In recent days, the Ghanaian tech startup scene has been awashed with a great deal of good news; in less than a month, 2 local startups have raised significant amounts of VC funding which hitherto was unprecedented in our ecosystem. From all indications, this will not be the last. As exciting as this may sound, a close analysis of these transactions seems to indicate that these companies are in fact not really Ghana-based as most of them had to be incorporated in foreign markets as a criteria for raising their investment capital (I stand to be corrected on these).
Taking a cursory look at our tech startup industry in Ghana, one wonders why local investors and for that matter local startups who have been operating for quite some time have been unable to raise significant funding to expand their operations and innovate around their product offerings. The usual story has been about local investors giving draconian terms and conditions and even preferring to invest in treasury bills than in a startup. I believe all is not doom-and-gloom for local startups to raise investments locally and contribute significantly to our GDP; as a matter of fact it’s really a simple process which other non-tech SME’s have undertaken and benefited from. The process I’m about to describe answers the key questions that most local investors might ask and also gives startups the framework to build future growth.
To begin with, local startups need to urgently see their ventures as a real serious business and treat them as such. It’s essential to keep proper records of all operational and financial transactions (and I’m not talking about a simple excel sheet). When you structure your business with clear operational and financial processes, which include — but not limited to —judiciously filing tax and pension returns, keeping accurate records of all projects, maintaining an updated database of projects and clients at every stage of your business, paying attention to patents for your own products and ensuring there are no copyright infringements, etc. It may seem a lot at first, but if you are able to do this for your business, you are on your way to raise guaranteed capital for your venture.
The processes above if done properly and provided your business model is grounded on facts, will qualify your business to list on the Ghana Alternative Exchange (GAX). GAX was created with the simple goal of helping SME’s who do not have the capital requirements to IPO on the main stock exchange (GSE), to be able to equally raise funding with very minimal capital requirements.
This simply means that, you will have access to a plethora of investors who will invest in your business based on the simple fact that there is a firm structure and framework in place to ensure continued growth and sustainability beyond a basic idea that you, once-upon-a-time, had.
It will be a delight to see some of the pioneers in our industry, take up this challenge and exploit the potential that GAX offers. For the relatively young startups, its time to get out of the eureka euphoria and think about how you can ensure that your startup can run for the next 20 years and outlive you.
It all begins from putting the right structure and procedures in place.