If you want to build an investable business and land funding, you need to understand the landscape. Vusi Thembekwayo unpacks how smart businesses attract investors.
- Player: Vusi Thembekwayo
- Company: My Growth Fund
- Visit: www.mygrowthfund.co.za
In 2014, Zithande Mbala pitched his business idea, a smart toilet paper lubricating device, to the Dragons on SABC’s Dragon’s Den. It was a bizarre pitch, not least of all when Zithande valued the business to be worth northwards of $100 million in a few months’ time. He was offering a 10% stake in the company for an investment of R1 million.
The Dragons did not respond to Zithande’s pitch well. It made for entertaining television, but no one thought they were watching a great investment walk out the door when the Dragons collectively said, “I’m out’.
And then in 2018, one of those Dragons, Vusi Thembekwayo, saw a smart toilet paper lubricating device at OR Tambo International Airport. He gave Zithande a call, only to discover that the business was off the ground — and had some large contracts to boot.
“How did we miss it? All of us are entrepreneurs and we completely missed it,” says Vusi. “I’ve rewatched that clip a hundred times, trying to figure out why we all thought it was a terrible idea with no hope of making it in the real world.”
There are lessons to be learnt in Zithande’s pitch for both funders and entrepreneurs looking for funding. “We pre-judged him, which we shouldn’t have done. He had an accent that he said came from spending time in New York, but we knew he hadn’t. It’s a strong lesson for us not to pre-judge, but it’s also a lesson for entrepreneurs.
We all put on personas — we wear suits to meetings when we wear jeans at the office — it’s a part of doing business, but you need to be careful not to come across as inauthentic. If you’re trying to be something that you’re not for a funder, it might backfire.
Rather be who you are and have confidence in yourself. Authentic, transparent entrepreneurs will be respected, even if you’re coming from a completely different space or background to the investors you’re approaching.”
The next lesson speaks to the nature of both entrepreneurship and finding funding: Always persevere. “If you believe it, do it,” says Vusi. “It’s a cliché, but clichés exist because they’re true. Don’t listen to negativity, don’t stop, and don’t in the moment let the bumps in the road shape your reality.
“There will always be hiccups. We make mistakes. We get rejected. If you let these derail you, you’ll never succeed. Most companies don’t get funding the first time round. Most entrepreneurs don’t succeed with their first ventures. You need to learn to push on, no matter what life throws at you.”
But perseverance is just a starting point. If you want to build an investable business and land funding, you need to understand the landscape. These are Vusi’s seven lessons in attracting a funder’s attention.
7 Ways to Attract the Attention of Funders
1. Put each “no’ to good use
According to Vusi, it’s almost immediately apparent whether entrepreneurs have pitched their business to investors before, and it works in their favour.
“They answer the questions we’re thinking in their presentations, before we need to ask them,” he says. “No meeting with a funder is a waste. You can either let the rejections wear you down, or you can learn something and perfect your deck.”
2. Record all meetings
“No funder will say anything in a meeting that you can’t hear, so ask if you can record the meeting,” advises Vusi. “When you play back the recording, you’re now a third-party listening in. You can hear yourself — wow, why did I stutter there? Why do I sound so nervous? Why didn’t I say this… There is so much you can learn and improve on just by re-living a meeting.”
In addition, when you’re recording a meeting, you don’t need to take a lot of notes and you can be completely present in the discussion.
3. Use the 10/20/30 Rule of PowerPoint
A few years ago, Guy Kawasaki evangelised the 10/20/30 Rule of PowerPoint. In a nutshell, a pitch should have ten slides, last no more than 20 minutes and contain no font smaller than 30 points.
“We’ve seen this combined with design thinking, and it makes for a compelling pitch,” says Vusi. “When I first saw it, it seemed so basic and even obvious, and yet so few entrepreneurs use this format. If you do though, you steer away from an executive summary and SWOT analysis and instead focus on the problem, how you’re solving it and where the commercial opportunity lies.
“What is the problem you’re solving? It’s such a basic question to ask, and yet so few businesses start there when they’re pitching.
Instead, there’s a tendency towards, “This is me and my team, and our amazing clients, and the 15 000 products we offer… and the person you’re pitching to is thinking, “hold on, what’s the problem? Help me understand the problem. Because if I get the problem, you have my interest.”
4. The goal of the first meeting is to secure a second meeting
You need to grab an investor’s attention in the first meeting to secure a second meeting, and the way to achieve that is by piquing their interest with a problem that you can profitably solve. “I’ve learnt that a pitch has to grab me within the first seven minutes, or my attention starts moving to my emails, to-do list or other urgent matters,” admits Vusi.
