Raising Capital

The decision on when and how to raise capital differs for every entrepreneur. Some entrepreneurs will be able to bootstrap their start-up for years before needing to turn to an investor for additional growth capital; others will need to tap into the friends, family and fools in their circle, in order to get their idea off the ground.

Raising money is an important part of every start-up’s journey. Without an effective way to get funding, even the most promising start-ups may fail. After all, competition among start-ups is intense, and one of the surest ways to beat competitors is growing fast, which is usually achieved using external financing.

Every founder’s and, therefore, every company’s financial situation is different. That means that each start-up’s financing needs and journey will be different, too. There are, however, things that every company, project or organisation should know when raising money; these are the fundamentals that will apply to most cases of fund- raising. This guide is meant to help business owners get a firm grasp of how the funding process works, to know when to approach inves- tors, what documents they will be asked for when fundraising, and more. For more tailored advice, start-ups can consult experts or join incubator or accelerator programmes like GIZ’s Make-IT.

Different Stages of Start-ups and Typical Funding Needs at Each Stage








Pre-product and revenue, only idea

Working on developing a product or service and hiring team

Finished proto- type in users’ hands, getting feedback

Refining product, reaching a larger audience

Early market success, expansion and growth to new geographies or new products

Approximate Funding Needs

N$0 – N$500k (US$0 – US$30k)

N$50k – N$1m (US$3k – US$60k)

N$100k – N$3m (US$6k – US$180k)

N$200k – N$5m (US$12k – US$300k)

N$500k – N$5m+ (US$30k – US$300k+)

Potential Investors

Angel investor networks, incubators, friends/family members, grant-making foundations

Accelerators, angel investor networks, crowdfunding platforms, public/semi- public grants, foundations

Seed-stage venture capital firms, impact investors, crowdfunding platforms, corporates, public/semi- public grants

Seed-stage venture capital firms, corporates, crowdfunding platforms, impact investors

Venture capital firms, private equity firms, banks, impact investors, public/semi- public funders

This chart breaks down start-up stages, the typical funding amounts that each stage requires, and the potential types of investors to approach at each stage.

Start-ups 101: What Makes a Start-up Appealing to Investors?

Before we get to the fundraising, the following is a brief overview of the signs of a successful start-up. These are things that an investor will want to see when thinking about putting money into a company.

According to Sam Altman, one of the most experienced start-up mentors in the world, there are four essential components to a start- up: the idea, the product, the team, and the execution. Luck plays a big role, too, but that is clearly not something that is within the control of the founders.


Ideas are key to setting a company’s vision and creating a compel- ling story around the start-up. Many companies end up pivoting as they develop their product, moving away from the company’s founding ideas and establishing new ones. Be that as it may, creating a unified vision for the start-up is not only a good way to focus everyone in one direction, it also makes it easier to sell the vision of the company to investors.


Once a start-up has a good idea, it builds a product around it. this is what customers actually use or buy when they are interacting with a company. A successful company will be able to translate a good idea into a great product and will listen earnestly to early users, taking into account their feedback and understanding how the product is being used (regardless of how it was intended to be used). Indeed, it’s not just the product that investors are examining. They also consider the product-market fit by asking whether the product satisfies a demonstrable need in the market.


One of the most important success factors for any start-up is hiring the right team. The first few employees of a company will often make or break the company. A start-up should look to hire only when they are desperately in need of new employees and recruit from personal networks first, asking friends and acquaintances to put them in touch with high performers they have worked with. Start-up founders should not be afraid to give their first employees a relatively large chunk of equity, as they will be the ones who will make the company succeed, and founders should also not be afraid to quickly fire people who are not working out.


Execution means putting everything together. This is the crucial aspect of the CEO’s job: making sure that the team is focused, motivated and growing. It means managing the team in a way that maximises the employees’ efforts and manages disagreements among team members. It also means setting clear, measurable goals so that progress and employee performance can be evaluated. Keeping these four components in mind is useful for all start-ups, especially those that are looking to raise money, as investors will organise their thinking around the same themes — is the idea any good? How about the product the company built around this idea? What about the team? And how focused and motivated is the company about executing its vision?

