Capital is to a business as blood is to a human being. It’s not the fundamental reason for its existence but it’s essential for survival. To grow in 2020, you need to chart a roadmap for growth and, more often than not, investors will help you get to the next level. However, statistics show that only 1 in 1000 businesses succeeds in securing investment capital. If you’ve been struggling for capital, and don’t know where to start, this webinar is for you. In this webinar, Kleos Africa’s Lead Consultant and Beta Gamma Sigma’s Board member, Glory Enyinnaya, will take you through the steps of raising capital from equity investors. Glory brings to bear her considerable technical expertise as an Accenture-trained management consultant and First Class accountant. She will also draw upon her experience as a technology entrepreneur and the Regional representative of Faster Capital, a venture capital fund in the United Arab Emirates that invests in entrepreneurial projects around the world. 2020 has just begun – will it be the year your business gets funded?

1. Securing Equity
Financing
Glory Enyinnaya– Kleos Africa’s Lead Consultant

2. 1. ABOUT ME
2. INTRODUCTION
3. CRAFTING YOUR BUSINESS MODEL
4. FINANCING PATHWAYS
5. SPLITTING THE PIE
6. REQUIRED DOCUMENTATION
7. EXIT STRATEGIES
8. QUESTIONS?
2
TODAY’S AGENDA

3. ABOUT ME

4. • BSc. Accounting (First Class),
University of Nigeria
• MBA (Distinction), Lagos
Business School
• Courses from IE Business
School, Spain; EGADE Business
School, Mexico; SDA Bocconi,
Italy; Cambridge University,
England; Wharton Business
School, USA
4
ABOUT ME - EDUCATION

5. • Started my career as an investment banker
• Accenture, Oil and Gas (NLNG, Eterna), Public sector (FIRS,
Eterna), FMCG (BAT), Telecommunications (MTN) Banking
(Access, Union)
• Fellow, Institute of Management Consultants
• Board member, Beta Gamma Sigma, ACMP Nigeria and DC
• Lead Consultant, Kleos Africa – 250 entrepreneurs
• Regional Representative – Faster Capital
• Centre for Global Enterprise’s AWEC – 200 female
entrepreneurs across Africa
• Speaker, facilitator, author 5
ABOUT ME - EXPERIENCE

6. INTRODUCTION

7. • What is a sustainable business model?
• How much capital do I need?
• How can I estimate when I’m going to run out of cash or when I will reach
positive cash flow?
• What are the available sources of capital?
• What financial analyses do I need for fund raising?
• What other information do investors typically require?
• When I succeed, how can I extract the financial value from my business?
7
KEY QUESTIONS

8. CRAFTING YOUR
BUSINESS MODEL

9. • A business model is a framework for making money
• It is the set of activities which a firm performs, how it performs them, and
when it performs them so as to offer its customers benefits they want and
to earn a profit
• A business model is a summation of the core business decisions and trade-
offs employed by a company to earn a profit
• A business model is like art: One of those things many people feel they can
recognize when they see it (especially a particularly clever or terrible one)
but can’t quite define
9
WHAT IS A BUSINESS MODEL?

10. • ‘’All it really means is how you plan to make money’’ (Michael
Lewis)
• ‘’Assumptions about what a company gets paid for’’ (Peter
Drucker)
• ‘’A set of assumptions about how a company creates, delivers
and captures value’’ (Alex Osterwalder)
• ‘’Stories that explain how enterprises work’’ (Joan Magretta)
• A business model is Narrative and Numbers
10
WHAT THE EXPERTS SAY

11. 11
FORMS OF BUSINESS MODELS (1)
FORM MEANING EXAMPLE
Brokerage Bring together buyers and sellers, charging a
fee per transaction to one or another party
Century 21, Orbitz
Bundling Package related goods and services
together
Fast-food value meals,
iPod/iTunes
Cell phone Charge different rates for discrete levels of a
service
Sprint
Crowdsourcing Get a large group of people to contribute
content for free in exchange for access to
other people’s content
Wikipedia, YouTube
Disintermediation Sell directly, sidestepping traditional
middlemen
Dell, WebMD

