Effective pitching for investment

Years ago, a study was done in Kenya that quizzed hundreds of entrepreneurs about the money they made from sales and what equipment and raw materials they had to buy to trade charcoal, make furniture, run a hair salon or duka. The findings demonstrated a return on capital larger than every Western figure I have ever seen.

For in Kenya, large areas of our business landscape remain underinvested, which means returns are high for those that exist, attracting foreigners, too, as ‘helicopter investors’. These young incomers, many with Harvard degrees, know about Kenya’s sky-high returns on capital. They don’t reap returns quite of that order, as they build innovative businesses that require heavy marketing in a relatively small consumer market. But they have accounted for most of the country’s recent large brands. And that has led to growing howls at the unfairness — how do these incoming entrepreneurs get the investment when we have brilliant young business starters of our own who are not getting the same $1 million of start-up capital?

Yet, this week, I was given a set of slides prepared by a local entrepreneur as an investor pitch, and the problem is rather an ancient norm, in wanting the mountain to come to Mohammed.

The investments that the helicopters attract are foreign capital. Kenya has not accumulated as much capital as the West, not by a long way. It does now have its first cadre of wealthy Kenyan investors, but it’s a tiny pool of money compared with the hundreds of thousands of British or American angels. And then there’s venture capital, and big institutionalised investment, little of which is derived locally.

Thus, to get investments, Kenyan entrepreneurs need to engage with an international investment industry, with its own perspective, ethos, and set of priorities. For international investment has a language of its own — just as any sector does.

So, the local deck, I was told, was for a brilliant super app. However, there was no way to know that. The brilliant inventor instead figured any foreign investor would know about this kind of app and what it did.

In fact, any international investor would know that a business lead who could not explain their product to an investor would not be able to explain it to consumers either. If it has unique selling points and a competitive advantage, these need explaining to investors in clear context.

The pitch also had no information about the local market, consumer behaviour, or any market research, data or anything to show why consumers would sign up for its new service.

Instead, it had a slide with a set of mugshots of people in the team, and another slide with logos of every company in the same sector — suggesting saturation to even the uneducated eye.

There was no revenue model, no clue on what returns investors could anticipate, no marketing plan, samples, pilot scheme, case studies, or costs. In fact, it was a pre-business deck with almost every aspect of the ‘business’ still to be worked out: just an unexplained app, staffed by some people, in an industry sector that exists.

So far, that pitch has produced a universal no, with invitations to come back after the business is operational. On top of all else, it doesn’t even make a nod to international investors key concerns around sustainability, women and youth opportunities, or social impact.

In short, without any target investor studied, with no understanding of any investors’ strategies and what they are looking for, the pitch stands as a smattering of internal information and some unrelated context around a nascent business idea.

Which brings home that entrepreneurs who want to get into the team, have to learn how to play the game. We don’t complain we don’t get selected for the football team, without learning to get more goals.

Which means, for Kenyan entrepreneurs, study the investors: read their blogs, read their strategies, study investment-winning pitches. There is a form of essay that earns an A, and there is a form of investor pitch that wins investments. The mountain isn’t going to move, but we can get local investments if we understand what wins and deliver it.