5 Reasons Why Your Start Up is not Attracting Local Funding

Over the past two years, GoBigHub, in its mission to connect local micro-investors to local micro-entrepreneurs, has realized certain traits of local startups, which hinder their ability to attract financing, and or, to grow big.

We have since classified them into the five common pitfalls as below;

  • Investor readiness versus Lack of Capital

Most start-ups, instead of working to be investor ready, are more focussed on bemoaning the alleged lack of capital. This is a cultural issue, an over-repeated narrative that now has found its way into the psyche of the business owners.

At GoBigHub, the investor pitch form that entrepreneurs fill, is basically built around the idea of testing the business system in the company. With questions such as: are you registered legally? Where is your customer database? How do you acquire customers? How do you grow customers? How do you invest your profits? and many more.

These are questions which address the business as a system that generates wealth, and hence, attracts an investor to invest.

  • Systems versus Products

Most startups focus more on the products and their packaging features rather than the system that sources, produces, packages, and sells the products to generate wealth and prosperity to the investors.

This is a sad reality, especially given that for a good product, an entrepreneur might get an accolade or appreciation, but for a good system, the entrepreneur will get investment, which is what they really need.

At GoBigHub, we ask start ups looking for investment to focus on their systems, and we connect the startups to local professionals who volunteer one hour per month, to talk to them, sharing their experiences - through our free mentor-ship program called Inua Kijana Fellowship.

  • Sales versus Innovation

Most startups focus on innovation, product development, and further product development. They focus on better features of apps, and better quality of product, and on winning awards on how great and innovative they are.

Indeed, most startups are constantly winning competitions on most innovative wards, but have no sales. Sales is everything. Without sales, there is no revenue, no profits, and no return on investment to investors.

The purpose of a company is to generate wealth, by solving a need of a class of customers. Companies, or startups, that are starting with no sales, will die because of no sales.  At GoBigHub, we do not allow startups with no sales record to pitch to investors, as these are not already wet, with no skin in the game, and no minimum effort.

  • Active networking versus lack of business skills

Most startups lack strategic skills to expand and grow the business, but instead of actively participating in business networking sessions to learn through pep-talk engagement, they are constantly deriding the systems around them for lack of skills and end up not growing their businesses.

There is need for active networking, and learning amongst equals. Networking is key. It enhances leverage, and collaboration. At GoBigHub, we organize the GoBig Cocktail, a monthly event where entrepreneurs get to meet with fellow entrepreneurs, and share their insights, while also interacting with potential investors.

We also connect entrepreneurs to skilled experts, under the mentor-ship program - Inua Kijana Fellowship - so they can learn basics in their industry from people who have been there.

  • Risk management plan versus business losses

Risk is inherent in any venture, and for businesses which apply capital to production, there are multiple risks. Some risks are straight forward, while others are hidden and unclear. There is need for start ups to have clear definition of their risks and their plans to manage the risks.

Most start ups do not have clear statement of their risks, and consequently, do not have risk management plans, or systems to reduce risk. GoBigHub does a two stage due diligence process to identify and minimize risk, namely cash-flow due diligence.This confirms whether the company has generated revenue, net positive profits and net positive cash-flow.

This proves the business is no longer an idea but a system. The next level of due diligence is legal/regulatory due diligence. This focuses on whether the business has legal personality, character of founders, their physical addresses, legal registration of business, tax payment status, payment of licenses, etc. This ensures that the entrepreneur and the enterprise, is legitimate.

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