“I’m present at the beginning of the meeting — that’s where you need to unpack the really important stuff. The rest can follow later. If you grab an investor’s attention, you will get the opportunity to discuss your team, products and clients. All of those things are important. But you don’t want them upfront, and then by the time you’re reaching the most crucial part of your presentation you’ve already lost everyone’s interest.”
As an entrepreneur, Vusi learnt this lesson the hard way. “We went on fundraising rounds ourselves, and I realised that I had eight slides of fluff upfront, because there were so many things I felt I just “had’ to let them know. The reality is that I needed to present our hook — follow-on questions and meetings will cover everything you need to unpack. But if you don’t have that hook, you’ll never reach that point.”
5. Practice, practice, practice
“Iteration is important. Deliver your pitch as many times as possible. Practice on business associates, friends, family — anyone who will listen. But make sure some of them are strangers, or at least people who will give you the unvarnished truth. You don’t want to feel good and get a pat on your shoulder — you want to perfect your pitch.
“Ideally, what you need is someone who will ask questions from an outsider’s perspective. See what they latch onto, or what they don’t understand. How long does it take to explain what you do, or the problem you’re solving? We all make assumptions and we all understand our businesses and industries, but don’t assume the person you’re speaking to has the same perspective or knowledge.”
6. Don’t treat every potential investor as the same
There are a number of key things to understand about the funding landscape. First, venture capital and private equity firms raise money from partners. They have shareholders that they are answerable to, and to whom they need to show returns. They need to grow the capital they invest. Therefore, if there isn’t a growth opportunity, there isn’t an investment opportunity.
“You need to show how the investment will help you grow the business,” says Vusi. “This is a key element — if I put in x, I will be able to get y out. Yes, there’s a risk that it won’t work, but you need to have a growth story; you need to be able to demonstrate how you plan to get there.”
In addition, each fund has a mandate. Approaching an FMCG and Agri investment fund for a tech venture is pointless. Similarly, approaching an eco-fund with a plastic bottled-water concept will not work. Understand the fund, the individual investors and how your business suits their mandate.
7. Know your numbers
If you’re a subject matter expert and not a finance person, speak to someone who is. “Tap into your network and find someone in that space. They will understand the money and ask you the questions that relate to that part of the pitch and business. This will give you an idea of what investors will ask so that you can come prepared to answer their questions. Too many entrepreneurs walk into an investment meeting and don’t have all the numbers they need at their fingertips. This is a red flag for investors — how will you grow their investment and your business if you don’t have a handle on the numbers?”
PITCH TO A TAXI DRIVER
This is a simple lesson that Vusi himself figured out while taking a ride in a taxi. “We were waiting for passengers and started chatting, first about how the local music industry is changing and then moving on to my business,” says Vusi. “It was an incredible experience.
Here was the stranger, asking me questions about my business that I knew the answers to, but had never considered including in my pitch. “Taxi drivers have a short attention span because of what they do. They also run high-volume, low-margin businesses and work under immense pressure.
They understand exactly how to think about their businesses in terms of how much return their vehicles are giving them. Think about it. A taxi driver will charge a passenger R2,50 for a ride, but owes R250 000 on his taxi, so he understands all about capital returns and depreciation cycles. He’s an excellent resource — and he’s free. You need to get to the point and see if your pitch makes sense.”
THE 10/20/30 RULE OF POWERPOINT
Guy Kawasaki’s 10/20/30 Rule of PowerPoint is made up of ten slides.
1. Title: Provide company name, your name and title, address, email and cell number
2. Problem/Opportunity: Describe the pain that you’re alleviating or the pleasure you’re providing
3. Value Proposition: Explain the value of the pain you alleviate or pleasure you provide
4. Underlying Magic: Describe the technology, secret sauce or magic behind your product. The less text and the more diagrams, schematics and flowcharts the better. If you have a prototype or demo, now is the time to transition to it. If a picture is worth 1 000 words, a prototype is worth 10 000 slides.
5. Business Model: Explain who has your money temporarily in their pocket and how you’re going to get it into yours.
6. Go-to-Market Plan: Explain how you are going to reach your customer without breaking the bank.
7. Competitive Analysis: Provide a complete view of the competitive landscape. Too much is better than too little.
8. Management Team: Describe the key players of your management team, board of directors and board of advisors, as well as your major investors. It’s okay if you have a less than perfect team. If your team was perfect, you wouldn’t need to be pitching.
9. Financial Ps and Key Metricsrojection: Provide a three-year forecast containing not only rands but also key metrics, such as number of customers and conversion rates. Do a bottom-up forecast, not top-down.
10. Current Status, Accomplishments to Date, Timeline and Use of Funds: Explain the current status of your product, what the near future looks like and how you’ll use the money you’re trying to raise.