Raising Capital

Stages of Startups Growth and Typical Funding Needs at Each Stage, Startups 101: What Makes a Startup Appealing to Investors? When to Fundraise, Assembling your pitch deck, Startups, Your Valuation Matters

Stages of Startups Growth and Typical Funding Needs at Each Stage

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

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

Every company’s financial situation is different. That means each Startup’s financing needs and the journey will be different too. There are, however, things that every company,  project, or organization should know when raising money. This guide is meant to help business owners get a firm grasp of how the funding process works when to approach investors, the documents they will be asked for when fundraising, and more. For more tailored advice, Startups can consult experts or join incubator or accelerator programs.

For SMEs, this section is helpful if they want to understand how to grow, if they can demonstrate their market potential, and are looking for external funding. It can also be helpful if an SME is looking for funds from other sources than institutional financiers.

The following table highlights the various Startup stages and the most common type of capital they need:








Pre-product and revenue, only idea

Working on developing a product

Finished prototype in users’ hands, getting feedback

Refining product, reaching a larger audience

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

Approximate Funding Needs

SDG 0 to 8.9 million (USD 0 to 20,000)

SDG 8.9 million to 22.5 million (USD 20,000 to 50,000)

SDG 22.5 million to 66.7 million (USD 50,000 to 150,000)

SDG 44.5 million to 222.5 million (USD 100,000 to 500,000)

SDG 222.5 million to 890 million + (USD 500,000 to 2 million +)

Potential Investors

Angel investor networks, incubators, friends/family members, foundations making grants

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

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

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

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

Startups 101: What Makes a Startup 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 your company.

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


Ideas are key to setting the company’s vision and creating a compelling story around the start-up. While many companies end up pivoting as they develop their product, moving away from the company’s founding ideas and establishing new ones, 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 you have a good idea, you build a product around it; this is what customers use or buy when they are interacting with your 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: does the product satisfy 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. Aim to hire only when you are desperately in need of new employees and recruit from your personal networks first, asking your friends and acquaintances to put you in touch with high performers they have worked with. Do not be afraid to give your first employees a relatively large chunk of equity, as they will be the ones who will make the company succeed, and do 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 the team is focused, motivated, and growing. It means managing the team in a way that maximizes 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, and especially for those that are looking to raise money, as investors will organize 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 to execute its vision?

When to Fundraise

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

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

The decision on when to fundraise also depends on the founders’ connections and experience in the start-up industry. If you 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, you can raise money fairly early on in a start-up’s development. As long as you have a strong idea, and do some work around putting together a pitch deck that explains how this idea will become a viable business, you 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 you have in the coffers, you will probably need to start looking for capital at least six to nine months before you find yourself strapped for cash.

Assembling your pitch deck

The documents you will need depend on the stage of funding you are in and whom you are approaching. If you are looking to raise money from a grant-making institution or an angel investor, you are likely to get away with a one-page document articulating your idea and why it is important now as well as a pitch deck. If you are going to a private equity firm or a bank, you are likely to need a detailed business plan,  financial projections, etc.

As this guide is geared more towards younger start-ups and first-time entrepreneurs, we will focus on the documents they will need to present when going to investors.

Generally, they will want to see a comprehensive one-page document that outlines a business idea and how the company plans to build their compelling product around this idea, considering current and future challenges, and how to get around them. Entrepreneurs should also include a pitch deck – a set of slides that they can use to showcase their ideas, traction, and market opportunity 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 concise overview of what the business is, what problem it is solving, and how you plan to turn your idea into an appealing product. Include charts, images (including your company logo), and graphs as much as possible but do not forget to clearly articulate the purpose of your business in writing and how you plan to execute it. This is a document you should be able to leave behind and that someone would want to read, so make sure to balance substance with visual appeal.

A Typical Structure of a Pitch Deck

The second document every entrepreneur will need to prepare is a pitch deck. A common standard for pitch competitions or in individual presentations is around 10 to 12 slides in the following format:

  • What you do describe in 30 seconds
  • The problem
  • Your solution (+ one slide here if you need it)
  • Market fit
  • Market size
  • Business model (USD)
  • Defensibility and intellectual property
  • Competition
  • Distribution
  • Team
  • Money and milestones
  • Financials (only if it adds value).

Additional slides investors may want to see include: traction to date, use of funds and investment instrument sought, and exit route. You can get some good orientation from looking up pitch decks from other companies in your sector online.

For both the one-pager and the pitch deck, a small amount of customization to better fit the investor can increase the chances of success. 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 your start-up may do that.

Remember that as soon as you raise money, expectations will shift. It is no longer just your money and time. Investors will expect increased reporting and tracking, as well as formalized record keeping and the like. Do not be unreasonable, and do not make empty promises, but do come across as optimistic, hopeful, hungry, and ready for increased scrutiny of the business.