Putting Together a Board of Directors

As is stated throughout this guide, networking is crucial for businesses in Namibia. One reason is that it can help a start-up to find people who it can put on its board of directors. The board is responsible for the overall direction of the company and will help the start-up make important decisions, so it is key to get people who are engaged and have a good track record. The start-up’s founder(s) will be on the board, along with (most likely) its investors. After that, the founder(s) will be able to invite several other individuals to sit on the board — try to make this an odd number so there are no ties during voting. Here are some tips on putting together a board:

  1. Do your research – much like founders want to screen the companies/individuals who invest in their business, they also need to screen potential members of their board. They should look out for what other businesses they are involved in and whether there may be potential conflicts of interest and ask those businesses about how engaged the person is.
  2. Find advisors in the market – board members are typically busy with other pro- jects and will tire of traveling long distances to attend meetings. So, founders should make sure that the board is made up of people who are near their target market and who will be able to allocate reasonable amounts of time to the start-up.
  3. Focus on the value-add – the board members should bring a tangible value-add to the business. As one investor put it, board members should add value in one of two ways: deep industry experience in the start-up’s sector or deep functional experience in an area that is crucial to the start-up’s business (e.g., sales, finance or operations).
  4. Take advice seriously – founders being humble and taking feedback and constructive criticism is key to keeping the board on their side. It is also a quality of successful entrepreneurs. One board member said that one of his or her key responsibilities is to question everything the founder thinks and does, as his or her employees may not feel comfortable questioning their boss.

For earlier-stage businesses that have not received funding, a board of advisors could also play the role of the board. It pushes the founder to be accountable to external parties while giving much-needed advice and guidance. The process of getting a board of advisors is similar to the one of getting a formal board.

When to Fundraise

One of the most important decisions founders need to make is when to actually begin approaching investors.

Each start-up is different, but nearly every start-up should be boot-strapped for as long as possible; there is no point in giving outside investors equity, paying for admin and legal fees, and spending time (that could be spent working on the product) just for the sake of fundraising. If founders can get a company to profitability without raising money from outside investors, they should.

The decision on when to fundraise also depends on the founders’ connections and experience in the start-up industry. If they have exited several companies in the past and have connections to investors, then the timing of the fundraising process will be different than for someone who is a first-time founder.

Most, however, are not experienced entrepreneurs and do not have the ability to bootstrap the company indefinitely. That means they will need to seek investors sooner or later. The good news is founders can raise money fairly early on in a start-up’s journey. As long as they have a strong idea, and do some work around putting together a pitchdeck that explains how this idea will become a viable business, they may be able to approach (relatively small) investors. It typically takes three to six months to raise funding from investors; sometimes, a lot less or a lot longer. Depending on how much money the start-ups have in the coffers, the founders will probably need to start looking for capital at least six to nine months before they find themselves strapped for cash.

Start Small

One thing for founders to keep in mind is that it is better to aim low and raise more than they had planned than aim high and lose face when they do not quite meet their goal. Ideally, they will only need to raise funding once from outside investors before they reach profitability; however, this is rare. More realistically, they are likely to raise money for the next one to two years and will need to fundraise again after that.

What is Needed in a Pitchdeck?

The documents a start-up will need depends on the stage of funding it is in and who it is approaching. If it is looking to raise money from a grant-making institution or an angel investor, it is likely to get away with a one-pager articulating its idea and stating why it is important now, as well as a pitchdeck. If the start-up is going to a private equity firm or a bank, it will probably need a detailed business plan, financial projections, etc.

As this guide is geared more toward younger start-ups and first-time entrepreneurs, it will focus on the documents the start-up will need to show when going to investors.

Generally, an investor will want to see a comprehensive one-pager that outlines a business idea and how the company plans to build a compelling product around this idea, outlining current and future challenges, and how to get around them. Entrepreneurs should also include a pitchdeck — a set of slides that they can use to showcase their ideas, traction and a market opportunity to offer to potential investors.

Brief ‘One-Pager’

The one-pager is an important document that every entrepreneur should spend time to get just right. This should be a mini-business plan and should include a succinct overview of what the business is, what problem it is solving and how the start-up plans to turn the idea into an appealing product. Include charts, images (including the company logo) and graphs as much as possible; but the entrepreneur should not forget to clearly articulate, in writing, the purpose of the business and how they plan to execute it. This is a document that could be left behind, so the entrepreneur should make sure to balance substance with visual appeal.


The second document every entrepreneur will need to prepare is a pitchdeck. Singularity Investments, which invests in businesses in Africa and North America, recommends 10-12 slides in the follow- ing format:

  • What do you do in 30 seconds (the elevator pitch)
  • The Problem
  • Your Solution (+ 1 slide here if you need it)
  • Market Fit
  • Market Size
  • Business Model
  • Defensibility and IP
  • Competition
  • Distribution
  • Team
  • Money/Milestones
  • Financials (only if it adds value)

Additional slides investors may want to see include traction to date, use of funds, investment instrument sought, and exit route.

For both the one-pager and the pitchdeck, a small amount of customisation/tweaking to better fit the investor can go a long way. For example, if the investor is known for wanting to see how the investment may affect social or environmental change, add a slide (or at least a few bullet points) about how the start-up may do that.

Remember that as soon as the start-up raises money, expectations will shift. It is no longer just the founders’ money and time. Inves- tors will expect increased reporting and tracking, as well as formalised recordkeeping and the like. Founders should not be unreasonable, and they should not make empty promises but should come across as optimistic, hopeful, hungry and ready for the increased scrutiny of the business.

