Small Businesses In Africa Need Angels Not Prayers
When you start a business, it becomes a part of your life, so it becomes very hard to let go of it. Imagine that you have a business idea that would have to employ a lot of people. You've written the business plan, registered it, researched the market to make sure you didn't miss anything important and launched it. And then — nothing. Of course, you're doing some transactions. Maybe 10 or 20 sales per day. But it's not close to the number of sales your success-destined business is supposed to be raking in. It's disappointing and it happens to many people. The problem is that a business idea isn't nearly enough. There's a role money and adequate "know-how" has to play in the success of a business. And the lack of that has seen many start-ups struggle to scale past the first two years of their existence.
According to business day, In Africa, 80% of businesses under Micro, Small, and Medium Enterprises (MSME) fail within the first five years of their existence. And, in Nigeria, for example, only 39% of this kind of business survived in the last 10 years.
For decades, Africa has consistently seen SMEs start and pack up within a short time frame, a defining notion that has made many entrepreneurs lose interest in implementing their ideas. Small businesses in Africa barely scale through the first 5 years, but it seems to not draw a lot of attention. With the way entrepreneurship is decorated as lucrative in Africa, hardly anyone would think only a few entrepreneurs in the continent see actual success. If you dig further, you'd find out they take on responsibilities too heavy for their shoulders to carry.
So when they pack up after a few years in business, we are not sure of how much help they received or if they even received it at any point. But this problem which has now become a culture can be curbed by "Angel Investors".
While we are hopeful that Angel investors will find African startups worthy of their investments, we also have our fears. Even though we dream of it, and hope for its fulfillment, there's always a part of us that runs from it. Being part of a continent considered to be backward in a growing world, there's only so much you can think of. The doubt that crawls and the waves of reminders of how your content is seen and interpreted, especially as a Nigerian, is enough to discourage anyone. This leaves us with no other option than to pray and ask for a miracle.
Angel investors are wealthy people who give money and their experience to small businesses to see to their growth. They do that by not considering the money a loan to be refunded hence the term "Angel". The term which was first used when wealthy individuals came together to fund theatrical productions in the Broadway Theatre, will soon go ahead to be a household name in a study on how entrepreneurs gathered capital by the University of New Hampshire's William Wetzel, founder of the Center for Venture Research. He called these people willing to take this risk on entrepreneurs "Angel Investors". Their aim since creation has been to provide a one-time investment to kickstart a business they are interested in or provide continuous funding until the business is strong enough to stand on its own.
These guys are often found in an association of elite entrepreneurs, they chill and dine with the big boys. People call them different names like informal investors, angel funders, private investors, seed investors, or business angels. Some people mistake them for venture capitalists, but they are not.
How Do You Know An Angel When You See One
Angel investors are individuals who have the means and desire to provide funding for startups, so they are not just committed to raising capital, they are ready to walk the walk with you. Most times, these guys are people who have successfully built a business from scratch, so their main goal is to support and be a part of the success story of another startup.
Another thing you should pay attention to is their network. Can they walk you through the doors of those that matter to your business in your industry? What businesses have they done in the past? What conferences have they attended? These are questions you need answers to. You can also use online directory platforms like gust.com and angel.co to research, pitch, and connect to reputable, connected angels.
An Angel Investor will put his mouth where his money is. They'll share your content on their social media wall and even recommend your products to their followers. So in your accessing an angel, check to see if he talks about the business(es) he's associated with. It is also important to know that these guys are often busy so you'd have to tag them to your company's content on social media or send them links directly to their inbox asking them to help promote.
Angel investors and their importance to a developing economy
Entrepreneurs play a vital role in enhancing economic development, by starting businesses that positively affect the local economy, create jobs, and establish solutions that better people's lives. All this won't be possible if entrepreneurs lack the money to fuel their businesses. That's where the need for investors arise. And the kind of investors that would look at the face of a young business is called "Angel Investors."
So Angel Investors help small businesses for these small businesses to help the economy. That's why they are important to a developing economy.
Will you give an Angel a chance or is the devil you know better than the Angel you don't know?
For most startups, the devil they know is the absence of financial capacity and the know-how to sustain and grow the business hence the need for an Angel. Given that angels release their funds in exchange for ownership equity in the company, will most startups be willing to agree to the terms?
In a recent interview, I spoke to small business owners in Nigeria while trying to gather real-life thoughts and experience on the subject matter, and their reply got me shocked. Most of them said they'd rather manage their business the way their strength (finance & know-how) could carry than allow a stranger to control them. These folks are clearly in business to put food on their table. This shows how much work needs to be done in enlightening small business owners in Africa to run their businesses in a way that will affect the GDP and per capita income of the continent. And, a good way to start is by opening up to opportunities when it comes their way or going all out to find one.
Well, sacrificing 20 percent of your company to someone who helped you in situations more than your strength could carry isn't a bad idea. It becomes a problem when they are demanding as high as 50% or more in ownership equity.