I remember the moment when we signed our $4 million Series A investment in February 2012. I had been losing sleep over the pending climax for many months, and when we finally got there the feeling was not one of elation, but of relief. Who knew that raising international venture capital for the first time from Zambia for a mobile money start-up would be so hard?
Well, it was. It was a new starting point — a rebirth — for our business. So much so that we even changed our name from the functional “Mobile Transactions” to the much more eloquent “Zoona,” which means “it’s real.”
So when we set out to raise our Series B in October 2015, I was determined to learn from my first experience and do it better. We had grown from 60,000 active customers and 62 agents at the time of closing our Series A to 1.3 million active customers and 1,300 agents. We had a thriving company culture, a much more seasoned management team, and an ambitious growth plan.
1. Find and emphasize the silver lining
There was only one minor problem — our revenue had just been obliterated from severe currency depreciation in Zambia, creating a cash crunch that required a bridge from our Series A investors.
But where there is crisis there is always opportunity. Emerging market investors are always concerned about these types of macroeconomic shocks, so we figured that at least this time they would get to invest in a management team that had lived through one. We could turn this into a selling point, emphasizing the opportunity for a well-capitalized business with an experienced management team and supportive investors to go on the offensive and expand quickly.
Where there is crisis there is always opportunity. Tweet This Quote
2. It takes a village
I learned from our Series A round that to raise capital properly, I would need to devote nearly all of my time to it. I would also need the full-time help of our CFO to build an investment plan (to determine how much money we’d need and what we were going to do with it) and manage multiple due-diligences. I would need to trust the rest of my team to not only run the business (with the crisis still very much ongoing) but also to grow it. I knew I had a great team that was up to the challenge, so I set the direction and stepped away.
3. Never underestimate the power of the pitch
I knew we needed a good pitch deck as a starting point. It’s true that you never get a second chance to make a first impression, so the pitch is critical. More specifically, the opening of a pitch is what creates a communication channel for what comes next, and if you don’t open well, the details will fall on deaf ears. I have learned that if you have great traction and results, lead with them.
Nothing gets an investor’s attention like traction; then they will start listening to what you have to say. If you don’t yet have great traction, lead with the problem you are solving but be sure to make it vivid and real. How you define your problem will communicate a lot about your understanding of your customers and your level of ambition.
Nothing gets an investor’s attention like traction; then they will start listening to what you have to say. Tweet This Quote
The goal of a pitch deck is to get into meetings to present it in person, and the goal of the presentation is to create engagement that leads to a due-diligence visit. We mined our network for leads and introductions, and gave the pitch over and over again. Through this process, we converted emails into phone calls, and phone calls into in-person meetings during a four-week roadshow in South Africa, the U.S., and the U.K.
4. Be purposeful
By mid-November, we had several investors interested and committed to visit us. During our Series A, we winged these investor due-diligence visits. This time, we designed a very purposeful investor on-boarding program with the goal of providing investors with a memorable experience that would stand apart from their prior visits.
We started with an interactive session on our values, culture, and customers, as we would for any employee on their first day of work. We then scheduled time with leaders across our business to come and present who they are, what they do, and why they do it. I stepped back and didn’t even attend most sessions — my job had been to get the investors to visit, and now it was time to let my team shine and create a favorable perception of our business.
5. Play the field
The dark art of fundraising is trying to get multiple investors to fall in love with you all at the same time. To keep our prospective investors moving along at the same pace, we set a very clear and transparent timeline up front. We told them that we would host due-diligence visits until mid January (without sharing who we were talking to), after which we would receive offers up until February 1. This created pressure for prospective investors to schedule their visits and to submit offers at the same time.
The dark art of fundraising is trying to get multiple investors to fall in love with you all at the same time. Tweet This Quote
By our February deadline, we had hosted five lead investors and received four term sheets. We also received a number of offers from smaller investors who wanted to participate behind a lead. We presented these offers to our board for feedback, and then gave everyone one more chance to submit a final offer with a two-week deadline. All the offers improved materially and we had a very difficult choice to make, which was exactly what we wanted.
But as it turned out, we still had a long way to go.
6. Time invested up front can save time later
Our chosen lead investor needed to schedule a more in-depth due-diligence visit, which we anticipated, but it couldn’t be scheduled for a month. In hindsight, we could have saved time by locking down the dates for this up front when we had more negotiating leverage.
Even better, we could have insisted on the full due-diligence before the term sheet, which takes more time but ultimately builds a stronger relationship and makes the terms more concrete.
7. Anticipate last-minute delays
We also underestimated how much time it would take to align all of our investors with each other in the legal agreements. When you have multiple investors in different time zones with a combination of in-house and outsourced lawyers who have different drafting styles and expectations, you get a long, drawn-out legal process. Having a complicated legal structure with multiple entities in different jurisdictions (which we have by necessity due to regulation) also doesn’t help.
It would have been helpful to schedule a weekly all-party call to get aligned up front and deal with any issues efficiently. Calls are always better than emails, and as CEO it’s important to manage the process to keep everything moving along.
After a few last-minute delays in securing all the necessary investor approvals and chasing down signatures, we finally got to the finish line. I felt an encore of relief, and learned once again that raising investment is a marathon — one where you have to sprint at a few critical sections. It is a huge investment in time, energy, and resources, which is why it’s so critical that you start early and are purposeful at every stage to get a good outcome.
Now onto the fun part: spending the money!