As we continue from our last article about understanding different investors and their interests, it’s imperative to tailor your pitch deck to your audience.
A topic I presented at the African Union MSME forum, themed “Fostering financial empowerment and educational innovations for African startups and MSMEs” on Tuesday 10 September 2024 sparked further engagement after my presentation.
Who are the potential investors, and what do they tend to look out for when making investment decisions?
Angel investors: These are high-net-worth parties interested in early-stage startups. Here, you must emphasise your business idea, passion, and growth potential.
Venture capitalists: They are mainly interested in high-growth and scalable businesses. Highlight your business model, market size, and traction.
Private equity: They tend to invest in mature companies with stable cash flow. Focus on financial performance and your growth plan.
Impact investors: Investors with the aim to generate positive, measurable social and environmental impact alongside a financial return.
Understanding what each type of investor looks for can help you tailor your pitch to their interests and consequently gain the investment you seek.
Let’s consider three different sources of funding that you may need to consider as part of your pitching decision.
These are Self-financing, Equity Financing, and Debt Financing. So, what are the advantages and disadvantages of each that it’s important to consider before selecting the best source of funding for your business?
Self-Financing: This entails Bootstrapping, early-stage VC, grants, and family & friends.
Advantages:
-Full business ownership
-Proven business model
-Independence & flexibility in management
-Enhances creativity
Disadvantages
-Limited capital & investment for expansion
-Slow growth level
-High operational risk
Equity Financing: entails angel investors, venture capital, crowdfunding, corporate investors and IPO.
Advantages:
– Suitable long-term alternative funding source
-Risk-sharing
-No monthly payment pressures
Disadvantages
-Ownership-sharing
-Less flexibility in management
-Lack of tax shields
-Very costly, compared to debt financing
Debt Financing: entails financial institutions, peer-to-peer, FinTech’s, family & friends.
Advantages:
-Preserve company ownership
-Lower interest rates
-Tax-deductible interest payments
-High accessibility
-Structured repayment plans
Disadvantages
-High pressure for regular income
-Potential bankruptcy
-Adverse impact on credit ratings
Overall, understanding this critical information will help you elevate your business. More importantly, you should ensure that you have developed a strong business plan and created a Business Model Canva, prepared accurate financial statements and projections, underscore market opportunities and your business competitive advantage, highlight traction and milestones, state the risks and mitigation strategies, develop a pitch deck, practice your pitch, leverage local, regional, international networks and note legal and compliance measures for your business.
Finally, ensure that you follow up with the investors after your presentation, with potential investors or lenders. If necessary, provide additional information, and keep the communication line open.
I hope your pitch will be a success with the above knowledge. For more information and assistance, contact us at the below contact details.
*Mekupi Kambatuku is a managing consultant at Simpli Business Advisory and can be reached at admin@simpliadvisory.com.