Pitching Effectively

Every entrepreneur has a different pitching style, and the start-up’s business model and maturity will affect what exactly the pitch looks like. Likewise, every investor will ask different questions. But there are similarities around what investors will want entrepreneurs to cover.

Traction so far.

A good idea will typically not be enough for investors to put money into a start-up. They want to see what your start-up has achieved. ‘Has anyone parted with their money for your product or service?’ is how one investor put it. If you are not there yet, get letters of interest from interested businesses or show how many active users you have. Simply put, investors want to see positive signals from the market that your product or service is in demand and solves a true need.

  • How many units have you sold?
  • How many sign-ups do you have?
What makes your team special?

Investors often look at the entrepreneur more closely than the businesses those entrepreneurs started. After all, investing in a company means forming a partnership that will last years. If an investor is not convinced of your team, they will not invest in your business no matter how much potential the idea has.

  • Why is your team in a unique position to solve this market problem?
  • What is the team’s experience in this field?
Know your market well.

Investors will ask about your market, why you are focusing on the segment and potential challenges in the future. You need to be able to answer their questions knowledgeable, backing up your assertions with hard data. Importantly, investors are looking not at just how well you know the market, but also how well you know how to make money in the market.

  • Has anyone else tried to solve this problem? How is your solution different?
  • What are the challenges you foresee in the future, and how will you navigate around them?
Your track record.

If you are a first-time entrepreneur, you will not be able to show what your previous companies have done. But you should be able to talk about what you have done since you graduated from school – how did you do, what companies have you worked for, what problems have you tried to solve? Investors will often do reference checks, so keep up with old contacts who may be asked to vouch for you.

  • What have you done in this space already?
  • Do you have people who will vouch for you?
Your thinking process is important.

Investors understand that as a start-up, projecting growth numbers is difficult; at best, it is an educated guess. While you should ground your financial projections, in reality, the most important thing about the numbers is being able to talk through them and explain your hypothesis.

  • How do you justify your growth plans?
  • How did you evaluate the size of the market?


Next, you will want to plan a results chain, also known as a theory of change. This is a mapping of how the actions your company takes will eventually lead to the desired social impact. Often, making a model in a spreadsheet or visualizing it in another way will be most effective. Each entrepreneur and investor will have different templates they look for. Typically, however, you want to show the following:

  • Current challenges
  • Your company’s inputs
  • Direct outputs
  • Eventual outcomes
  • Market changes
  • Social impact.

Startups, Your Valuation Matters


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

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

There are many online resources available (find them in the links section) to entrepreneurs that will help them to better understand how valuation works. In the box on page 82, 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 does 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.

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

DCF (Discounted Cash Flow) Model

The DCF methodology computes the cash flows the start-up expects to make in the future and discounts this to the present. This means taking all the cash in the future and making adjustments 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. Make sure that you 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 – similar to yours in terms of sector, size, business model, etc. – with sales of SDG 8.9 million (USD 20,000) is valued at SDG 44.5 million (USD 100,000) it implies a value to sales multiple of five (SDG 44.5 million / SDG 8.9 million, or in dollar terms USD 100,000 / USD 20.000). If the startup is truly similar to yours, you can use this multiple to value your start-up. Assuming your start-up had sales of SDG 17.8 million (USD 40,000) its valuation would therefore be SDG 17.8 million x 5 = SDG 89 million (or USD 40,000 x 5 = USD 200,000 in dollar terms).

Net Assets Model

The net assets valuation approach calculates the total value of the tangible assets the company has and its liabilities. 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.

Each entrepreneur needs to note that the final price in a deal is a combination of the valuation and negotiation between the investor and entrepreneur.

Do not raise more money than you can handle! Many investors we interviewed warned against raising too much money too quickly. If your valuation is high early on in your company’s lifecycle, investors will expect you to show similar (if not faster) growth when you raise money again in the future. If you cannot justify a rise in value, you 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.

As for the case for Sudan, the DCF (Discounted Cash Flow) Model could be more suitable for valuation as it considers the future cashflow expected by a startup and then adjusted for inflation and risk to reach a net present value. However, make sure to be realistic in your calculations, also given the spectrum of risk in the market where you operate.

Valuing Your Startup

Imagine a fictitious entrepreneur who has an idea for an e-commerce company. He 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 up 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 decides to invest USD 10,000 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 gets 100 shares that the founders issue to the angel investor. So, he owns 100/1100 shares (9.1%), while the founders now own 500/1100 (45,5%) each. Because the angel’s USD 10,000 investment bought him 9% of the company, the post-money valuation is USD 110,000. At this point, the price per share is USD 100 (=110.000/1100).