12. 12
FORMS OF BUSINESS MODELS (2)
FORM MEANING EXAMPLE
Freemium Offer basic services for free, charge for
premium service
LinkedIn, Facebook
Leasing Rent, rather than sell, high-margin, high-
priced products
MachineryLink
Low-touch Lower prices by decreasing service Walmart, IKEA
Negative operating
cycle
Lower prices by receiving payment before
delivering the offering
Amazon
Razor/blades Offer the high-margin razor below cost to
increase volume sales of the low-margin
razor blades
Printers and ink

13. 13
FORMS OF BUSINESS MODELS (3)
FORM MEANING EXAMPLE
Reverse
razor/blades
Offer the low-margin item below cost to encourage
sales of the high-margin companion product
Kindle, iPod/iTunes
Reverse auction Set a ceiling price and have participants bid as the
price drops
Elance.com
Pay as you go Charge for actual, metered usage Electricity companies
Standardization Standardize a previously personalized service to
lower costs
MinuteClinic
Subscription Charge a subscription fee to gain access to a
service
Netflix
User communities Grant members access to a network, charging
both membership fees and advertising
Angie’s List

14. • The business model construct is useful for understanding value
creation for new ventures and can be a source of venture
differentiation
• Diving into the details of revenues, profits (and other numbers)
is important for thinking through how your new venture’s value
proposition to key stakeholders can be converted
• Storytelling matters
14
KEY POINTS

15. FINANCING
PATHWAYS

16. • Early stage ventures often need extra cash to fund their expansion, but
struggle to get funding because they don’t have enough of a track record
• Over half of all startup founders say that a lack of financing is restricting
their business’s growth opportunities
• In this section, we will look at all the different ways a business can raise
money, with a special focus on angel investors and venture capital
16
FINANCING PATHWAYS

17. • Consider using your personal resources – self funding may be an option
assuming you have the money available
• Many people fund a business themselves (savings/credit)
• Mark Zuckerberg and Eduardo Saverin, for example, started Facebook in
2004 with their own personal funds
• One good reason to consider self funding is if it gets the business to a point
where outside investors feel comfortable investing
• However, unless you have deep pockets, self-funding is not usually a long-
term strategy
17
PATHWAY (1): FUND IT YOURSELF

18. • ‘’Angel’’ investors are not philanthropists looking to give away cash – they
are regular investors looking for profit
• Angels are usually wealthy individuals who invest in promising young
companies
• You can pitch to angels via local networks e.g. LAN, Rising Tide
• Angels invest anything from a few thousand dollars to a few million Some
advantages are:
• They may invest when others won’t
• They’re usually experienced business people
18
PATHWAY (2): ANGEL INVESTORS

19. • Venture capital funding is money given by a company, not an individual,
and is usually at a slightly later stage than angel investors
• VC investors usually invest higher amounts than angel investors
• Most VC deals work in the following way – the VC provides funding
(usually to firms with high growth prospects) in return for equity
• VC money can really fuel your business growth, but you will probably lose
some control as a VC likes to ensure the business is making all possible
choices to secure a return
19
PATHWAY (3): VENTURE CAPITAL

20. • Like venture capital firms, private equity companies will invest in your
business in return for a share of ownership
• Private equity firms invest in both a wider range of businesses, as well as
in older, more mature companies
• They tend to make larger investments, and take larger stakes
• Private equity investments are usually oriented at turning around failing
businesses or achieving rapid growth, but they always take control
20
PATHWAY (4): PRIVATE EQUITY

21. • IPO – when a company sells shares to the public
• Advantages are that with potentially millions of people to buy shares, a
business can raise serious amounts of cash
• Usually an IPO is for a business at a later stage
• Likewise there are disadvantages:
• Loss of autonomy
• Cost of meeting regulatory requirements for public companies
• Complex process
21
PATHWAY (5): IPO

