Startups emerge from the seed of an idea. Dedication, careful planning, strategies, foresight, the drive & passion to succeed—it takes a lot to turn a simple idea into an operational business. And, let’s not forget—you will also need substantial funding as well.
Finance is the lifeblood of any business. You need money to turn your business ideas into reality, run your business & contribute to society and the economy, and make a living out of it. Pre-seed and seed funding for startups are essential to finance to kick-start the entire process.
For a start-up to sustain itself, it must scope out capable & reliable funding sources that can support it through turbulent times.
Here, in this article, we take a look at seven effective & reliable options concerning funding for startups in Africa.
Seven of the Most Effective Start-Up Funding Options.
1. Bootstrapping
This is the most common avenue for all start-ups when the ball starts rolling.
Bootstrapping has business owners using their savings and wealth to fund-start their ventures. Family and friends are generally the most common source in these cases. As the capital belongs to the owner, he or she can exert a significant amount of control over financial decisions.
Bootstrapping is a secure pre-seed funding for startups around Africa.
2. Government Loans & Grants
In a bid to boost the economy & employment opportunities, many governments across the globe offer start-up loans & grants. Government loan schemes are great sources of funding for African tech startups as they offer attractive interest rates and flexible tenures, while business grants do not need to be repaid.
Alongside debt funding, grants are one of the most common sources of early stage funding for African tech startups.
3. Crowdfunding
Crowdfunding has become a popular way to raise funds via donations made to an online platform.
Many businesses, NGOs, and charity projects have secured substantial funding through viral crowd funding campaigns. There’s no need for any repayment and online platforms charge a nominal fee for hosting a campaign. Crowdfunding remains one of the most trusted avenues of seed funding for tech startups.
4. Start-Up Accelerators & Incubators
Accelerators and incubators are specialized arms of businesses & venture-capitalized firms, designed to help new businesses grow & prosper. They may offer early-stage funding for tech startups, mentorship programs to help businesses scale up as well as subsequent investments.
African tech startups across Nigeria, Egypt & around the continent enjoyed immense growth thanks to the support from start-up accelerators and incubators. Start-up accelerators such as the ODX accelerator played an immense role in the rise of 16 African tech startups.
5. Business Loans
Public & private sector banks, non-banking financial institutions, and certain micro-financing institutions offer different kinds of start-up loans. Working capital loans, long-term and short-term loans, equipment funding loans, microloans, & asset-backed loans — there are a host of options available as funding for start-ups.
But, there are a lot of hassles & red tape involved in acquiring debt financing from banks. Given their fragile nature, if options are available, then it is best to look for other early-stage funding options for African tech startups.
6. Angel Investors
Having an angel investor on their side is every African tech start-up’s dream. These investors are established & wealthy businessmen themselves who harbor a keen interest in supporting promising entrepreneurship. Like Early-stage venture capital firms, they offer initial early-stage funding for tech start ups in exchange for equity followed by possible Series funding for start-ups alongside possible mentorship programs through Angel Investors organised in networks.
7. Venture Capital Firms
Early-stage Venture capital firms are generally investment firms that provide both financial and mentoring support to rising start-ups. They offer early-stage funding for start-ups and follow it up eventually with Series A, B, C, and D funding. Venture capitalists often become limited partners, as institutional investors, with a start-up and get equity in the business.
Take Your Business Ahead With Africa’s Foremost Venture Capital Firm
Step into the world of Blaq Ventures, where we invest in leading start-ups in the African tech industry. We offer pre–seed funding for tech startups, mentorship programs, support for devising effective business strategies, putting in place models, and developing network connections.
If you have the idea, the vision & the drive, connect with Blaq Ventures and turn your business into a leading disruptor of the African tech industry.