All through my life, I have always craved to be financially free. Financial freedom as I define it, is being able to live the rest of your life without ever having to worry about money. The great Robert Kiyoasaki calls it ‘escaping the rat race’. Being financially free though has a lot more to it than just having a stack of money staring right back at you while you smile gleefully. It is the freedom to be who you really are and do what you really want in life.
I assume that a lot of people have similar dreams! The real question is how many people are actually able to go out there and get it. The purpose of this write up is not to teach you how to do it but to make you understand the entrepreneurial mindset and the old age syndrome of start-up capital, both of which are essential to attaining financial freedom!
Who are entrepreneurs and how do they think?
Many years ago as a young man in secondary school, I tried to flex my vocabulary muscle by asking my senior who an entrepreneur was. His answer was very brief, simple and concise but still very relevant to me. His answer was ‘an entrepreneur is a business man’. He couldn’t be far from right! An entrepreneur is a person who sets up a business or businesses, taking on financial risks in the hope of gaining some profit. Rather than working as an employee, the entrepreneur pursues his or her own dreams and is commonly seen as a business leader and innovator of new ideas and business processes.
To be an entrepreneur, you obviously must think like one. That is something we call the entrepreneurial mindset. Having this mindset simply refers to a specific state of mind which orientates human conduct towards entrepreneurial activities and outcomes. People with such mindsets are often drawn to opportunities, innovation and new value creation. Their whole state of mind is geared towards sniffing out opportunities in every situation. Where one sees a brick wall, they create a ladder to enable one climb over it. Where one has only a ladder, they build a brick wall to make the ladder useful and hence put them in business. They are relentless like that!
People with such mindsets have peculiar characteristics which make them;
- Free thinkers
- Problem solvers
- Innovative in their approach to change
- Willing to fail to eventually win
- Abandon the employee mindset that looks to short term pay checks to building a powerful money making business that works 24 hours a day, 7 days a week.
The good thing is that entrepreneurs are not born, they are built. One environment may unearth an entrepreneur a lot quicker than the other, but they are definitely built through a constant training of their minds to reject the status quo of taking an 8-5 job and an innate desire to be truly financially free. If they cannot come up with new products or ideas, trust them to find new markets for existing products. A classic example is the story of two marketing executives who went to sell shoes in a village. One person came back despondent and sad and exclaimed ‘there is nothing good in that place, nobody wears shoes over there!’ The other executive who definitely has the entrepreneurial mindset came back smiling and full of optimism because for him, it was exactly the kind of market he was looking for! A new market to sell his shoes!
Being an entrepreneur can be fun! Trust me, really fun. But there is down side to it that cannot be emphasized enough. One may have all the ideas, enthusiasm, zeal and what not, but if you don’t have the ‘benjamins’ (cash), it’s an extremely herculean task taking the next step. How do you make all those pretty little ideas in your head functional? Do you have the money for it? If the answer is no, it’s not all doom and gloom. There is always STARTUP CAPITAL available.
What is Startup Capital
Startup capital refers to the money that is required to start a new business. Startup Capital in a lot of circles is also referred to as “seed money”. Coming up with an idea to start a new business is just half the battle in succeeding at it. You need to set that idea into motion and that most often than not, involves money. Most of the time, money you cannot come up with by yourself.
As a result, most entrepreneurs look without or outside to get the capital they need to push their ideas forward. The process for getting funding is arduous. You speak with people, then they will critique what you are doing, and then you improve your proposal based on that feedback. It’s not a process where you show up, knock on the door and they say yes. It’s a process where everything has to be carefully laid out. Your ideas should be communicated as clearly as possible without the assumption that everybody understands your brilliant idea.
Sources of Startup Capital
Capital or funding to startup your business can come from a wide array of sources. Some of these sources include but not limited to;
- Family and friends: Family and friends stand tall in this list because they are the easiest to convince. They probably have known you all their lives and will likely not request for any form of documentation. More importantly, the interest on the funds may be next to nothing due to the ties you have with them. This ultimately gives you breathing space since the early days of your business may prove tough
- Angel Investors: An angel investor is an affluent or rich individual who provides capital for a business startup. In the US alone, there were about 258,000 angel investors documented in the year 2007. As a startup, it is prudent to look for active or professional angel investors rather than occasional angel investors since they take longer to close or convince.
- Angel Groups: An angel group, as the name applies is a pool of investors sharing deal flow. They normally get a number of proposals from startups from all over the globe, and if a significant percentage of the members are interested in your idea, they can lead your deal.
- Venture Capital: This is also a type of funding for a new or growing business. It is a type of equity that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth.
How to pitch for startup capital
As someone who has been engaged in a fair number of private equity deals, I am going to do this solely on the experience I have. Private equity simply defined is a source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies.
I have personally had young individuals come up to myself and my team to pitch for investments to get their businesses up and running. Some of them have been successful in getting us to partner with them whiles most of them have been turned away simply because they got their pitch horribly wrong.
Now, let me try to share a few essential tips on how to get it right when looking for startup capital;
- Know who to pitch to! This is as essential as coming up with your start up idea. You need to know if a specific fund is for you. Spend time studying the portfolios of the individuals or companies you pitch to. Most of this information is available online or through hearsay (verified hearsay of course). Not only do you need to understand each fund, you also need to understand each partner. Some funds or partners have their focus areas so there is no need wasting your efforts where you do not fit. Target specific partners at a specific fund.
- Perfect Your business plan! You need to be as clear as day light in transmitting your idea across board. You are clear in your head as to what exactly you want to do. Being able to communicate that out efficiently is a different ball game altogether. The people you most likely pitch to don’t know you from Adam and their job is to scrutinize every single detail. Fail to deliver on one single detail and it’s ‘hasta la vista baby!’ Be as clear as possible and know your audience as well.
- Numbers, numbers, numbers! Getting serious with the numbers is important for two reasons. Firstly, you will need to present incredibly detailed, accurate and realistic financial estimates and figures for any potential investor to take you seriously. Secondly, you also need to need to work out exactly how much capital you need to get your business up and running. Ask for too much and you are gone, ask for too little and you will be blown away. Listen to this, myself and a group looking for ideas to invest in had a young man ask for GHS500,000.00 to start a poultry farm! Your take?
- Passion is not negotiable! Lastly, personally, the biggest thing I look out for is how much passion you have. How passionate are you about that idea of yours. Is it an idea you sleep and wake up with or it’s just something you think can make you some amount of money. Are your eyes all wide and bright as you communicate your idea or you appear as if you are communicating just any ordinary idea. Look into the mirror and answer those questions for yourself!
By Victor Tandoh. Victor works with EDC Investments Limited
