How to find investors for your business in Kenya
Where enterprise is concerned, the customer is key. Be that as it may, people who venture into building businesses are vital to the business ecosystem. While many of our blog posts are geared towards the consumers’ needs, this one is dedicated to those looking to be on the other side of the deal – the business owner. For the entrepreneur thinking of starting a business in Kenya, here is how to raise capital for your business.
Raising Capital in Kenya
1. Crowd Sourcing
An example of a crowd sourcing platform used by Kenyans is Zidisha. Individuals post their project proposals from which a collective of lenders choose which project to fund. Lenders pitch-in different amounts, totaling up to the final amount that the entrepreneur requires. After a period of time, the entrepreneur pays back the amount, which the lender then can choose to rotate to other projects. Some advantages of crowd sourcing in platforms such as Zidisha include;
- No need for collateral assets, bank account, guarantors or a salaried job.
- Choose your own repayment schedule
- Credit limit increases with each on-time repayment
- No interest rates. Total cost of loan is a service fee of 5% of the loan amount
Other crowd sourcing platforms include KIVA, Cheetah Fund, Fasini, Quirky AfricInvest, Enabilis etc.
2. Microfinance
There are numerous microfinance institutions in Kenya popular with small start-ups. Although most are geared towards special interest groups and community development projects, individuals can benefit too. One good example of how Microfinances work is Faulu Kenya; which has several packages geared towards small to large businesses, asset finance, chamas (table banking groups’ investments), self-help groups etc. Other microfinance funds in Kenya include Zawadisha, Unaitas, Plan International, Craft Silicon, Taifa MFI, Opportunity Kenya etc.
3. Government Funds
The Youth Enterprise Development Fund, Uwezo Fund , Women Enterprise Fund, Kenya Industrial Estate, Industrial Development Fund, Agriculture Finance Corporation and the ICDC are just some renowned government initiatives aimed at funding enterprises and ventures. Visit their websites and/or offices for more information on eligibility and process.
4. Venture Capitalists
Venture capitalists (VC) provide seed money for (sometimes high risk but highly promising) start-ups. In exchange, they have an equity position in the company. Therefore, besides money, they also provide management/ human resource support. VCs are a popular funding platform in IT. VCs in Kenya include Nairobi Garage, Seed Capital, Savannah Fund, Westpac, Monsanto Fund etc.
5. Foundations
Many corporates and organizations set up foundations as part of their CSR programs, handing out grants and/or interest free loans to eligible individuals in their sector. Foundation grants are popular in the arts, academics and research sectors. Do your research to be aware which companies fund which projects, grant opening dates, applications processes etc. In Kenya some foundations of interest include Safaricom, Chandaria, Aga Khan, Master Card, Coca Cola and the Ford Foundation.
What you should know before you start fundraising
Clate Mask is the CEO and Co-Founder of Infusionsoft and co-author of the New York Times bestseller conquer the Chaos: How to Grow a Successful Small Business without Going Crazy. He Says:
“The first core of raising capital for a venture, especially when planning to approach investors is to be crystal clear on your vision; to passionately articulate your story. Investors want to know you have a top tier plan and that you will stick around to make the vision a reality. Next, know your market. Have an exact idea of what your customers want. Investors want to see the market potential and proof you have the scale to go after it. They are typically looking for a 3 to 10 times return in a reasonable amount of time. Therefore, know what your key performance metrics are before you walk into those meetings. Show how you will use the proceeds to drive greater results and a great return of their money. Build relationships with the influencer groups – such as partners and potential clients – these third party references will validate your venture. Finally, you may be tempted to take your first or biggest offer, but be selective. Weed out firms that that have terms contrary to your vision.”
Michael Lewis is a former business executive and entrepreneur, Lewis writes about business funding, money management, and technology on the popular financial blog, Money Crashers. He says:
“Having little or no capital is a primary reason why businesses fail. Bootstrapping a business when you’re not drawing a salary and depleting whatever savings you have is dangerous. Similarly, the most egregious mistake an entrepreneur can make is asking for too little money. Lacking sufficient capital in the beginning is akin to starting a long journey with empty pockets, a broken-down vehicle, and a half-tank of gas; the odds that you will reach your destination are slim to none. When calculating the capital you need, plan that everything will take twice as long and cost twice as much as you expect. Figure that your worst-case scenario will occur. Don’t assume instant profitability. And remember, if you don’t raise enough capital initially to cushion your company if sales are slow or emergencies occur, it will be nearly impossible to raise more money just to keep the business going.”
Richard Branson is a business magnate and investor, best known as the founder of Virgin Group, which comprises more than 400 companies. He says:
“Your local community is often the best place to start when looking for funding opportunities, but if you can’t find anyone suitable to work with, the logical next step is to broaden your search to the national or even international level. Online communities and forums about issues in your sector can help you to contact those who will be interested in what you’re doing. Such people are all potential investors. Crowd funding is a great way to generate excitement about your idea and raise funds. Thanks to websites like Kickstarter and EquityNet, it’s now easier to drum up interest around your new idea or innovation and find small loans and pledges.
Preparing a pitch for an online forum is not easy, but if things go well, you could soon find people from all over the world hoping to buy your product or service. Entrepreneurship isn’t just about selling things — it’s also about finding ways to make a difference in people’s lives. Setting up a company explicitly to bring about positive change may be challenging, but keep in mind that enterprises that survive and thrive in the long run are ones that have won the trust and respect of their communities.”
Rachel is a prolific Kenyan writer, with over 15 years’ experience in the print media industry and has been part of editorial teams in major publications. Her specialties are health, community development, children and women’s affairs, global current affairs and lifestyle. She currently runs a content and creative consultancy outfit and holds an almost full-time gig at Kenya’s leading Newspaper, The Nation. When she is not creating content for her clients and has finally caught up with newspaper deadlines, she can be found at home reading or trying to (finally) work on her ‘Great African Novel’.