Funding can be an incredible way to induct growth in your business.
But it’s not easy.
Given that many entrepreneurs are unsure of how to approach the whole funding landscape, here’s a simple four-step roadmap to help secure funding:
• Research investor landscape
• Profile competitors
• Perfect the pitch
• Be ruthlessly realistic with figures
Research the investor landscape
SMEs contribute close to half of UAE’s annual GDP. Also, nearly half of all companies registered in Dubai are early stage startups. Not surprising, then, that total startup funding across the MENA (Middle East and Africa) region increased by 12 per cent in the first half of 2018 compared to the same period in 2017. That’s 141 investments in H1 2018 alone.
While there is considerable competition in the market, there are also plenty of investors keen to find suitable, potentially lucrative businesses to invest in; securing funding isn’t an impossible task.
Significant above all is to do research to differentiate yourself from other businesses. Also, key is to familiarise yourself with the investor landscape, for higher chances of securing funding.
The UAE’s three most active venture capital investors in the first half of 2018 were:
• 500 Startups – 10 investments
• MEVP – eight investments
• Arzan Capital – seven investments
Most importantly, read up about major players operating in relevant markets and study their portfolio to gauge their preferences and strengths. Approach the right investor and tailor your pitch accordingly.
Profile your competitors
Companies don’t secure funding in a vacuum, which is why it is imperative to be well-versed with one’s competitive landscape.
Look beyond direct competition. Indirect competitors are a threat – and an opportunity. A company that sells trainers competes directly with similar firms but indirectly competes with brands that sell slippers, flip-flops, biker boots and crocs.
Perfect the pitch
Pitching often causes entrepreneurs to break into a sweat. Perhaps, because a pitch can make or break the deal. Key factors in perfecting the pitch include:
Prove customer fit: Funding can help you scale – but there has to be something worth scaling. If your fundamental product-to-customer fit isn’t there, you won’t win. So that should ideally be the primary focus.
Focus on risk management: Investors are less risk-adverse than most. That said, they are looking to make profits which means they have a nose for danger, as well as opportunity. Show you’ve considered how to manage hurdles, to convince investors you’re an almost-safe bet.
Practice incessantly: The truth is, investors are not only investing in your business but you too. Practice till perfect or till you put those nerves to rest.
Share team information: For investors to put their money into your business, they need to trust you’ll deliver on your promises. Unless you’re a solopreneur, you’re not doing everything yourself. Make sure your pitch includes plenty of information about the key people involved in delivering success.
An exit strategy: Investors mostly aren’t looking for long-term, low-risk investments. They aspire to gain their investment back quickly. Show investors a worthy exit strategy to make your opportunity irresistible.
Be ruthlessly realistic with figures
Investors have seen it too many times: hopeful entrepreneurs who have done robust research, hold pertinent market knowledge, and have a confident, compelling pitch. But when they run the numbers, nothing adds up. Know key figures, i.e. revenues, expected profits, company valuations, investment required, etc.
If your key forecasts aren’t accurate and realistic, it undermines credibility. Worse, it undermines the claim that your business presents a good money-making opportunity. So investors are more likely to walk away.
Securing funding can be a fantastic way to drive growth – Getting your basics right will help steer the way.
Anisha Sagar is the general manager of Business Incorporation Zone (BIZ)