If I had a dollar (US of course) for every time someone complained about their business or business idea failing to get funding I’d have enough money to start my private equity fund. Funding is one of the biggest complaints people have in Zimbabwe when it comes to startup problems but did you know that Zimbabwe is ranked very highly in World Bank Ease of doing business report for access to credit? So there’s money somewhere in the system, it is relatively not hard to get but we somehow cannot get it. Let’s look at reasons why your idea may be missing out on funding.
You’re not operating
Whether you’re looking at private investment or institutional investment they will almost always shy away from something that is still at the idea stage. Why? You see no matter how good and well-intentioned your idea is things will seldom go as you think they will in business. You will come with a tried and tested format but if you haven’t started operating, if you haven’t started creating customer relationships your ideas are just that. Execution is what is rewarded. So go back and look at your concept. Can you come up with a minimum viable product? Go out there and do some business. Come back with 1000 customers under your belt.
You’re high risk
Yes, young people are considered high risk by lenders and investors. It’s not an insult or discrimination, it is a matter of inertia. Objects in motion tend to stay in motion. People who have been working at a particular thing for a long time are more likely to stay at it. We’ve surely all heard that statistic about start-up and small businesses failing within the first 5 years of operating. No magic happens at the 5-year mark. It’s what you learn in the 5 years that sets you apart. There are many reasons for starting a business but only one that investors and lenders care about, delivering a product.
Your numbers lie
When doing financial projections it is, dare I say customary to tell lies. Now please understand, there is nothing wrong with having big numbers in your projections the problem is having big unexplained numbers. For example, the projection chart that tells us that customers will grow by 5% every month but doesn’t have a customer acquisition cost or any other explanation as to why more people will want to spend their money on you. You need to consider everything, no matter how small to tell the full story to those who will read your projections.
Lack of detail
The Devil is in the details so the saying goes. And you will find the same with your business idea. I just mentioned the issue of customer acquisition costs above as one example. I remember speaking to a young man about a business for what is considered a cliche idea, the chicken project. This young man secured a working capital loan from a Zimbabwean Bank to the tune of US$35000. The difference was the degree of detail! In the cost table was included the cost of washers for the roof nails. For those who don’t understand these little things cost around US$2 for a pack of 8. Very small things but necessary. The degree of detail to which you plan has an impact on how effective your plans will be. Poor plans show a lack of detail.
Too much too soon
I remember seeing somewhere that you support businesses by purchasing their products not by funding them. It’s a bit of a paradigm shift but it rings true. If you’re going out there asking for huge amounts of funding or loans early into your business you may be signalling to those who hold the money that you’re going for too much too soon. We sadly cannot draw a Zimbabwean parallel but look at the number of funding rounds the likes of Facebook, Uber, Lyft and other startup successes went through before hitting the big time. At each stage, they developed their business more. I mentioned before that it’s all about serving customers and getting more under your belt. People in general love to join working ideas.
None of those may be your problem and in that case, I can only give you one piece of advice; go out there and prove them wrong. The hang-up over funding in business in Zimbabwe is quite perplexing. Of course, some businesses are capital intensive and need upfront investment but what you should be focused on if you are not in this type of business is serving customers and getting more of them. Do you have any experiences with looking for funding, successful or not? We would love to hear from you.