This is according to Fosters Kalaile, country manager at Business Partners Malawi (BUSINESS/PARTNERS), who says that there are numerous investors and financiers in the country eager to invest in viable innovative business concepts, but that many entrepreneurs grapple to successfully find the right investor for their specific business model, or do not pitch their business to its best potential.
Kalaile says that too often entrepreneurs approach a financier without reviewing their funding requirements and establishing whether they are in fact the best fit for their business. “For instance, an entrepreneur's requirement may be outside the funding threshold, following which an entrepreneur often just adjusts the application in order to fall within criteria communicated. This immediately places doubt in an investor's mind as it becomes evident that the entrepreneur hasn't fully planned how this funding will be utilised in the business to address the authentic funding needs."
There are four key components in a business pitch that investors tend to look out for, says Kalaile. “What the money is needed for; whether it is a short-term or long-term need; what the owner can give up or provide for the capital; and lastly, what rate of return can be expected from the success of the business."
In addition to these key components, Kalaile offers some additional points that an entrepreneur should highlight in a pitch to an investor. “Firstly, where is the business now? This provides the investor the opportunity to see your background and business experience of both the entrepreneur and support team, as well as the current health of the business.
“The next point is what the entrepreneur wants to do. What is the core product or service being offered by the business; how unique is it compared to competitors; is there a demonstrated need for the product or service; and is there sufficient market potential to make the investment worthwhile?
“Lastly, the entrepreneur should explain the purpose of the funding applied for (to start, expand, restructure, etc.). Investors need a clear, quantified idea of what the money will be used for, as well as realistic financial projections which indicate that the business veers towards being cash-flow-positive. The investor's thinking is around whether they can make the best return on the investment within the agreed upon time frames – a clear exit strategy."
Kalaile warns entrepreneurs against falling into the trap of including too much detail during the business pitch. “Often entrepreneurs become so caught up in their passion for their business, that the pitch becomes littered with too much technical information which can disinterest the investor. Such intricate information belongs in a business plan, which should only be provided post-pitch. The pitch presentation should always remain concise and contain only the essential elements."
She also emphasises the need to conduct thorough research on each individual funder before meeting them to ensure that the business matches the specific criteria of the investor, speaks to their investment preferences and that the proposed funding agreement ensures a fair deal for both the entrepreneur and investor.
Such research will improve the chances of a successful application for finance, says Kalaile. “Each investor or financier will have a precise idea of the type of business or idea that would attract their interest. It is therefore imperative that entrepreneurs tap into this and 'play the right field' to ensure a successful application for finance.
“Investors do not only invest their time and money into a business, they also invest in the entrepreneur behind the business – and it is for this reason that the partnership between the two parties should be a good match," concludes Kalaile.