Finding Series A funding can be one of the biggest challenges for African startups. With local investors often conservative and Silicon Valley still a distant land of opportunity, serious founders need to get creative with fundraising or risk getting pummeled by the competition and market forces.
African founders can unlock smart series funding to scale their ventures and hack their way to successful closes. Here are 10 hacks African founders have used to seal Series A deals:
1. Build a Minimum Viable Coalition
In the same way a minimum viable product is key to raising pre-seed funds, a “minimum viable coalition” can be instrumental in the Series funding stage. Rather than waiting for the “perfect” investor, get started by building a minimum viable coalition of strategic investors who share your vision.
These can include angels, corporate VCs with strategic synergies, foundations focused on your market, etc. Show momentum from this coalition to attract larger investors.
2. Target Impact Investors First
Leading with your social impact or sustainability goals can help attract early-stage funding from the growing pool of investors seeking both financial and social returns. Highlight how you address real local needs like affordable housing, clean energy access or healthcare. Show how making a social dent also makes business sense.
3. Get Tied into Networks
Attend local and international pitch events, join accelerators and get intricately connected to the wider startup ecosystem. The right introductions and networks can surface investors a cold email never would. Well-connected advisors can also help make warm introductions to key funds.
4. Leverage Your Board
Board members are a valuable untapped resource. Your success is their success. Encourage them to actively source and refer potential investors through their networks. Consider “seller’s fees” to incentivize referrals that result in closed deals. Just make sure referrals don’t compromise the integrity of your governance.
5. Experiment with Crowdfunding
Regulated equity crowdfunding is still new to Africa but growing. Experiment with campaigns on platforms like SeedInvest, GetEquity, or StartEngine to source deal interest from the African diaspora and retail investors. The modest funds can help you expand operations as you pursue larger raises. Campaigns give you the chance to be expressive with your storytelling and to introduce your story to a wider audience.
6. Pitch Local Corporations and SME Funds
Large African corporations and SME funds focused on tech innovation like the Nigeria Startup Act are increasingly looking for solutions to plug into their business models or distribution networks. Your product-market fit may resonate more with such investors than traditional VCs due to synergies.
7. Quantify Alternative Metrics
If growth metrics like monthly active users (MAUs) or recurring revenue aren’t compelling yet for Series A investors, get creative quantifying alternative metrics that show impact or potential, like number of farmers reached, small businesses onboarded, jobs created. Impact sells in Africa more than anywhere else.
8. Leverage Accelerator Alumni Status
If you graduated from a major accelerator, leverage that brand association aggressively. Reach out to the accelerator’s network of Limited Partners and portfolio alumni for introductions. And pitch your graduation showcase as an opportunity to woo potential investors all at once.
9. Reassure Investors with a US Business
Showing an ability to generate income in a stable economy reassures investors of your profit potential and ability to self-sustain longer without further funding needs.
Register a company in the United States to build trust in your startup. Investors do not only invest in startups, they invest in markets and economies as well. A founder with an entity in Delaware is more likely to raise funds than one with a Nigerian entity alone.
You can get a registered US business (C-corp or LLC) online in 3 – 5 business days on Norebase.
10. Tell a Compelling Story
Storytelling for seed raises can be tricky because you don’t want to see desperate (as this could negatively impact your valuation) and you don’t want to seem laid back (as this may depict you as unmotivated). Here are two interesting angles you can use.
Think lean, mean and focused. Demonstrate how you have been scrappy and resourceful so far, focusing only on the most vital activities and levers. Show how funding will pour rocket fuel on that lean strategy and growth engine.
Emphasize the upside. Thanks to Africa’s youthful demographics and fast adoption of mobile technology, the growth potential for most technology categories is astronomical. Draw attention to the steep hockey-stick growth curves you can ride with sufficient capital and resources.
African founders are developing unique plays to source Series A capital with creativity and grit. Traditional methods don’t always map onto the startup ecosystems here yet. By thinking outside the box and leveraging diverse untapped resources, smart founders can hack successful closes. Success lies in quantifying impact clearly while also demonstrating commercial viability through “hacks” like these.