Vusi Thembekwayo Shares Tips On How To Raise Funding For Your StartUp

Raising funding for a startup is one of the most daunting tasks for entrepreneurs. Vusi Thembekwayo took the time to share tips on how to raise funding for a startup in a series of tweets that read;

I can't tell you how many emails, WhatsApps, DMs etc. I get asking for advice on how to raise funding.

Over 90% of the requests lack a basic understanding of how to raise funding for your start-up.

Here is a smallanyana thread on what you need to know.

— VT (@VusiThembekwayo) August 25, 2020

Not all investors are the same 

Not all investors (funders) are the same. You have to understand that most individual investors that “take a punt” on businesses are very different from institutional investors that have a fund mandate. So first understand the nature of the investor you are approaching.

Angel Investors 

The individual investors typically invest as angel investors very early in the funding lifecycle for a business. Angel investors are very important because they typically force the entrepreneur to think about professionalizing their capital raises.

Impressing them 

For most angel investors, a simple & clean cap table is very important. What is important for most angels is a forecast of how investment rounds affect dilution, ownership, valuation &  distribution of proceeds to the founder & investors through a detailed exit waterfall.

So, if you are raising you to have to consider questions like:

1. Do we have a shareholders agreement?

2. What is the value of my business based on? 

3. How many shares am I willing to offer? 

4. Do I have a tiered shareholding structure? 

5. Can the business take-on debt?

The most contentious issue for non-listed assets has to be valuations. Typically, the management or the founder feels that the business is worth more than the market is willing to pay. This is the sentimental premium attached to the business. The founder will tell you about the toil, lack of sleep, personal financial sacrifices, near-death experiences, broken relationships, and even abandoned pets to make you see the value of the business through their eyes.

But the investor is only concerned with making a justifiable investment case based on a sound investment thesis. The valuation can not be overcooked at entry. This will make it much harder to extract the upside value in the business…. unless it is TRULY exponential.