Popular Ghanaian Entrepreneur, Isaas Sesi, Speaks About Challenges With Funding Startups in Ghana

Have you thought of starting a new business? If you have, there’s one major thing you have to deal with: funding. Funding for startups is a critical issue

Funding is quite an intricate business to navigate, as there are too many options to consider. While there may be many options, choosing the right fit can be quite difficult to settle on. 

For business startups across the globe, here are some options to consider when it comes to funding: seed funding, equity stakes, or venture capital funds. 

Have you wondered what angel investors are? Have you wondered how series funding works? What does equity funding entail? What’s the best way to land an investment from a venture capital firm? Is crowdfunding actually legitimate? Is external funding the best option?

In this article, we will seek to explore these funding avenues and take some localised funding challenges as stated by a popular Ghanaian entrepreneur in the agribusiness area.

What are some types of startup funding?

When it comes to funding, as was mentioned earlier, there’s a plethora of options. Let’s pay attention to a few of these avenues for funding. Often, it is expected that the type of business and how much funding is needed will determine the avenue of funding to explore. 

Personal Savings and Credit

Personal savings and credit accounts continue to be one of the largest and easiest sources of funding for many businesses. Entrepreneurs understand that for them to get support from others in the way of funding, they are expected to show commitment to their own ideas. How do they do this? Well, generally, if an entrepreneur funds his or her own business idea, it would be most likely from his or her personal savings and credit. It’s also the most accessible form of funding, as you don’t have to rely on anyone but yourself in order to use it.

Friends and Family

For many startup business owners, aside from financing businesses from their personal finances and savings, another low hanging fruit for startup financing is to turn to family and friends. Often, family and friends are people who immediately believe in your dreams, aside from yourself as a founder. And as such, it is easier to convince family and friends rather than other investors like angel investors and such.

Venture Capital

Venture capital (VC) forms part of private equity that is available to business startups. For many who prefer or choose this type of funding, it is based on their belief in its long-term growth potential. 

Venture capital generally comes from well-off investors, investment banks, and other financial institutions. Venture capital doesn’t always have to be money. Sometimes, it comes in the form of expertise. This could be managerial or technical. 

Angel Investors

Angel investors are typically individuals with very high incomes and resources. These individuals are often willing to spend money, in varying amounts, on startups.  Because Angel investors are individuals, they are able to take decisions on their own without necessarily having to go through a cumbersome process of interacting with a board or supervisors before a decision is taken. This is very helpful for start-up business owners who need to make decisions quickly to help their businesses grow.

Banks

Small business loans have become a regular feature for many startup businesses. In line with that, many banks have curated specific business loans for business startups with flexible repayment terms. Unlike taking funds from angel investors or venture capitalists who would require equity, banks take interest on loans they give out. 

Crowdfunding

This is a method of raising capital through the collective effort of friends, family, customers, and individual investors. This approach taps into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure.

Accelerators

Startup accelerators offer support for startups that are getting themselves off the ground. The details of each accelerator is different but they usually offer a combination of funding, mentorship, and other forms of guidance.

Grants

Government grants for small businesses are usually tied to specific programmes and projects. 

Series Funding

Series funding is when a founder raises increasingly larger rounds of capital in order to keep their startup going. 

Challenges with funding for businesses in Ghana

For seasoned Ghanaian entrepreneur Isaac Sesi, there are many challenges when it comes to funding startups in Ghana.

“It’s disheartening to witness the current startup culture, where trying to build a solid, profitable business that grows at a healthy, sustainable pace is often viewed as unexciting and unattractive by investors, the startup media, and the entire entrepreneurial community. 

Instead, what captures the attention and enthusiasm of investors and the startup community are massive funding rounds, unrealistic growth rates, and getting into prestigious accelerator programs. 

Venture capitalists are always on the lookout for the next flashy opportunity to throw money at, while opportunistic entrepreneurs are exploiting this trend to enrich themselves with investors’ capital. 

Unfortunately, when this approach inevitably unravels, it’s the honest entrepreneurs who suffer the most, because the resulting distrust in the system makes investors increasingly skeptical, making it even more challenging to secure funding—as if that isn’t hard enough.”

Mr. Sesi is an entrepreneur, Founder of Sesi Technologies, Founder and Editor at Mesika and Former Research Engineer at Department of Agricultural Engineering.

Conclusion

Mr. Sesi’s thoughts on funding for business startups are one that should concern all business owners, particularly new business owners. While the avenues for funding new businesses are many, a business owner would have to properly evaluate the pros and cons of each to make a firm decision on which works for their business.

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