Raising Your First Funding Round: 8 lessons from Lagos Startup Week

Lagos Startup Week, an annual event that brings together entrepreneurs, investors, and industry leaders in Nigeria’s tech ecosystem, hosted its event last week. One of the panels that stood out was on how to raise your first round and here are important nuggets from the event.

Lagos Startup Week may have ended but the lessons definitely resonate for any tech founder looking to succeed in the world of tech. Starting a business is hard, especially a technology enabled startup. Last week, the trio of Odunayo Eweniyi of PiggyVest, Dolapo Morgan of Ventures Platform and Seun Alley of Fez Delivery shared crucial pointers for tech founder looking to raise venture capital funding.

Clarity

If there is one thing both Alley and Morgan agree on, it’s the fact that the essence of the business and the problems it intends to solve must be clear. Morgan states it must be a one liner. It is really important for any founder seeking funds to not ramble. Being clear also involves figuring out the business model, staff structure, how one intends to raise and how long that period must last.

Traction

It is important that before seeking a raise, you must have launched. You must have grown before anyone would take an interest in you. If you are pre-seed, there are a million and one things you can do to show growth. “If you are a new startup, you can show things like users or other tricks that show you are making progress. If you are post revenue, show your revenue. We want to see what your growth looks like on a monthly basis. The magic number people argue like 15-20% of the monthly growth rate. Per year in Nigeria you need to do 50% due to high inflation, currency devaluation, ” Morgan explained.

Hire Generalists

The current trends of layoffs have taught businesses that more can be made with less. It’s a temptation to hire so much when one is starting out and turning back to cut those hires due to economic challenges. Cofounder of PiggyVest, Odunayo Eweniyi notes that her firm was a team of 12 for a very long time before it recently expanded to fit over 100 people due to the other products they created. “At the beginning stage of your business, the kind of hiring you should be doing is generalist people — people who can stretch across various roles, whose skills and experiences translate,” she said.

Capital efficiency

The poster lady for capital efficiency is Odunayo Eweniyi. As she rightly asserts, her startup raised $1.1m in 2018 and is yet to raise any funding since then. This situation led her to figure out how to work with little money. “Capital efficiency is stretching one dollar further than it would normally go, “Eweniyi explained. With unpredictable markets in Nigeria, one has to be capital efficient especially with the dearth of funding for African founders. Capital efficiency is building the right customer persona, finding them and then selling to them.

Bootstrap

It’s usually common for founders to actually bootstrap their businesses. Alley noted that she invested 10 million into her logistics startup. Eweniyi agrees as well. Sometimes, you need to support your business by yourself, to keep it afloat. It is also okay to have a side hustle, raise money from close friends, as long as you can return it.

Valuation

For many startups, who are at the pre-seed level, valuation of their startups is a bit of a pickle. However, it’s important to be able to assign value to what you are building even in the season of valuation markdowns, according to PiggyVest founder. You are building in a market and there is a company similar to you whose valuation you can check. So you can adjust upward or downward.

Account for everything

Run your company the way you should run a company. Budget very strictly, don’t overspend. There are boundary lines between departments. Make sure every dollar is accounted for and make sure they are bringing in value. Also, audit your firms. Some of these wise words are ways to think about your Startup.

VC Backable

Not every business needs VC funding. But if you must raise, your business must be VC back able. This simply means you must be able to grow at the rate of 10 times or more. The money being raised is not free money. If one is writing you a check of $50,000. It’s only natural you return it with interest. Also, check the portfolio of your investors to be sure they are not backing a similar business to yours because they may find it difficult to back yours. In all, the key is embracing innovation and tapping into underserved markets.