Last week I received a message from a dentist in Nigeria who had come across my blog (he gave me permission to refer to him here). He has a passion for the health sector and dentistry and has concrete plans to fill a huge gap in the market by setting up a modern dentist practice with excellent service provision in the heart of Nigeria.
Her wrote: “It got me wondering if there are investors willing to fund startups and what can people like me do to access and attract such funds? It’s pretty frustrating when you know that at the end of the day, no matter how good your ideas are, without funding you’re dead in the water.”
I thank him for his honesty and for approaching me and fully understand the frustration.
It can be very challenging when you have a great business vision, you are passionate about it, but the lack of capital is a major hurdle. This is where many wanting to do business in Africa feel stuck.
Those of you who have read my blog posts from the start may have noticed that I talk repeatedly about getting your Africa business going despite the lack of capital and I do this with a purpose: You need to know that there are many ways to get you started despite the shortage of money and then grow towards where you want to be. Do not let the lack of money hold you back from realizing your dream, otherwise it may never happen. Just by changing your business structure, by being flexible in your approach, and by making the first steps with what you have available right now, you can get started besides the shortage of funds.
Malaria VaccineHaving said that, knowing your options and your limits during the startup phase is important. And if you have a grand idea that gives you sleepless nights or you are planning to set up a business that can simply not run without some sort of significant financial injection, you need to be aware of the sources of financial capital that are available to you and become proactive!
There is money available for African entrepreneurs and those who want to do business in Africa – you just need to know whom to approach, but also understand what the requirements, requests, and additional input of the ‘investor’ would be. Because this varies a lot.
There are various avenues you can take depending on industry, scope of project, and other variables. It therefore makes sense to stress on the African health sector in this blog, but I promise to raise the issue of capital investment and funding here on Africa Business JumpStart regularly, and give you concrete tips and guidance.
Now let’s get started:
# The Health in Africa Fund
The Health in Africa Fund, managed by Aureos Capital, will invest in small- and medium-sized companies in sub-Saharan Africa, such as health clinics and diagnostic centers, with the goal of helping low-income Africans gain access to affordable, high-quality health services. The fund will be measured not only by fiscal performance but also by its ability to cultivate businesses serving the poor.
With its HQ in Oslo, Norway, and an Africa office in Nairobi, they currently focus on Ghana, Nigeria, and Senegal in the West and Kenya, Tanzania, and Uganda in the East,but have also supported projects in other countries.
Aureros is an Africa private equity firm. Africa private equity firms enjoy a rather good reputation at the moment and are fast on the increase, in particular targeting Eastern Africa. They will invest in your company, which means that they will own shares in your business, but they are well known for the wider input they make into companies in regard to management, financial training, company structure, and operations.
The money for Aureros comes from the likes of the IFC, the African Development Bank and the European Development Bank, which means that you have to provide a strong development aspect to your business.
# Venture Capital 4 Africa (VC4A)
If your business in not a start up (first 1-3 years), but you only have a strong concept in hand you need to look for seed funding, which is mostly provided through venture capital investment.
VC4A is Africa’s biggest online community where you can pitch your project now and potential seed investors can view it.
# The Medical Credit Fund
First up: they are a non-profit fund meaning they do not want a share in your business. I actually called them up and had a chat with one of the directors. They are open to fund specialist services, as long as they target the middle class (including the lower middle class).
I think you will find that this is the case with many of these Africa funds and investments who are not run by an individual or a small group of private investors: No-one is interested to invest into services targeting primarily the upper class.
# The Investment Fund for Health in Africa (IFHA)
This is yet another equity fund for Africa, so they would ask for a share in your company. They invest in small and medium sized African health care providers who have a competitive advantage. I think this may be perfect for a specialist clinic such as a dentistry, especially if you are able to offer treatments and services that are not available in on the market yet.
But besides care provision, they may also be the ideal investor if you are planning an African business in the area of Health insurance, Healthcare products manufacturing, including production of pharmaceuticals, IV fluids, medical supplies, Wholesale and distribution of healthcare products, including the distribution of pharmaceuticals, medical supplies, veterinary products, vaccines and other medical products or Supporting Industries, including education, management, administration related ICT services, buildings, and supplies.
Here are a few additional tips from me:
- Get in touch with Homestrings, who are linking the Diaspora with investment opportunities on the ground in Africa. I listened to Homestring’s CEO at an expo I attended in London in March, and he has systematized how to match certain projects with potential investors from the African Diaspora. You can register your opportunity right now on their website.
- Again, get in touch with the US Embassy if you live in Nigeria, Ghana, Kenya, or South Africa, as it offers commercial services and matchmaking, so they may be able to help (matching someone in their data base with you)
- Check with the Embassy of Pakistan in Nigeria (if this is where you are based). Just a few weeks ago, during a Nigerian investment delegation to the country, Pakistan vowed to invest in key sectors in Nigeria, and health was among them. Maybe they are in a position to guide you into the right direction regarding investments into SMEs or linking you up with individual investors. It’s worth a try.
- Don’t forget investors are on the lookout for valuable projects too. Think of where investors in your industry would be both offline and online to find these opportunities and make sure you are there, so they find you. Africa investors regularly visit related investment conferences, make sure you look out for such events and attend where possible.
- You may not want to hear it, but I suggest to re-consider bank loans. If you have a track record as a professional expert, you may have a good chance. The benefit with bank loans is that they do not ask for a stake in your company like many investors do. Ask several banks for business loans and don’t give up if the first couple of them turn you down. Sometimes it even helps to get back to the same bank several times, I know of people who have succeeded this way,so be persistent! FirstBank of Nigeria for example are focusing on start-ups, they even sponsor CNN’s Africa StartUps program.
- Look for a partnership. This is what I mean by being creative, it’s about attempting multiple avenues and being brave. Talk to colleagues in your industry. They could be based in Africa or abroad – the US, UK, UAE etc. So why not contact the American Dental Association (or a similar organisation in your field of expertise) asking for support? You may be amazed what people are willing to support if they are being asked. Maybe you could place an article in their newsletter or ask for a joint funding effort outlining the lack of dental care in Africa. People want to be part of something good and worthwhile, be it in form of funding or investment.
And here is some final advice: Be proactive and well prepared when you approach a potential funder, investor, or partner in Africa – be sure of what you say and that you convey a clear message. First impressions count a lot! And if you are looking for funding you need to be out there and have an I-am-ready-to-get-it attitude…..despite the many setbacks. That’s the trait of a successful entrepreneur….get up again and again and go for it. All the best!
I hope you found the information useful. Is the access to financial capital your key challenge for your African business? What are your experiences? Or what advice are you able to add for others who want to get started?
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