What to Include in Financial Projections?

Every investor will weigh financial projections in different ways, but most investors in early-stage companies will understand that start-ups’ financial models are educated guesses, at best. A start-up’s financial projections should be more of a way for investors to judge their ability to plan ahead, conduct research and come up with a compelling pitch. Here are the things founders should include in their financial projections.

  • Key assumptions – what is the cost of acquiring a customer? The product price? Increase of goods sold per month or year? Customer retention rate? Projected employee costs? Attainable market size? The founders should think through their business, create a list of key assumptions and be able to walk the investors through their logic. They should make sure that the assumptions are realistic and grounded in reality. To take it one step further, the founders should create a base case of assumptions; a downside case, in which business is slower than expected, and a home run case, where business is better than expected; and assign a probability to each.
  • Cash flow statement, balance sheet and income statement – these three documents are linked to one another, so the founder(s) should think of them as a package. They are meant to provide a snapshot of the business, as well as create a basis for future projections.
  • Use of funds – investors will want to understand how, specifically, the start-up plans to use their capital to grow their business. The founder(s) should be intentional here and should specify how they plan to use the money, and how they will get the start- up to either break even or move on to the next fundraising effort.

Three Fundraising Tips

  1. Create something unique. Some start-ups come up with new features to add to existing solutions, but do not actually build something that is truly new. Investors will know the difference between a genuine innovation and a product with new features added.
  2. Have a good understanding of the market. Founders should truly understand the market situation. Importantly, they should know how to make money from solving problems in the market. Some start-ups have false assumptions and struggle to gain traction.
  3. Show commitment to solving a problem. Some of the most successful entrepreneurs have a proven track record of working on solving problems — at school, in their past jobs and in the start-ups they create. Investors like to see someone who is committed to solving problems.

Key to Raising Money Successfully: Telling Your Story

Time after time, we have heard from both investors and entrepreneurs that being able to tell the right story is key to raising money successfully. But what does that actually mean? We have used the insights from investors and entrepreneurs to break this down.

  • Introduction – Here, investors will want to understand who the founders are and the motivation driving them and, therefore, their company. They should be ready to answer questions about their leadership skills. Many investors will put money into founders, rather than their company, so founders should make sure that they are clear in why they started the company and what they hope to achieve.
  • Market – Founders should know their market; know who they are selling to and what problems the start-up is solving currently. If the start-up has a track record of sales, great. If not, founders should be ready to answer questions about why someone will pay them to solve a perceived problem. Founders should set lofty, but achievable, goals and use concrete examples to illustrate how they intend achieving them.
  • Future growth – The details here will differ based on how advanced the company is. If the company has not sold a product yet, then founders need to make clear, provable assumptions about how many they aim to sell in the coming months, how much each unit will cost to produce, and how many units they need to sell before they reach the break-even point. While they should be able to tell a growth story, most investors will want to understand their process of thinking and how they come up with their projections, rather than what the specific numbers are — for early-stage start-ups, these are educated guesses.
  • Investment ask – Founders should not just ask for a random number; they should do their research and explain how the funding will get the start-up to the next key milestone. This should not be an investment in people or machinery, but the outcome of that investment.
  • Finish – Founders should use the opportunity to showcase how their company is aligned with the investor they are pitching to. Research on the funders will help a lot here. If he or she prioritises impact, talk about the potential social or economic benefits of the company. If one of the partners has experience in the field, the founder should explain what connections they would like the potential investor to facilitate. Investors want to be seen as smart money, so talking to them about why they would be good partners could be a good way to get them to warm up.

Start-ups, Your Valuation Matters!


Valuing a company is a highly important part of the fundraising process especially when raising money through equity. It is also, however, imprecise and highly difficult. This is because many start-ups are in the ideation stage, and it is nearly impossible to value a company that has few assets besides an idea and the promise of a commitment by a few eager co-founders. One way to avoid this question early on is to consider convertible debt, a form of mezzanine funding mentioned above. At some point, however, it will be necessary to determine the start-up’s value.

Valuation and why it matters is important for every start-up up to understand. This is because value affects not only the company’s short-term prospects but can also have important ramifications down the line.

There are many online resources available to entrepreneurs that will help them to better understand how valuation works. In the box on the right, we provide a basic example to introduce the concept and to explain why it is important.

Of course, one of the key questions is how the investor obtains a certain valuation and, hence, the shareholding he or she accepts in the business. Many factors come into play to determine this; key among them being the cash flows a company expects to make, current performance and even the number of investors interested in the deal.

Various methodologies are used to come up with a company valuation. The key ones include discounted cash flow (DCF), multiples based, and assets-based methodologies.