22. SPLITTING THE PIE

23. 23

24. 24
WHAT EVERYONE DOES

25. 25
SPLITTING THE PIE

26. • At first it is just you.
• You are pretty brilliant, and out of the many ideas you have had, you
finally decide that this is the one.
• You start working on it. The moment you started working, you started
creating value.
• That value will translate into equity later, but since you own 100% of it
now, and you are the only person in your still unregistered company, you
are not even thinking about equity yet.
26
FUNDING STAGE (1): IDEA STAGE

27. • As you start to transform your idea into a physical prototype you realize
that it is taking you longer (it almost always does.) You know you could
really use another person’s skills.
• Look for a co-founder. You find someone who is both enthusiastic and
smart.
• Offer equity in exchange for work (sweat equity.) A true partnership is
based on respect. Respect is based on fairness. Anything less than
fairness will fall apart eventually. And you want this thing to last. So you
give your co-founder 50%.
27
STAGE (2): CO-FOUNDER STAGE

28. • Who can you take money from?
• Accredited investors – People who either have $1 Million in the bank or
make $200,000 annually. They are the “sophisticated investors” – that is
people who the government thinks are smart enough to decide whether to
invest in an ultra-risky company, like yours.
• Family and Friends – Even if your family and friends are not as rich as an
investor, you can still accept their cash. That is what you decide to do,
since your co-founder has a rich uncle. You give him 5% of the company in
exchange for $15,000 cash. Now you can afford room and ramen for
another 6 months while building your prototype.
28
STAGE (3): FAMILY AND FRIENDS STAGE

29. • To give your uncle the 5%, you register the company.
• You issue some common stock, gave 5% to uncle and set aside 20% for
your future employees – that is the ‘option pool.’
• (You do this because
• 1. Future investors will want an option pool;
• 2. That stock is safe from you and your co-founders doing anything
with it.)
29
REGISTERING THE COMPANY

30. • With uncle’s cash in pocket and 6 months before it runs out, you realize that
you need to start looking for your next funding source right now. If you run out
of money, your startup dies. So you look at the options:
• Incubators, accelerators – these places often provide cash, working
space, and advisors. The cash is tight – about $25,000 (for 5 to 10% of the
company.) Some advisors are better than cash, like Paul Graham at Y
Combinator.
• Angels – in 2013 (Q1) the average angel round was $600,000 (from
the HALO report). That’s the good news. The bad news is that angels were
giving that money to companies that they valued at $2.5 million. So, now
you have to ask if you are worth $2.5 million. How do you know? Make
your best case. Let’s say it is still early days for you, and your working
prototype is not that far along. You find an angel who looks at what you
have and thinks that it is worth $1 million. He agrees to invest $200,000.
30
STAGE (4): THE ANGEL ROUND

31. • Finally, you have built your first version and you have traction with users. You
approach VCs. How much can VCs give you? They invest north of $500,000.
Let’s say the VC values what you have now at $4 million. Again, that is your pre-
money valuation. He says he wants to invest $2 Million. The math is the same as
in the angel round. The VC gets 33.3% of your company. Now it’s his company,
too, though.
• Your first VC round is your series A. Now you can go on to have series B,C – at
some point either of the three things will happen to you. Either you will run out
of funding and no one will want to invest, so you die. Or, you get enough
funding to build something a bigger company wants to buy, and they acquire
you. Or, you do so well that, after many rounds of funding, you decide to go
public.
31
STAGE (5): THE VENTURE CAPITAL ROUND

32. • There are two basic reasons.
• Technically an IPO is just another way to raise money, but this time
from millions of regular people. Through an IPO a company can sell
stocks on the stock market and anyone can buy them. Since anyone
can buy you can likely sell a lot of stock right away rather than go to
individual investors and ask them to invest. So it sounds like an
easier way to get money.
• The people who have invested so far want to finally convert or sell
their restricted stock and get cash or unrestricted stock, which is
almost as good as cash. This is a liquidity event – when what you
have becomes easily convertible into cash.
32
GOING PUBLIC

