South African growth equity fund manager and advisory firm Knife Capital received 87 applications for its Grindstone accelerator programme, which it will soon narrow down to 10 startups to begin the process in January.
But how do you go about obtaining funding from an investor like Knife Capital? Co-founder Keet van Zyl used his platform at the U-Start Africa conference in Cape Town last week to give startup founders his ten top tips on how to make their companies and themselves as investable as possible.
van Zyl’s biggest takeaway for startups? “If you’re still pitching to investors and they’re not pitching to you, then you’re doing something wrong.”
- Be awesome
Point number one from the Knife Capital co-founder is to make sure both you and what you have built are the best they can possibly be. “In a startup you don’t have the luxury to be mediocre,” he said.
- Build a business, not a product
The product might be extraordinary, but if your business affairs aren’t in order you’re going nowhere. “That goes with all the boring stuff of corporate governance,” van Zyl told the conference.
- Build a solid platform for growth
Make sure you’re ready for your business to take off before it does. “The more solid the building blocks the more chance of success you have and people will smell that.”
- Build traction
“Traction is momentum and momentum gets built in very different ways,” van Zyl said, when it is through PR, social media or various other means. “If you’ve sold one widget to Pick n Pay, they are a customer, their logo can go on your website.”
- Scale proportionately
Make sure all parts of your business grow concurrently. “Do not have too small a team to execute on too big a business model,” he said. van Zyl also said too little money or too much money can also kill a business.
- Package the opportunity
Investors are inaccessible as it is, van Zyl said, but too often startups fail to package and present themselves as well as they could. “We have a packaging crisis in the country when it comes to entrepreneurial contents.”
- Build a partner universe
With partners come all sorts of opportunities, the investor said. Enter into as many as you can.
- Populate your data room
Once an investor has expressed an interest, he said, startups need to make it as easy as possible for investment to follow. A full data room should contain all corporate, marketing, and financial information pertaining to your business. “We have to have that stuff anyway so you might as well put it into a data room folder, and if someone wants to invest in you and do due diligence, it’s done,” van Zyl said.
- Understand your value
The investor said startups needed to have a realistic view of their valuation, as too many times startups claimed a valuation that was not borne out by the two or three year projections. “You also need to understand your value to a potential acquirer,” he said. “You need to understand what is going to be bought eventually, and then you need to build that.”
- Build the right networks
Be sure help is at hand, he said. “Make sure that you are aligned with the right partners to take you through the process.”