Valuing Your Start-up

Imagine a fictitious entrepreneur has an idea for an e-commerce company. He or she discusses it with a friend, and the two of them decide to set up a company around it: Widgets Ltd. The two go about working on the company for a month, developing a clearer strategy and business plan, as well as a website design to show potential investors. Because they have committed the same amount of time on the idea, they decide that it is fair to split ownership of the company in half. They issue 1,000 company shares and take 500 shares each, meaning each one owns 50% of the company. After spending some time working on their idea and the pitch deck, they approach several angel investors, one of whom is interested. He or she decides to invest N$100,000 (US$6k) in the company, to help the founders set up a functioning website and to begin building up a pipeline of products they want to sell on their site. In exchange, he or she gets 100 shares that the founders issue to the angel. So, he owns 100/1,100 shares (9.1%), while the founders now own 500/1,100 (45.45%) each. Because the angel’s N$100,000 (US$6k) investment bought him 9% of the company, the post-money valuation is N$1,100,000 (US$66k). At this point, the price per share is N$1,000 (US$60) (N$1,100,000/1,100).

A couple of months go by and Widgets Ltd begins to attract media attention and customers. Things continue to go well, and several VCs become interested in investing in the company. The start-up’s founders are feeling bullish about their prospects and decide they need to raise N$1,000,000 (US$60k) to keep the company going for the next 6 months. They turn to an early-stage VC, who agrees to invest the money in exchange for 500 shares. That gets the VC 500/1,600 shares (31.25%) and values the company at N$3,200,000 (US$192k). The price per share after this investment rises to N$2,000 (US$120) = (N$3,200,000/1,600). That means if the angel investor wanted to (and was able to) cash out, he or she would have made a 100% return in just a few months — that helps to explain why investing in start-ups can be so lucrative and why it is attracting so much interest.

DCF (Discounted Cash Flow) Model

The DCF methodology computes the cash flows the start-up expects to make in future and discounts this to the present. This means taking all the cash in the future and adjusting for inflation and risk to find out the value of these cash flows as at present. The discount rate is a highly debated variable, and it will be set by the funder when evaluating the investment. It is a good idea to create several scenarios with different discount rates and, therefore, different net present values, founders should make sure that they can explain the reasoning behind the different scenarios.

Multiples Model

The multiples approach compares similar start-ups to obtain the valuation. This would mean if one start-up is similar to the start- up being valued in terms of sector, size, business model, etc. and with sales of N$2m (US$120k) the start-up is valued at N$10m (US$600k). That implies a value-to-sales multiple of 5 (N$10m/ N$2m). If the start-up is truly similar to the start-up being valued, this multiple can be used to value the start-up. Assuming the start-up being valued had sales of N$4m (US$240k), its valuation would therefore be N$4m x 5 = N$20m (US$1.2m).

Net Assets Model

The net assets valuation approach calculates the total value of the tangible assets a business has. For start-ups, this would usually result in the lowest valuation since most start-ups do not own a lot of assets – it is the intangible assets like the idea, the potential and team talent that excites investors.

It is important for each entrepreneur to note that the final price in a deal is a combination of the valuation and negotiation between the investor and entrepreneur.

A start-up should not raise more than it can handle! Investors warn against raising too much money too quickly. If the start-up’s valuation is high early on in the company’s lifecycle, investors will expect it to show similar (if not faster) growth when the start-up raises money again in the future. If the start-up cannot justify a rise in value, it may need to settle for a down-round – an investment that results in a lower company valuation than previous rounds. That not only leads to unhappy investors but can also seriously hurt employee morale.

Negotiating with Investors: Tips from Entrepreneurs

Negotiations can be a difficult time for entrepreneurs, especially those who have not been there before. Here are some tips from entrepreneurs who have been there before:

  • Speak to objective (i.e., those who do not invest in the start-up’s sector) investors about how they would value the company and use their estimate.

  • Run through several valuation methods to have a better understanding of how they might structure their pitch. There are resources online that will walk the entrepreneur through how to value their company (see a list of resources in the conclusion).

  • Be able to explain the projected numbers and the assumptions behind them. Investors will push back on everything the entrepreneur will tell them, so the entrepreneur should have an answer ready for multiple scenarios of the business. Practice makes perfect – the entrepreneur should go through the pitch with friends or in front of a mirror.

  • Bring a draft term sheet to the pitch meeting, in order for the entrepreneur to anchor the investors to the terms of the deal they would like – the entrepreneur is more likely to walk away with better terms if they put their cards on the table first.

  • Get external advice – most entrepreneurs will negotiate anywhere between one to five times with equity investors during the life of their start-up. A typical investor handles a similar number of negotiations a week. This means that the odds are most often in the investor’s favour, and a good advisor could help to even the negotiation table.