venture capitalists - Afrikan Heroes

Reasons Why Your Startup Is Still Not Getting Investment

May 24, 2020

Thomas Bird, a venture capitalist at a Canadian seed-stage investment fund

This is probably the most discouraging thing in the startup ecosystem. You’ve got a beautiful slide-deck, passion for your work, have talked with VC’s, but you still can’t seem to get anyone to commit.

After you’ve got your potential investor’s attention, there are still a few extra roadblocks that I’ve seen over the years that can be the culprits.

Let’s dive in.

1. Your financing plan doesn’t make sense

Investors don’t invest arbitrary amounts in startups, we invest in plans.

Investors want to ensure that you have enough money to make it to your next round while executing your business plan. You’ve got to show how exactly that is going to happen and how much it’s going to cost. If you pitch investors for $1M and they interpret your plan as needing $5M to adequately grow, you may have an issue getting them onboard.

If you need $5M to make it to your next round of financing and you’re looking for one investor to fill that entire amount, it probably won’t happen. Investors like to share the needs of a round and work with each other. They discuss the investment and each participates in the round to reduce the overall risk.

Takeaways: Have your financing needs defined and build a team of investors from that.

2. You haven’t looked for cheaper capital

Venture capital is expensive. It’s the most expensive money you can get because you’re buying it with shares of your company. Venture Capitalists should be the final partners you consider when funding your business, and they know it. They also want to know that you are going to be efficient with their money; if you haven’t tried or gotten resources from somewhere else, why should they give you theirs?

There are lots of non-dilutive funding sources out there: government programs, economic development initiatives, and select accelerators. You may even consider debt options (not payday loans or credit cards). There are lots of low-interest programs out there that are familiar with seed-stage risk.

Takeaways: Research other types of funding and incorporate those into your financing plan.

3. They don’t really know you

Venture investing is a long process. You are entering a relationship that can last up to a decade on average. For this reason, investors want to know that you’re someone who they can trust to deliver. This is the reason that so many investors are reluctant to invest in entrepreneurs they haven’t worked with before. So find a way to get to know them! An example of creating familiarization would be bringing on someone as an advisor who has prior experience with this VC.

Takeaways: Network and become associated with the fund through other ways rather than just asking them for money.

4. They haven’t fallen in love with the product

I’ve seen this happen multiple times, an entrepreneur has an interesting product but the investors just haven’t fallen in love with it. This can be tough to overcome but not impossible. It’s important that the investor can envision the product-market-fit.

Sometimes this comes down to the investor not fully understanding what your product does. I once heard a veteran VC say that before he invests in any company, he gets them to pitch to his 8-year-old grandson. If his grandson doesn’t understand what they do then he doesn’t invest. Simplicity and clarity are key.

Investors usually fall in love with a product when they see a clear path to revenue and the potential for serious adoption. Your job as an entrepreneur is to make that vision as clear as possible.

Takeaways: The first customers you have to sell to are your investors. If you suspect that the investors you’re pitching don’t understand the product fit, create an “Ah-ha!” moment for them. You can do this by clarifying the path to revenue and market adoption.

Thomas Bird is a venture capitalist at a Canadian seed-stage investment fund.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.

Start-ups shouldn’t be pushed to profitability too early, says CEO of China fund

November 9, 2019

Some venture capitalists and private equity players are likely going to re-evaluate their investment priorities after some of SoftBank’s promising bets went south, Jonathan Larsen, chairman and CEO at Ping, a Global Voyager Fund said.

The $1 billion Global Voyager Fund is part of major Chinese finance conglomerate Ping An and it invests in early-stage fintech and digital health start-ups.

Pushing companies to profitability too early isn’t the answer, but having a coherent story and a coherent path to profitability is, Larsen said.

Venture capitalists and private equity players will likely have to re-evaluate their investment priorities after some of SoftBank‘s promising bets went south, an investor said Thursday.
The Japanese conglomerate reported its first quarterly loss in 14 years on Wednesday, and some of it was owing to the dramatic fall of office space-leasing start-up WeWork in recent months. SoftBank recorded a $3.4 billion writedown on its WeWork investment two weeks after injecting fresh funds of $5 billion and taking 80% control of the company.
While it’s difficult to speculate the long-term sustainability of WeWork’s business model, it is “not unusual in innovation cycles for expectations to get ahead of reality,” said Jonathan Larsen, chairman and CEO at Ping An Global Voyager Fund.

“We see that time and again, and I think this is probably an example of that,” he told CNBC’s “Squawk Box.”
The $1 billion Global Voyager Fund — part of major Chinese finance conglomerate Ping An — invests in early-stage financial technology and digital health start-ups. Typical investments range between $15 million and $30 million — a fraction of the $10.65 billion SoftBank invested into WeWork at a $47 billion valuation.

“Pushing companies to profitability too early isn’t the answer, but having a coherent story and a coherent path to profitability is the answer.”-Jonathan Larsen, chairman and CEO at Ping An Global Voyager Fund

“From our perspective, rationality and reasonableness of expectation is actually positive,” Larsen said. He added that a slight reset in how investors scope out investments would probably be helpful to those trying to put their money in real, transformative technologies. “I suspect that we’ll see some re-evaluation across the venture spectrum as well as private equity.”
Of the 11 investments the Global Voyager Fund has made so far, the largest was a 41.5 million euro ($45.90 million) check for German start-up Finleap, which builds fintech companies.
Asked about expectations Ping An has of its portfolio companies, Larsen said that they don’t have to show profitability in the short term. Instead, those start-ups should have a sustainable path toward long-term profitability.
“It’s typically a 7 to 10-year process to be able to get a business up and running, to be profitable and then meaningfully profitable on a sustainable basis,” he said.

“Pushing companies to profitability too early isn’t the answer, but having a coherent story and a coherent path to profitability is the answer,” Larsen added. In Ping An’s case, the fund looks at both the financial case presented by prospective investments as well as the strategic case — in terms of how well the technology and business scopes align with Ping An’s own research and developments.
“Our job at the Voyager Fund is to find technologies, business models, platforms and approaches, which are complementary and are additive to what we can do internally,” he said. “Alongside that, of course, we’re looking for a strong financial case so that we can deploy our capital responsibly.”
Larsen explained that if the right opportunity presents itself, the Global Voyager Fund may shell out amounts north of $100 million, but the scrutiny into the company would be a lot more stringent.
“It would need to be a larger company, it would need to be later stage, it would need to look more like a private equity opportunity than a traditional venture opportunity.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world