Project Management . Capital Raising . Renewable Energy

To say that fundraising was a mountain climb for companies in 2020 would be a gross under-statement. The COVID-19 crisis has inflicted heavy damage on otherwise healthy firms through four channels: Falling demand and revenues, reduced input supply, tightening of credit conditions, and increased uncertainty. As a result, the pandemic has thus brought to a grinding halt investment pipeline that was in the works for weeks to months prior to the movement restrictions and the follow up economic recession and gloom forecasts on the economy that gave many investors cold feet.

The situation is worse for early stage companies that need more time to get cashflow positive to fund repayments, in times when debt and debt-like structures are becoming predominant.

As for Kenya and other developing economies, the pandemic was by no means the trigger to the worst business year in recent times. Rather it is an exacerbation of what was widely expected to be a bad one at the very least. For instance, government data showed that there was a downward trend in terms of job creation and other economic indicators as early as 2017. 

Nevertheless, there are a few success stories in terms of companies that were able to close reasonable investment rounds despite the seemingly lacklustre economic times. For instance, GOGLA noted that in 2020, 75% of all off-grid sector financial commitments went to three companies. Thus representing significant concentration risk by funders contrary to the conventional investment wisdom of portfolio diversification taught in business school.


A representation of what could be the main reasons why investment deals fall through in Africa. Source: Intellecap Sankalp Africa Forum 2021

So how does one fundraise effectively in the new normal?
With the continuous uncertainty in what the path to normalcy or a trip back to the old world will be, companies will need to find ways of being able to attract investors at least in the medium term. Below are some of the nuggets of wisdom gathered by industry experts on how early stage companies can iterate with respect to attracting investors. 

  • Embrace resilience: Covid-19 reminds us that the unexpected can always occur. Businesses need to focus on long term resilience. For instance, it is important to consider how sustainable one’s supply chain is from both a shipment and a supplier diversification point of view. Moreover, aspects like climate related risks should also be looked at strategically, and priced in any future market expansion plans. Resilience also involves considering who is the best investment partner to support the business strategically as opposed to reaching out to any financier who can write a check.
  • Less is more: The wisdom that less is more should not be understated. It may be that scaling down on certain product launches, focusing on specific market segments rather than the broader market and focusing on better customer service is the path to scale during this period. For instance, as for off-grid energy providers, improving response time to customer calls for repairs and also-selling new product portfolios to existing customer segments might be a better medium term strategy than rapidly expanding in an unproven market environment.
  • Planning is key: Proper planning with respect to fundraising ensures that a business does not get into a cash crunch. Hence under the new normal, it would be wise to assume that it would possibly take more time to close an investment round as it would before. Moreover, given the current uncertainty, investors may also be conservative and often over negotiate on previously boilerplate contract terms such as carry on rights, standard exit clauses, board roles etc., further compounding the timeline risks.
  • Cash is king: Cash is the lifeline of any business. Hence sticking to the budget and targeted burn rates are important indicators of effective internal controls. Investors would always favourably consider such a business as they would infer to mean that they would be efficient in how they spend investor resources that would be advanced to them.
  • Have an agile culture: The world today is one that is full of volatility, uncertainty, complexity and ambiguity (i.e. VUCA). Hence being able to be agile can be the differentiating factor to the competition. There’s no point in holding on to the 3-year business plan that has been overtaken by events. If your employees see that it is no longer working so will investors. A manager should thus empower his/her juniors to make judgement calls when the dynamics dictate. However, there should always be continuous communication between teams so as alignment of objectives is consistently maintained.
  • Prioritise your mental well-being: The greatest asset for any business is not in its systems, technology or products but rather its human capital. With the working from home culture, it is easy to blur the lines of what construes one’s personal space vis-a-vis work. The pressure to be always online and often overcompensate for slow business cycles by grinding the hours can take a toll on one’s mental well-being. Hence it is important that companies remain cognizant of this fact and emphasize this in team meetings and interactions. It also helps if C-suite teams keep each other accountable and thus mitigate potential burnout which negatively affects overall productivity. No investor would want to invest in a team that is not productive. 

In summary, while the above aspects are key to companies at any stage, sector and market, it should never be lost to a company the core ethos of its existence. Often periods of uncertainty also breed moments of utmost clarity. As such, clarity of mission, vision and focus should be what management communicates to potential investors. The ultimate question one should ask themselves is “what problem am I trying to solve?” If one is able to clearly articulate the problem and its corresponding solution, then can he then seek investor facetime.

Content By:
Wanjohi Theuri
Yok Consulting where we help build African enterprises