33. 33
BOOSTRAPPING – PROS AND CONS
KEY POINTS PROS CONS
Savings • Need a healthy savings account
• Tap retirement or pension funds
• No costs except lost
interest
• Risks of relying on
your own savings
• May not be enough
Personal debt • Relying on personal debt
• Ranges from using credit cards,
refinancing mortgage, to taking out
home equity line of credit
• Easy (need good
credit)
• Use with caution – as
interest rates rise
need to ensure can
pay back debt
Friends and
family
• Go into partnership with friend or
family member
• Pooling funds into business or borrow
from them
• Trust in someone you
know
• Can put strain on
relationship if things
don’t go as planned
Business Cash
Flows
• Profits/cash generated by a business
that is put back into the business; aka
‘’Organic’’ growth
• Low-risk, low-cost • Requires the
company is profitable
enough
• May not drive fast
growth

34. 34
BOOSTRAPPING – STRATEGIES
KEY POINTS
Set
Parameters
• Draw lines between personal and business accounts
• Pay yourself a salary; cover personal expenses and draw line between
you and your company
• If using friends and family, make it very clear who owns what
• Create formal agreements with terms, have everybody sign
Plan Ahead • Taking inventory of your savings, loans and other resources
• Decide how much you can commit to the business (stick to that)
• Make a plan, list all the investments needed
• Figure out break-even point; make sure you have enough funds
• Consider worst-case scenarios: long product cycle, etc.
Stretch • Come up with creative strategies to stretch resources
• Practical ideas: delaying investments as long as possible, renegotiating
payment terms and minimizing inventory
OVERALL SELF-
FUNDING
ADVANTAGES
• Certainty
• 100% ownership
• Full control
DISADVANTAGES
• Slower growth
• Personal risk
• Smaller network

35. 35
ANGEL INVESTORS – PROS AND CONS
KEY POINTS
Pros • Availability – Angels often step in when others won’t – want to
get in early
• Flexibility – Angel investors are usually more flexible with
investment amounts
• Network – Angels use own experience and contacts to help
companies they invest in
Cons • Expectations – Angels look for (usually) 10x investment; your
business needs to drive high growth (and you must deliver that
growth, otherwise you can expect to come under a lot of
pressure)
• Loss of Control – Angel investor co-own the business; he/she
will have a say in how to run it
• Limited Funds – Investments are usually small

36. 36
ANGEL INVESTORS – STRATEGIES
KEY POINTS
Finding An
Angel
• Angels invest locally – they want to know the company they invest in
• Most cities have local angel networks (Lagos Angel Network)
• Look for local business people and network with people that might want to
invest
Pitching • Know what Angels are looking for in a deal
• Show strong growth prospects, but don’t overdo it; things need to be
realistic (investors see hundreds of business plans)
• Show how you think you can make money and show best/worst cases
• Show compelling idea (or problem solved) and competent team
• Show an exit strategy – angels don’t look for lifetime commitment
Working
With
Angels
• Need to know how to work with your angel – some are ‘’hands off’’, but
others aren’t
• Read the agreement carefully – see how much power you are giving up,
and discuss with them to get an idea of how they plan to be involved

37. 37
VENTURE CAPITAL – PROS AND CONS
KEY POINTS
Pros • Growth – the average VC deal is 5 to 10x larger than angel investments
• Not a 1 time investment – Can raise large amounts of money from VC’s multiple
times
• Not a loan – There is no repayment to VCs and there are no personal guarantees
• Capabilities – Very useful to have experienced investors, as they bring both money
and strategic thinking, as well as proven tactics and reliable networks
Cons • Difficult to raise funds – must meet VC criteria of driving spectacular growth in a
specific time period
• Controlling spending – VCs can write some very big checks, making sure money
isn’t spent on low-value-add activities/people/equipment is a real challenge for some
• Loss of Control – The agreement signs over a share of your company and usually
gives VCs a place on the management team/board of directors – you’re not the sole
decision maker anymore
• Conflict of Interest – VCs are on a strict timetable and want to exit the business with
a particular return by a particular date

