Africa has the youngest population in the world, with 70% of sub-Saharan Africa under the age of 30. Such a high number of young people is an opportunity for the continent’s growth – but only if fully empowered to realize their potential.
Young entrepreneurs play an important role in social change and innovation. New products and services created by entrepreneurs can cause a ripple effect and stimulate related businesses or sectors that need to support the new venture. That’s why young entrepreneurs are important for stimulating economic growth.
Why then, is it so difficult for young entrepreneurs to access funding?
Starting a business is a big financial challenge in itself, but young entrepreneurs face a unique set of problems when it comes to money. From funding their business to managing cash flow, there are a number of obstacles that can trip up even the most sensible job creator.
Young need to know how to attract investors. Investors consider multiple factors when dealing with a young entrepreneur who is new to being a business leader. They’re looking for certain signals that help to persuade them to their money.
We unpack three potential questions that entrepreneurs need to be prepared for in pitching to venture capitalists:
- Is there a great team?
For many investors, the management team is the most important element in deciding whether or not to invest. Entrepreneurs must show they are passionate, dedicated, and have the temperament to grow the business. Investors find comfort in a business that has a team in place, where team members have expertise and have been given enough authority to oversee their area of operation.
- What is the market opportunity?
Entrepreneurs need to be prepared to discuss the potential of the new market as it relates to the business venture’s growth and projections. Most investors are looking for businesses that can scale and have the potential to create jobs. They will want to address the issue right up front: How robust and far-reaching is the market in which the business intends to enter? The market usually needs to show promise before an investor will trust it to invest.
- Do you have a competitive advantage?
This is going to be a critical issue for investors. What makes the product/service unique? Potential investors will want to know why customers will choose that solution over alternative approaches. There has to be something about the product that sets it apart. These questions determine how quickly a business can acquire new paying customers and increase its revenue.
It’s tough for anyone to start out as an entrepreneur building a new business from the ground up. Older business owners have the advantages of a history of good credit and years of networking under their belt, making it easy to find investors and secure loans and contracts.
The younger entrepreneur does not yet have these resources.
A growing community of investors are working with the Anzisha Prize to understand how very young entrepreneurs to enable their transitions from school to entrepreneurship and build deal pipeline for later stages.
Do you have tips and strategies to share on how to get investors interested in young entrepreneurs?
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FREE RESOURCE: Learn more on how YOU can invest more into a Very Young Entrepreneur (VYE) by downloading the Young Entrepreneurs Fund Fact Sheet.