“Have patient. Own it. Bootstrap it. Take debt to finance specific bills and when you have your fruits, you can then invite investors to come and you will make more and you don’t have to lose huge percentage of your company.
“Be patient. Don’t rush out to collect funds and celebrate it. You will have to pay back,” he said in a post.
Austin Okere, the founder of CWG Plc has appealed to young tech entrepreneurs in Africa to be wary of raising seed monies from venture capitalist to finance their growth.
According to him, what is behind every raise is that the fintech entrepreneur find out he is diluted significantly.
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His words: “The issue here is that many Nigerian young companies are celebrating that they have raised Series C, Series D and anytime they raise this funds, people hail them, but what was behind it? What is behind every raise is that the entrepreneur find out he is diluted significantly,” he emphasized.
He explained that at some point, raising fund in exchange for equity may seem cheap deceptively but the reality is that debt financing is cheaper.
He therefore urged the fintech entrepreneurs to always explore the option of debt financing.
He noted that an average venture capitalist expects more returns than Treasury bill interest rate.
“Make no mistake. The Treasury bills interest rate is 15% sometimes. If someone is going to bring money to invest in your company, he will be looking for more than that 15%, giving that there is a high rate that his money will not come back and the rule is that they are looking for three times what they brought in within 5 years.
“So in all cases, if they inject $8m into your business, they were going to ask for $24m within 5 years or you list and give them liquidity to exit.
“Hence, you have to check very well that the $8m that you are taking you can do business in such a way that the value of the company can generate $24m in 5 years”, he concluded.