building a relationship with the investor over time.

     

    From The African INVESTOR
     

     

    We also spoke to Tamer Azer, Partner at Shorooq Partners. The MENA focused firm set up an office in Egypt this year and is keen to invest in startups that are solving complex problems and solving them at scale. 

    Egypt has stood out as a major startup hub for many years, often falling between the top four countries netting the highest amount of investments in the continent. Last year alone, even as investment activities were expected to slump, Egypt recorded a 30% increase in VC funding to a total of USD 190Mn. It also took the second largest share in funding in the MENA region, second only to the UAE, as per a Magnitt report.

    “Even though COVID sort slowed down some types of businesses, it actually accelerated the digitization of the Egyptian market,” states Tamer.

    Technology adoption was on the rise as more entrepreneurs found ways to offer digital solutions to adapt to current times. This in turn created enormous opportunities and facilitated Egypt’s transition to a digital economy.

    However the personal aspect of negotiations was greatly minimized yet the world had to keep on moving and business deals still had to be closed. This meant that relationship forming was now happening online, taking out a huge factor in this – body language. This is why it was beneficial for Shorooq to have an office in Egypt so as to be able to be close to its portfolio companies and create the rapport needed in fostering these business relationships.

     

     

    1. Shorooq Partners on investing in Egypt and adjacent markets 

     

    According to Tamer, Egypt boasts a dynamic environment, with numerous opportunities and plenty of talent alongside its suitable proximity to other markets. Egypt has also been a gateway to other North African countries with investors taking interest in other markets adjacent to the country.

    But is Shorooq open to these other markets?

    Definitely! Tunisia and Morocco are some of the North African countries that possess some exceptional talent and have captured the eye of this investor. Additionally, the firm is in talks with entrepreneurs in other thriving ecosystems in Sub- Saharan Africa such as Nigeria, Kenya and South Africa. Though Shorooq Partners is still exploring these other hubs and having conversations with founders in these countries, it is projected the firm will make more investments in these countries.

    2. What does Shorooq look for in startups to invest in?

    2a. Working with intention

    Tamer states that to be considered for investment, founders have to show that they work with intention. Investing is risky and investors want to see that their investment goes into the capable hands of a team which can drive the startup to success.

    Having founded some companies himself, Tamer advices that it is important for entrepreneurs to recognize why they’re doing what they’re doing and ensure there’s reasoning and intention behind trying to solve what they set out to. 

    Such entrepreneurs are intentional with their decision-making and have a firm why and know why they ventured into that business. A strong why begets ruthless execution which is a must have to show investors that the founder is able to maneuver around obstacles that may arise in their entrepreneurial journey. 

    “We want to see that the quality of the entrepreneurs matches the opportunity and because the opportunity is immense, we need to see entrepreneurs that see the opportunity as large as we see it.”

     

    2b. Be keen on operational excellence

    The success of a startup is pegged on many things; the product, marketing strategy, relevance and need for the product, the team behind the startup and many more. However, one thing that culturally founders miss out on is ensuring that they have and maintain operational excellence, which is actually the muscle behind growth

    “Achieving operational excellence is something that's really important for building a large, scalable business,” says Tamer. 

     

    Another area that needs improvement apart from ensuring operational excellence is how to approach investors and knowing the right investor to pitch to. Although Tamer notes a huge improvement in the quality of pitches and pitch decks, entrepreneurs still need to do their research and tailor their proposals to the right investor who is actually focused on the startup’s industry of operation.

    However, he notes that there have been other massive improvements over the last three to five years.

    A key highlight, which is often reiterated by other investors, is that the quality of founders has improved. More founders and teams who are aptly able to run the businesses are emerging. 

    A lot of learning is also fostered in the ecosystem. Alongside the myriad of accelerator and incubator programs on the continent which facilitate learning, there is a readiness to share information in the ecosystem. Founders that have been successful in growing and have had exits are open to sharing and giving feedback. This is advantageous for startups that have been in the game or even for the ones that are starting out as they have information to reference to that could potentially impact their successes along the way.

    There's an opportunity now to learn more from the experience of previous cohorts that have gone through the full investment cycle.

    "The experience and learning opportunities present will go a long way in creating newer and more sophisticated generations of founders like the Uber-Careem experience in Egypt, which created an entirely new generation of entrepreneurs that are fundamentally of higher quality and just understood what it means to really scale a business."

     

     



    Click the link below to find a related whitepaper dubbed "Why it's time to invest in digital Africa." The whitepaper addresses the challenges faced in the digital Africa space and offers actionable development perspectives.
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