Connect with us

Startup Guide

Five easy ways to win funding from angel investors

Have a good estimate on your first-year cash requirements, your gross margin, and how it compares to the average for your industry



Budding entrepreneurs are putting all their efforts to clinch an opportunity in this year’s KCB Lions’ Den Season Three show

Money is the lifeblood of any business, and at some point, every company needs an outside infusion to help it grow. Unfortunately, small businesses do not usually have the luxury of large cash reserves to meet temporary or long-term funding requirements.

At the moment budding entrepreneurs are putting all their efforts to clinch an opportunity in this year’s KCB Lions’ Den Season Three show, which allows entrepreneurs to pitch their business and get financing from top business moguls in exchange for stake. Being a competitive engagement, this means that only the best will get the financing they need.

Here are five things to consider when taking the journey to approach investors for any amount of money.

Define yourself: First, define your startup properly, the sector you’re in, and who could potentially be interested in this sector. Think laterally about the possibilities that your product offers, and what industries it could be used in beyond the obvious. Defining your product and where it stands, will also ensure that when it comes to approaching an investor you have a really strong sense of what you’re offering, why it’s important, and where it fits.

Write a detailed business plan: Writing a business plan is easy. But writing one with sufficient detail for investors, can be tricky. Entrepreneurs often leave out key numbers and are overly optimistic with those they provide. For starters, know your burn rate, which measures how much money a not-yet-profitable business is spending each month, and break-even point.

READ: How SMEs struck deals worth Sh138 million in Lion’s Den

Have a good estimate on your first-year cash requirements, your gross margin, and how it compares to the average for your industry. Also calculate a realistic growth rate and how your costs will scale up as your sales do.

Clean up your credit: If your business doesn’t yet have its own credit history, many investors will want proof that you can responsibly manage money and pay your debts. That proof is your personal financial track record. If you find any mistakes, contact the creditor involved, requesting a letter acknowledging the mistake and stating they plan to inform the credit-reporting agencies about it.

Investors might be less concerned with your credit score than lenders, but they’ll be wary of entrepreneurs with major blemishes such as a bankruptcy or loan default on their record.

Line up your team: The big question for nearly every angel investor is: Can you do this? They’ll want to know that you and your co-founders or management team can execute the ambitious business plan you’ve presented and pay back your loan or generate a return for investors. Make sure you and your key people can talk about what may be ahead for the business, what the later phases of growth might be, what could go wrong, and how you might handle those things.

READ: How a change in mind change save your business

A viable exit strategy: Before he or she invests in your business, an angel investor will expect to see an exit strategy. While angel investors are patient and willing to make long-term investments, they need to see how they’re going to reap the return on their investment.

The sale of shares to the company’s principals is a common exit strategy for angel investors who hold equity ownership positions; the sale or merger of the company is a common exit strategy for debt-holding investors. Don’t be surprised that your prospective angel investor wants a time-frame set.

You want to get an investor to help you take your business to the next level? Apply KCB Lions’ Den Season Three on and achieve your next desired business growth.

NEXT: Great wealth creation lessons from cabinet ministers

Business Today is the leading independent online business website in Kenya. Started in 2012 by a veteran business journalist, it has a huge following both in Kenya and abroad. It covers various business and related issues. Email editor at: [email protected]

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

BAKE Awards 2018 Nomination Badge

News Updates

Media Profile22 hours ago

Betty Kyallo: Just petty or real drama queen?

If fame has followed her as she rose through the ranks, so has controversy, the latest being the beef with former...

NEWS22 hours ago

Kenyan woman makes it to TIME 100 list for 2018

Nice Nailantei Leng'ete was named among the world's Most Influential Persons in the world for her crusade against Female Genital...

NEWS1 day ago

MP Shah Hospital under fire over ‘exorbitant’ bill

Kenyans on social media are unhappy after hospital billed a family of a woman who was stabbed by thugs and...

NEWS1 day ago

Baringo South MP Grace Kipchoim is dead

She is credited for being in the forefront in fighting outdated cultural practices, including cattle rustling and female genital mutilation...

Business Unusual1 day ago

Jobless young women turn to sex for money

Report shows that within an overall pattern of a system rigged against youth, there are worse prospects of accessing decent...

Education2 days ago

Is Kirubi company buying Daystar University?

The university was closed last week after students refused to return to class, protesting failure to release a report on...

Health2 days ago

Insurers issue warning as healthcare costs overrun inflation

According to Minet Kenya, while the medical insurance industry recorded a growth of 0.65% in gross premiums, claims incurred over...

Careers3 days ago

How to join university with D+ and get a degree

There is a one-year programme that enables students to progress to diploma then proceed to the professional qualification and onto...

NEWS3 days ago

10 million youth ready to leave Kenya

British Council report says many young people frustrated by corruption and a ‘rigged system’ that have resulted in high unemployment

Education3 days ago

Kenya to host global education conference

The event will gather Ministers of Education from the 54 African countries, as well as UN agencies, NGOs, and high...