A couple of months go by and Widgets Ltd begins to attract media attention and customers. Things continue to go well, and several VC firms have become interested in investing in the company. The start-up’s founders are feeling bullish about their prospects and decide they need to raise USD 100,000 to keep the company going for the next six months. They turn to an early-stage VC firm, which agrees to invest the money in exchange for 500 shares. That gets the VC firm 500/1600 shares (31,3%) and values the company at USD 320,000. The price per share after this investment rises to USD 200 (=320,000/1600). That means if the angel investor wanted to (and was able to) cash out, he or she would have made 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.

As for equity or share dilution, it is important to understand the basic mechanics of how dilution takes place. An equity dilution in simple terms, is a decrease in equity ownership by the shareholders of the business. It takes place when a startup is growing and moving towards fundraising more capital to support its needs. For example, you are the founder of company xyz and you own the 5,000 shares the company has. You are doing well, and with time, you decided to raise capital and issue more shares for about 2,000 shares in return for a much-needed capital for expansion. In total, the company would now have 7,000 shares of the company stock. By doing so, you now own 71% of the company as opposed to 100% before issues new shares.

It is important to understand that dilution is not only linked to how much you financially own in the company, but also how much control you have. Therefore, equity dilution impact both how you may gain out of the company as well as your ownership rights.

Further, make sure to study and research how to balance the impact of equity dilution through future rounds of capital that you may need. In addition, do research to understand how other startups handle dilution, and in general how tag-along and drag-along rights work.

Furthermore, keep in mind that the best-case scenario is when there is alignment of interest when approaching capital raising. Meaning, you may want existent shareholders to contribute additional value at each round to be able maintain the same level of equity or ownership in the company, otherwise new investors may be reluctant to invest.

Lastly, avoid giving too much, and approach your valuation realistically, while maintaining an alignment of interest for the future benefit of your company.


What to Include in Your Financials

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

  1. 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? Think your business through, create a list of key assumptions, and be able to walk the investors through them. Make sure the assumptions are grounded in reality. Create different cases based on different assumptions; a worst-case scenario in which business is slower than you expect and a best-case scenario in which business is better. It would be good to assess the probability for each.
  2. Cash flow statement, balance sheet, and income statement – The three documents are linked to one another, so you should think of them as a package. They are meant to provide a snapshot of your business, as well as create a basis for future projections.
  3. Use of funds – Investors will want to understand how, specifically, you plan to use their capital to grow the business. Be intentional here – specify how you plan to use the money, and how it will get you to break even or to the next fundraise.


How to Connect with Funders for Startups

Entrepreneurs can struggle to find out how to contact funders once they figure out whom they would like to approach. Here are a few suggestions from investors and entrepreneurs.

  1. Personal introductions are best. Do your research and find out how you may be able to get introduced to an investor. Because the start-up scene is still emerging in Sudan, there are probably only a few degrees of separation between you and the investor.
  2. Seek out portfolio companies. Find out whom the investor has already backed and reach out to those start-ups. Most will be happy to share their experiences and put you in touch if your idea is well-developed.
  3. Enter accelerator, incubator, or mentoring programs. Connecting to investors is one of the key reasons start-ups apply to these programs, and they can be good for facilitating introductions. Make sure the program is related to your start-up’s sector, so the investors will be relevant.
  4. Networking events. These can be invitation-only (in which case you can reach out to the organizer), or open to the public. Even if you do not find the right investor there, the people you meet can bring you one step closer.
  5. Cold outreaches are a last resort. If you did your research and cannot find a connection, send a brief but informative email with your pitch deck attached.  Emphasize your track record in your email (products sold, users signed up, etc.).


How to Connect with Funders for SME Financing

This part applies to banks that you intend to reach or individuals

  1. Evaluate potential loan options: Finding the right loan for your small business is easier if you understand the various types of loans that are available for small businesses. The purpose of your loan often dictates the type of loan needed and the available financing options. The three primary loan types are asset-based loans, short-term loans, and long-term loans.
  2. Determine your eligibility: Every lender has its own set of parameters for determining whether or not you qualify for their loan products. When comparing small business lending options, it is important to understand the eight primary factors that lenders evaluate you on. Understanding these eligibility requirements will help you determine which loan products are best for your business’ situation.
  3. Find a lender experienced in your industry: Having a lender experienced with loans for small businesses in your industry is a good indication that the lender understands the nuances of your business needs. The type of small business loan that you can qualify for and the information that you may be required to provide may vary based on the type of business that you have.
  4. Start reaching out: Knowing the amount of financing you need and if you meet the minimum qualifications will help you to choose the right type of small business loan to apply for. The type of loan you’re applying for will determine how much documentation you will need to gather prior to submitting your application. While short-term loans from online lenders usually require the least amount of documentation, long-term loans typically have an extensive application process.


