No matter how great a business idea is, without enough funding, death will become inevitable.
In fact, a study shows that about 29% of business failures are a result of the owner running of money while another study by Fundera in 2018 found that 82% of businesses that failed did so because of cash flow problems.
And the bad news is 84% of small businesses reach profitability in their first four money.
Now the question is, how many businesses in Nigeria can survive the first four years without profits.
Of course, just a few.
And unfortunately, raising those funds from investors is not easy.
A survey by Gallup reveals that only 23% of small business owners are able to raise initial capital from investors while the other 77% rely on the personal savings of the founders.
Of course, running a business for four years in a country that has been adjudged to be the costliest place to operate a business in Africa through personal savings could be a lot of challenges, especially for young entrepreneurs.
Thankfully, in this post today, I’ll walk you through simple ways to raise funds from investors without even knowing anyone.
If this is what you want, then let’s get started.
5 Ways To Attract Investors Without Going Insane
This post has compiled 5 simple ways to attract investors in Nigeria without going insane. For each one, I’ll breakdown exactly what makes it an amazing choice.
If you find it useful, which I am sure you would, kindly share with your friends on social media and I will be super grateful.
So, let’s dive in.
Grow your business first
Given the numerous challenges a startup has to overcome in Nigeria to survive and thrive, a lot of investors expect business owners seeking funding to at least have good enough active customers.
Some will expect the business to have a nice balance sheet, formidable partnership or in an advanced stage of having one.
Of course, this might require some capital investment probably beyond your means, but the truth is no sane investor will willingly invest in uncertain terrain.
So, make the effort to acquire customers first before seeking for funds rather than seeking for investors first.
“Investors want proof that your idea is going to work, and nothing proves this better than having real, paying customers” Briana Morgaine
Get a Co-founder
In this part of the world, average entrepreneurs starting out new prefer to work without a co-founder.
Honestly, I don’t know why but studies have shown that this is a huge mistake.
According to Fundera, startups with two co-founders rather than one raise 30% more capital and this is even more important for female entrepreneurs seeking funding.
A study by HSBC Private Banking revealed that more than one-third of female entrepreneurs face gender bias while raising capital for their businesses.
According to the report, social norms and gender roles are the major reasons for investors’ lack of faith in female entrepreneurs. A lot of them have doubts about women’s full-time commitment to their businesses.
Enroll in business mentorship
A study by Stanbic Bank shows that 80% of new businesses in Nigeria fail after 5 years and a different study found that 96% will fail after 10 years.
Of course, this means that only 4% of businesses started together will survive after 10 years.
But business mentoring can make the difference between survival and doom and these stats prove it.
- 70% of mentored businesses survive more than 5 years while non-mentored businesses have a 35% survival rate.
- 89% of business owners who don’t have mentors regret not having one
- 84% of business owners with mentors have avoided costly mistakes.
- Mentored business has increased revenue by 83% while non-mentored businesses did so by 16%.
Thankfully, you don’t have to pay to get one.
Mentor Nigeria connects young business owners or aspiring ones to business growth mentors that will help them to start a business that is scalable, profitable and repeatable, work with them to grow it and then secure funding from investors.
Join a startup accelerator
Startup accelerators help support early-stage, growth-driven firms through education, business mentorship and helping them secure financing.
And according to VC 4 Africa, companies participating in ecosystem support programs are 23% more successful in securing investment.
In the United State for instance, between 2005-2015, startup accelerators collectively invested in more than 5,000 US startups and these companies raised a total of $19.5 billion in funding.
And here, Nigeria leads the pack of the 30 African startups has taken part in the Y Combinator’s acceleration program with 60% representation.
Outside the YC’s $120,000 standard seed round, 22 of the startups have raised additional funds and combined, these YC-backed African startups have raised the sum of $65.5 million in funding.
From mentorship opportunities to helping you secure funding, joining a startup accelerator can be helpful for entrepreneurs seeking investment funds.
Pitch your business
One quick way to get noticed by investors is by pitching your business to them, and of course, this could be quite difficult.
Thankfully, this article from the Entrepreneur compiled 13 tips on how to deliver the perfect pitch.
I recommend you check it out.
While pitching to investors, ensure that you convey the nature of the market opportunity you address with your business, describe how your products are differentiated and clearly articulate the go-to-market strategy.
Ensure that you explicitly highlight the exit strategy and what they will personally gain from investing in your business.
And of course, be ready to answer any question.
Getting Started Now
Securing investment funds could be difficult but probably, not as difficult as you think.
It takes boldness, hard work, dedication, perseverance and you can get started today by following any of the tips above.
Of course, if you need any help along the way we are always available to help.
At Mentor Nigeria, we help people to transform their life experiences, talents, skills, education and their passion into a highly successful story as an entrepreneur millionaire.
We help them to create businesses that are scalable, repeatable and profitable, work with them to scale them and secure funding from investors.
You can get started immediately by registering to attend the next edition of our mentorship’s Opportunity Discovery Day seminar.