Thank you for your money!

In 2011, Elizabeth Simiyu-Bisher quit her job as an assistant engineer at Kengen’s Tana Power Station to start her own business. She had given birth to her firstborn son, Karim, six months earlier and gained an

extra 13 kilos while pregnant.

“In six to 10 months, my weight jumped from 62 to 75 kilos. I wondered how to shed it and go back to my pre-pregnancy body,” she says. Although she tried to exercise, wear slimming belts and go on diets, nothing worked for her.

It was then that she thought of trying electrotherapy – a weight loss and muscle toning electronic procedure. “It worked wonders. I lost all the extra fat that I’d gained within a few weeks.”

Elizabeth’s struggle to lose weight sowed an entrepreneurial seed in her.

“I imagined that there were many other women out there who couldn’t find proper means to lose weight, and started thinking about opening a business that could offer electrotherapy slimming solutions.”

However, Elizabeth did not have the Sh3 million start-up capital that she needed to build her idea into a business.

“I only had Sh500, 000 and bank loan rates were very unfriendly.”

She decided to pitch her idea to venture capitalists, who are typical investors with a high appetite for risk, who are willing to put money behind a good, but not tested, idea.

“I got three venture capitalists, one of whom I had interacted with in my previous career,” she says. One of them offered her Sh1.2 million on condition that she raise the remaining Sh1.3 million.

Luckily, the other two investors gave her Sh500, 000 and Sh800, 000 respectively.

Elizabeth immediately launched her business, Slim Therapy Limited, in Nairobi. Today, she has branches in Mombasa, Thika, Nairobi, Eldoret and Tanzania. In 2014, she was nominated one of Business Daily’s Top 40 Under 40 Women.

Sounds like the perfect entrepreneurial dream, doesn’t it? And if you have yearned to find the capital to launch your entrepreneurship dream, Elizabeth’s story has given you hope that it is as simple as finding a venture capitalist or two, no?

Not so fast; just like any other investor, you still need to work hard to impress one of them, even if they may be more receptive than banks, family and friends.

The first hurdle for many women entrepreneurs is that it is difficult for them to convince angel investors to loosen their purse strings.

According to Solomon Maina, a director at Sahara Capital which invests mainly in the finance, agriculture and IT sectors, says women need to learn how to separate emotions from their businesses.

“They must replace their emotional attachment to a business with proper market research,” he says. His sentiments are echoed by popular billionaire venture capitalist who stars in the TV programme Shark

Tank, Kevin O’Leary.

According to O’Leary, an investor looking to buy into your business idea does not care about your feelings. They are looking for the money. “If a business has no merit, it’s a bankrupt idea that is going to fall

anyway regardless of your emotional attachment to it,” he says.

 WHAT THEY WANT

First things first: to get funding, you must have your company paperwork in order. Growth Africa is a company that connects angel investors looking to fund local businesses from Sh10 million onwards.

According to Kete Shabani, the communications director, you must ensure that your business is legally compliant and registered. This may include company registration and tax compliance.

According to Maina, venture capitalists then evaluate how innovative or original your business is, how sustainable, and how efficient it is. They will ask questions and conduct a thorough check on your business records.

“Before we invest, we must also see if there is anything we know about your area of operation, and whether there are new markets we can expose you to, or business deals we can help you strike,” he adds.

“If we have nothing to offer, we may turn you down.” Additionally, according to Shark Tank’s O’Leary, businesses that get financed must be able to explain why they are the right people to execute the

business plan, and must know their numbers.

“An investor will lose confidence in your business when you don’t seem to understand your numbers,” he says.

WHERE THINGS GO WRONG

Even if you get your angel funding, your business may still fail. According to Elizabeth, lack of proper book-keeping is likely to be the cause of your failure when turning a funded idea into a profitable business.

This is the challenge that she faced in her early days.

“After getting the capital, I struggled with cash flow management due to poor book-keeping,” she says. “A normal book-keeping day for me was a record of how many customers showed up and how much they spent.”

She also struggled with unplanned expenses and improper credit control. Consequently, she lost 15 per cent of her would-be income.

“I had clients who’d take our services for a whole month on credit only to end up failing to pay on time or defaulting altogether.” Additionally, she didn’t pay herself a salary and at times dug into her purse to

supplement her business.

Brian O’Rourke, the CEO and founder of online entrepreneurial publication EnTrends, agrees with her, adding that you must consistently check your cash-flows, sales efforts, marketing, and the demand level

for your product.

“Just because you think there may be a need for your product or service doesn’t mean the general public feels the same,” he adds. “If people do not want to buy your product or service, then you may just have to abandon ship and move on.”

Additionally, you may be eating into your capital by engaging extra expenses you could otherwise avert. “Before you spend any amount of money, whether on business furniture, salaries or extra hiring of staff, interrogate whether there you will get value for

your spending,” says Tonnie Mello, a local entrepreneur and certified business mentor.

Finally, one of the key mistakes you may be committing is to ask investors for more funds than your business is worth. “For instance, you shouldn’t ask for Sh10 million funding for a boutique stall,” says

Maina.

Over-valuing your business in this manner makes you look greedy.

OPPORTUNITIES

In February this year, Centum Foundation announced a Sh510 million fund for small businesses. Each business that seeks a pie of this fund is eligible to get up to Sh15.3 million.

To get in, you must pitch a competitive business idea, and showcase the ability of your team, the potential impact of innovations, and the potential market size that you’re targeting. So far, Centum has funded blissful.co.ke, a local website that connects

businesses in the events and weddings industry to potential customers, and Elimu TV, a television station that provides the secondary education curriculum.

At Growth Africa, start-ups are given an initial amount of Sh500,000 ($5,000) to help them complete their business prototype within a given time frame and conduct a pilot in the market in order to get proof of

concept and real feedback from customers.

In the second stage of financing, known as acceleration stage, investment from Growth Africa will start from $100,000 for expanding, meeting demand and growing operations.

In the final stage, Growth Africa will work with roughly 38 organisations, seed funds, angel and venture funds, who will invest $100,000 and above.

Factors to consider when starting a business

• Research, opportunity and competitors: Carry out basic research on whether your business idea is already in the market, or how businesses that are similar or close to the one you want to start are doing. According to Forbes, don’t venture out if there are about 10 competitors who already have the product or service you want to start offering in your area.
• Costs and expenditure: Evaluate the possible level of costs you are likely to face and contrast it to your stamina and skills to build a young business.

• Business location and expansion: As troubled Uchumi Supermarkets has shown, this could make or break your business. Don’t go for areas that have a low concentration of buyers or that are far from

  the source of your products.

Mistakes to avoid

  Lack of business plan: According to Elizabeth Simiyu of Slim Therapy, never start a business if you don’t have a plan. “Always read the business environment to tell if it’s a good time to start or not,” she says.

  Control: Don’t sacrifice give control of your business to a venture capitalist for more investment money unless you’re ready to sell your business.

  Cash and costs: Don’t allow too many costs to overcome your income, says Tonnie Mello. Neither should you spend too much before you record any sales.

  Quitting: Don’t hold on to a dying business, says Elizabeth. “Be brave and let the costs you’ve lost in the business go, and move on,” she says.