The Key to Raising Money Successfully: Telling Your Story

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

  1. Introduction – Here, investors will want to understand who you are as the founder, and the motivation driving you and, therefore, your company. Be ready to answer questions about your leadership skills. Many investors will put money in you as an entrepreneur, more so than in your company. So make sure you are clear about why you have started your company and what you hope to achieve.
  2. Market – You should be able to know your market: whom are you selling to, and what problem are you solving? If you have a track record of sales, great; if not, be ready to answer questions about why someone will pay you to solve a perceived problem. Set lofty, but achievable goals, and use concrete examples.
  3. Future growth – The details here will differ based on how advanced your company is. If you have not sold a product yet, then you need to make clear, provable assumptions about how many you will aim to sell in the coming months, how much each unit will cost to produce, and how many units you need to sell before you reach the break-even point. While you should be able to tell a growth story, most investors will want to understand your process of thinking and how you come up with your projections, rather than what the numbers are, specifically – for early-stage start-ups, these are educated guesses.
  4. Investment ask – Do not just ask for a random number, do your research and explain how the funding will get you to the next key milestone. This should not be an investment in people or machinery, but the outcome of that investment. The most important consideration is the time span of investment during which you will use the fund to reach the milestone. The other is the equity you are willing to give to the investor in return, which is based on your companies’ valuation.
  5. Finish – Use this opportunity to showcase how your company is aligned with the investor you are pitching to. Research on the funders will help a lot here. If he or she prioritizes impact, talk about the potential social or economic benefits of your company; if one of the partners has experience in the field, explain what connections you would like them to facilitate. Investors like to be seen as smart money, so talking to them about why you think they would be good partners could be a good way to get them to warm up.


Negotiating with Investors: Tips from Entrepreneurs

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

  • Speak to objective investors (i.e. those who do not invest in your sector) about how they would value your company and use their estimate.
  • Check all the valuation methods as you don’t know which type will be used by the investors and get to know which method is most appropriate for your business. There are resources online that will walk you through how to value your company.
  • Be able to explain your projected numbers and your assumptions behind them.  Investors will push back on everything you will tell them, so have an answer ready for multiple scenarios of the business. Practice makes perfect – go through the pitch with your friends or in front of a mirror.
  • Bring a draft term sheet to the pitch meeting, to anchor the investors to the terms of the deal you would like – you are more likely to walk away with better terms if you put your 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 with the investor, and a good advisor could help to even the negotiation table.


Pitching to Impact Investors

Impact investors are funders who seek to effect positive social or environmental change in addition to making a financial return. They vary widely in their emphasis on impact. Some will screen out investments that have the potential to make a negative impact but will not specifically look to invest in companies that have a stated aim to make a positive impact. In these firms’ view, the act of investing in Sudan is likely to have direct and indirect positive effects, including job creation.

Others have a much more specific view on what counts as impact and will ask entrepreneurs to report the impact metrics they agree upon. Some will forgo potential financial returns as long as the company’s social and environmental impact is high enough; others will not sacrifice financial returns.

Typically, when approaching impact investors, you will need to prepare the same documents as you would for other funders. Additionally, you will need to show how you plan to effect positive social or environmental change.

The first task will be to choose which metrics to track. Often, this will be a natural fit – if your company is involved in renewable energy, for example, tracking the number of households affected and the amount of CO2 emissions foregone makes sense.

Additionally, you should integrate impact into your financial model. Just as you make assumptions about annual customer growth, customer retention rate, etc., you can also estimate how much impact each additional customer or product will bring.  Above all, investors want to see how your company affects the bottom of the pyramid (BOP) — the poorest citizens in a country.

Finally, you should include a separate spreadsheet in your model that makes it clear how you plan to measure the impact you are setting out to achieve. This should link to your financial model and your theory of change. Impact metrics should be easily attainable – do not promise to get in-depth survey responses from each of your customers if you are not sure each one will respond. Measuring outcomes should not get in the way of running your business, especially early on, so be reasonable about what you can show. If investors want to see more impact, they will ask for it.

While these concepts may be foreign to many entrepreneurs, they do matter to a growing number of investors in Sudan. You should think carefully before you attempt to position your company as an impact investment. It may be a natural fit for some, but less so for others. If your company is not positioned to make an impact, getting funding from impact investors will create a big burden with regard to reporting and in board meetings. In the long term, it will lead to a breakdown in your relationship with the investor and will likely be a net negative, even if it does result in more funding early on.