In my professional walk, I have come across a number of issues that concern me. As a Financier working in Europe and Africa, I have been involved in funding projects from Start ups to Growth- oriented businesses.
Prior to the economic downturn in 2008 onwards, capital and funding for businesses, though hard to come by, was accessible in the western world.
In Africa, the traditional way of funding has always been to take your business proposal to the traditional banks to raise funds for one’s business. Apart from the higher interest rates(in some cases 31%p.a), most businesses never get pass the first hurdle and are left on bank managers’ desk to gather dust. The “go and come”…”call me later” attitude is shoved in the face of many a buzzing enterpreneur. Eventually, their enthusiasm, will and ambition is so broken, that they decide to join the many talented African enterpreneurs in the “band wagon” of easy-way-out professionalism… enroll back in a course of study, obtain and MBA , update the CV and go looking for a job to make ends meet.
As a result, Africa, though awash with resources and talented enterpreneurs, never gets to see real enterpreneurship in action, as their efforts are almost always stifled,for lack of funding! In some cases however, some of these enterpreneurs,though may have great business ideas, do not spend enough time to research their business idea or the industry they are looking to enter. They sometimes are unable to put together a comprehensive business proposal/plan with good supporting documentation and financial forecasts that can stand scrutiny.
In my previous role as FD in the Housing industry in the UK, to raise finance, one had to demonstrate “need” via a comprehensive financial proposal with “sensitivity analysis” and “capacity testing” of the key variables in the business model. Angel Finance has been working on a number of business proposals requiring funding. Most of these have been presented to us by enterpreneurs from the African continent. Unfortunately, most of these business proposals do not meet the test and are too porous for any serious investor to put their money in them.
Angel Investors
The most words some of these seekers of funding like using is “Equity partnership” or “Angel Investors”. Well, in the USA and Europe there are many Angel Investors… mostly, rich individuals looking for the right opportunities to invest their money, with the view to exiting within the shortest possible time, having made their return on investment, etc. More often than not, they like to take key management roles in ensuring that the business is managed well enough.
On the other hand, Equity partners are mostly interested in taking a percentage share (e.g. 40%) of the business by injecting an equivalent amount into the business. Equity partners may be other companies of fund managers, etc, not necessarily individuals. As corporations, they have their expectations about the management of the business, returns on investment and of course have their exit strategy. Enterpreneurs in the US and Europe tend to know what they are going in for when they court Angel Investors or Equity partners. Unfortunately, in my experience, this is not the case with African enterpreneurs. We want funding for our business proposal and we want it now… without giving thought to the research, financial analysis, funding requirement, profitability forecasts and management. Once somebody is doing it and it appears to be successful, we think we can also do the same. Wrong!
To raise funding for your project from an Angel Investor or obtain an Equity partner to come on board, your business must stand up to financial scrutiny.
At my last count, there were over 2300 Angel Investors in USA, over 60 in UK, and similar numbers in other European countries. On the African continent, only South Africa has over 15 Angel Investors. Ghana has 2, Nigeria – with all its oil billionaires, has 2, Kenya 1 , Tanzania 2 and so on! The answer to my question: Do Angels really exist in Africa, is therefore a resounding No!. Even with the scanty numbers shown above, I am yet to hear of any real business project funded by Angel Investors on the African continent. Yet, apart from the USA, there are more churches in the African continent than you will find anywhere else in the world. Even in the European continent, particularly in the UK, there are more African churches than European ones, yet there are less Angels for African businesses.
So when we pray… please lets pray for Angels to land in Africa. I am sure the good Lord will listen to our prayers.
This article was written by VC4A member Douglas Oppong, the Managing Director of Angel Finance Group