Early-stage investor, Elizabeth Pambuka talks about how women-led startups can attract angel investments
Elizabeth Pambuka talks about how women-led startups can attract angel investments
Access to capital is a critical requirement for early-stage startups. Funding is required to support the startup's product development, marketing efforts, operations, and team sustainability.
Venture capital deals are more frequently the order of the day on the African startup scene. However, there is an alternative in the form of angel investment.
Elizabeth Pambuka, Managing Partner at ThandInvest, spoke with TechNext. Additionally, she was recently appointed Vice President of Growth at Pickmeup, a Nigerian ride-hailing startup, and serves on its board of directors. She works with investors in Asia and Africa from her base in Kuala Lumpur to help female-led startups secure funding from the right investors.
A week rarely passes in Africa without at least three startups securing funding. However, this has not always been the case. Ten years ago, Paystack, Flutterwave, and Andela did not exist, and startup funding was in its infancy.
The continent's local funding landscape is still in its infancy, with only a few sparsely distributed angel networks. The Lagos Angel Network is one of the more prominent angel networks in Nigeria (LAN).
One of the primary distinctions between venture capitalists and angel investors is that the latter will provide significant mentoring and advisory assistance to the startup, whereas the former will primarily provide funding. For a startup in its infancy, obtaining funding and advisory services from an angel investor is a preferable option due to the more favorable terms.
“Angel investors are frequently referred to as risk takers due to their willingness to invest in a startup's highly volatile early stages. While venture capitalists will typically require a seat on the startup's board of directors, they will not act as mentors,” Pambuka explained.
She added that another distinction is that venture capital funding is typically obtained from a variety of sources. The distinction between venture capital and angel investment is in the amount of money invested and how that amount affects the investment terms. While angel investors invest their own money, venture capitalists invest money from pooled funds.
Male-led startups continue to receive less funding than female-led startups. Recent data indicate that women entrepreneurs receive less funding than their male counterparts. Another study conducted in the United States found that an increase in the number of female angel investors resulted in an increase in the number of women-led businesses funded.
This indicates that one way to increase the number of viable women-led businesses receiving angel funding is to increase the number of female angel investors in the network of investors. Pambuka added, "African female tech founders require this type of support in the early stages to ensure success and growth for the next stage and funding round."
How women-led businesses can attract more angel investment
According to Pambuka's experience analyzing pitch decks for various startups and managing startup funding programs, angel investors and venture capitalists typically choose a business based on the team and the availability of a minimum viable product. In this regard, angel investors are similar to venture capitalists.
They invest not only in the business, but also in the people behind the concept. A minimum viable product is required in the technology industry. Pambuka continued, "If your idea has not been validated for market viability, you add another layer of risk to the risks associated with early-stage startup funding."
A validated product or technology will lower entry barriers. Market adoption testing will determine how well the product will perform in the market against potential competitors and will provide additional information from which potential investors can draw conclusions. Additionally, a minimum viable product (MVP) demonstrates an exit strategy for early investors.
Networking
Attracting investors' attention and interest in a startup begins with developing a relationship with them. This is where networking comes into play, particularly for female entrepreneurs.
Male entrepreneurs are more comfortable going to clubs and socializing with other business people than their female counterparts. However, women entrepreneurs need to do more of it.
As a result, it is critical for female entrepreneurs to deliberately develop and implement a plan that keeps them in constant contact with potential investors and business partners.
Pambuka explains, "In an environment where startup visibility is generally low, the first thing I would advise female founders to do is to be more aggressive in their networking." This is simply because it is the only way to connect with potential investors.”
Returns on investment
Contrary to popular belief, angel investors are just as invested in ensuring a return on their investment as venture capitalists. However, angel investors' mentorship, strategic advice, and support are critical to the success of early-stage startups that receive these investments.
Mentorship and coaching will increase these startups' chances of success and decrease the risk of capital loss and return on investment for investors.
