ATBN in collaboration with AfriconEU hosted a webinar titled “Phases of Investment” aimed at strengthening the investment knowledge of Digital Innovation Hub Leaders and tech ecosystem enablers. The main speaker, Michelle Mboha, is an Investment Manager at INUA CAPITAL, in Uganda. The webinar introduced the various types of investment, the core phases of traditional investment as well as some of the key aspects of the investment process.
Below are three important takeaways from the session;
Know the Types of Investments
Private Equity is an alternative to Traditional Finance. Traditional finance is typically facilitated by microfinance institutions, credit unions, and banks. Private equity uses capital from private funders to invest in private businesses. Types of private equity include seed capital, venture capital, growth investing, and buyout.
Source: Michelle Mboha
Know which investor is right for your business
Michelle laid out 4 key questions that every business owner should consider before deciding which investor will be best for their business.
- What stage is your business? Are you ready to absorb and fully utilise this investment?
- Do the values of the investor align with your business’ values
- What investment strategy will work best for your business?
- What additional value will this investor bring on board?
For example, in the early stage of a business, a seed or venture capital funding usually goes into the business. You may still be figuring out your minimum viable product and investors are typically FFF (friends, family and fools), Angel and VC investors. In the growth or expansion stage, the business owner considers acquiring private equity to fund their business as they would have developed a more defined business model, sure of growth and investors will take ownership in exchange of equity.
Have a clear understanding of the investment process
Michelle took participants through a typical investment process and how they may vary across companies or industries. Knowing the investment process for your industry prepares you as an entrepreneur going for an investment and if you are an entrepreneurial support organization, you are able to guide your stakeholders through the right procedures.
The investment process usually involves:
- Identifying the source of investment through networks or players in the ecosystem
- Doing due diligence in terms of having all legal, financial, commercial, technical, Environmental Social and Governance (ESG) and Gender documents or resources in place. Your books have to be checked in all of these perspectives.
- Setting the investment terms and conditions
- Showing active ownership which means you have to be engaged in the day to day management and leadership activities of the business.
- Having an exit plan of about 5 to 7 years
A thorough investment process can be exhausting and frustrating but every business looking forward to scaling up must do all of these to be able to secure the needed funds for growth.
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