38. 38
VC FUNDING – STRATEGIES
KEY POINTS
Finding a VC • Approach a list of several funds
• Ask Google for ‘’Venture capital firms in <YOUR LOCATION>
Making the
pitch
• VCs get thousands of pitches
• Need to work hard to get a meeting as the numbers are huge; ideally use your network to
get an introduction
• Successful pitches don’t get you money, but they do get you further discussions which might
lead to money
• Successful pitches show your company has a good team, a clear plan and strong growth
potential; get the point across quickly and clearly
Working With
a VC
• If successful in making them interested, need to agree on amount and terms
• Important to set valuation (determines VC’s share)
• Once agreed, a ‘’term sheet’’ is created which lists the agreement’s key points
• VC will also do ‘’due diligence’’ – they will investigate your company in detail to check that
all the information you’ve provided is accurate
• Money might be divided into ‘’tranches’’ – aka portions of money that are gradually given to
you depending on whether your company meets its targets

39. REQUIRED
DOCUMENTATION

40. • Business Plan
• Ballpark figure for company valuation
• Pro Forma Financial Statements
• Executive Summary
• Pitch deck
40
REQUIRED INFORMATION

41. 41
WHAT’S THE DIFFERENCE?

42. • The Opening Sentence
• Inspirational/compelling/powerful
• Name dropping – famous advisors, customers,
Board members
• The Problem
• Current or emerging or even unknown
• The Solution
• Software, hardware, service, combination?
• Where you fit in the value chain/distribution
• The Opportunity
• Size
• Growth rate
• Dynamics
• Your Competitive Advantage
• The Model
• Revenue – Metrics, 3-5 year forecast
• Cost: Cost drivers
42
EXECUTIVE SUMMARY
• The Team
• Years of experience
• Background
• The Promise
• I will make you a LOT of money
• The Ask
• How much you need
• What you will use it for
• Key Points
• 6-8 paragraphs
• 2-3 pages

43. • The Problem
• Entrepreneurs are by nature problem solvers
• Value Proposition
• We are the Uber of food delivery
• Target Market and Opportunity
• TAM
• SAM
• Target market
• The Solution
• Use pictures and stories
• Competition
• Explain how you are different
• Revenue Model
• What do you charge?
• What frequency?
• Who pays the bills?
43
PITCH DECK
• Traction and Roadmap
• Early adopters
• Next milestones
• Marketing, Sales and Retention
• How will you capture customers?
• Team
• Why are you the right people to solve this
problem?
• Financials
• Sales forecast, P&L statement, cash flow
forecast (for the next 3 years)
• Investment and Use of Funds
• Exit Strategy
• Partnerships

44. • Analysis done by month, for 36 months
• 3 standard statements
• Income statement
• Cash flow statement
• Balance sheet
• Supported by a more detailed budget for
the next 12 months
• Different scenarios – realistic,
conservative, optimistic
44
FINANCIAL STATEMENTS
• Questions answered:
• What do I believe this business could
look like financially in the future?
• And therefore what might it be worth?
• What is the relationship between my key
performance indicators (the managerial
parameters) and financial performance?
• How much cash do I need for working
capital and for losses I sustain prior to
breaking even?
• Is my operating plan internally
consistent and financially feasible?

45. EXIT STRATEGIES

46. 46
ACQUISITIONS – PROS AND CONS
KEY POINTS
Pros • Organizational synergies
• Faster resource acquisition relative to organic development
• Shareholder liquidity
Cons • Loss of control

47. 47
PUBLIC OFFERINGS – PROS AND CONS
KEY POINTS
Pros • Visibility/credentialing
• Shareholder liquidity
Cons • Hard to ‘’time’’ the market (no objective threshold for a public offering)
• Costs (direct and indirect)

48. 48
RICH Vs. KING– YOU DECIDE!!

49. 49
• Wharton Business School (Entrepreneurship Specialization)
• Anne Vital, 2013
REFERENCES

50. ANY QUESTIONS?

51. Place your screenshot here
51
You can find me on the
KLEOS Africa Website if you
are interested in my services:
▫ Capital raising
▫ Consulting services
▫ Online mentoring: 5pm-
6pm, Monday – Thursday
Contact Info
https://www.kleosafrica.com/profile?id=2