Securing funding remains an ongoing struggle for many African startups and NGOs trying to drive meaningful impact. However, many myths and misconceptions about startup funding often hold entrepreneurs back from getting the financial support and investment they need. This article aims to debunk six of the most common myths about securing nonrefundable capital and empower both aspiring and experienced African entrepreneurs to confidently pursue funding.
Myth 1: Perfection is Required to Get Funding
The belief that a startup idea needs to be completely perfect and flawless before it can secure funding deters many aspiring entrepreneurs from even trying. However, this is not true as perfection is simply not a prerequisite for startup success when it comes to getting funding.
The key factors that funders care about more are:
- A Robust Execution Plan: If you are seeking funding, develop a detailed, data-driven execution plan mapping out exactly how you will build your startup into a viable, high-growth business. Having a solid plan that details your go-to-market strategy, product roadmap, growth KPIs, and key milestones goes a long way.
- Ability to Adapt Quickly: Next. The population of startups is increasing. With the competition becoming fierce, the ability to nimbly pivot, adjust, and adapt is crucial to secure funding. Things will not always go according to plan and funders want to see that you can quickly change course when needed.
Take for example KiaKia Health. Their initial concept faced quite a bit of skepticism at the point of implementation. They banked on something during the conception stage but it turned out they had banked on the least important thing. However, through relentless perseverance and making a series of strategic adjustments and pivots, the startup was ultimately able to find product-market fit, scale up quickly, and secure grant funding. The takeaway is that with grit and adaptability, an idea does not have to be perfect from the outset to still succeed in securing funding down the road.
Myth 2: Startup Funding is Only for Tech Startups
While fast-growing, technology-driven startups often dominate the headlines around startup funding deals, the notion that significant startup funding is exclusive to only this sector is simply unfounded. By the way, grant funding is not only for fintechs. Innovative startups across a diverse array of industries have successfully secured funding.
Aside from tech startups, falling under any of the under-listed can position a startup for funding.
- Agriculture: Startups bringing innovation to supply chain management, crop optimization, and marketplace models in agriculture. A lot of AfDB and GIZ funding exists for agricultural startups for food security.
- Healthcare: Startups expanding access to care through telemedicine, decentralized clinics, and shared medical record platforms. Funders like the Bill & Melinda Foundation make available funding for health startups all year round.
- Renewable Energy: Startups building and distributing solar technology and clean cookstoves. The world is feeling the scourge of climate change and this is forcing funders to fund climate-related projects. This sector is hot cake.
The diversity of industries receiving startup funding shows that opportunities abound for startups across all sectors - not just tech. Aspiring startup founders should focus intensely on addressing real problems and tangible needs in African communities first and foremost rather than crowding the already suffocating tech ecosystem. African entrepreneurs have an opportunity to attract funding by leaning into their domain expertise and local context rather than conforming to stereotypes.
Myth 3: Only Big, Well-Known Startups Can Attract Significant Funding
Another common myth is the belief that only big, well-established startups like can secure substantial grant funding to drive major initiatives. This myth shrinks the aspirations of small startups and medium-sized startups who are intimidated by the scale and name. However, the reality is that numerous relatively small and medium-sized startups have received grant funding.
Here are a few things they did to stand out:
- Emphasize Your Unique Value Proposition: Funders receive countless funding applications from startups tackling similar or different problems. As a small startup, you should clearly articulate what makes your approach or solution uniquely innovative and have an advantage at standing out from the pack. It could be something as simple as focusing on children (Play4Health by DoktorKonnect) or women and girls only (KiaKia Health) while others focus on adults.
- Demonstrate Tangible Impact: Do not try to match the traction or goals of the big startups. Rather than stating unverified achievements (with no evidence) or lofty goals (which obviously cannot be achieved based on size, strength, and capacity), restrict yourself to the specific, measurable outcomes you have already driven on a small scale. If available, use data and facts to showcase your impact.
An excellent example is the cyber-hygiene App developed by Epower, a Nigerian tech agency. The project was selected for the Africa Online Safety Fund Grant powered by Google, in 2021. Satisfied by the execution and impact of the project, the funder used them as an example in the subsequent call for proposal (training for applicants). The project was so compelling that Google funded the project again in 2023. This success story underscores that funding success is not limited to big and popular startups.
Myth 4: Startup Funding is a One-Time Event
Moving on, another very common and potentially damaging perspective that many startup founders have is the notion that once startup funding is initially secured, they have no business with the funders again. To them, “they have arrived.” Securing grant funding is a major success, but in truth, it is just the beginning - not the end goal. Startups have different stages of funding and a one-time grant funding can not do it all. Burning the bridge after the first funding is a bad thing to do.
A few critical components of success post-funding include:
- Build Lasting Funder Relationships: Rather than having transactional-like interactions, successfully funded startups need to develop and foster deep connections with their funder. Startup founders can do this through regular communication or virtual/physical invitations to events. This makes the funders feel invested in the startup.
- Maintain Transparency: Grant funding is non repayable and there is no profit sharing, but still, funders need to be kept in the loop. There should be no such thing as a surprise. A detailed report on key metrics, financials, product development, and ongoing progress compared to milestones is vital. Surprises should be avoided.
- Consistently Delivering Against Targets: As in the Epower story shared above, it is not enough to collect grant funding and go back on the proposed targets in the proposal before funding. They are interested in startups that will achieve all outcomes and even surpass them. For startups seeking second funding, avoid long periods of inactivity in between sudden requests for more funding. Establish credibility through routine visible progress.
The key insight for startup founders here is that pursuing funding is not a one-time thing. Creating a connection with the funder can aid subsequent funding from the same funder or a completely different one.
Myth 5: Investors Only Care About Financial Returns
The next myth arises from the misconstruing of grant funding with investment or equity funding is the notion that funders evaluating African startup pitches are purely financially driven and singularly focused on forecasts of high returns or equity upside. This has led many startups to design business models optimized for profit first while social impact becomes more of an afterthought. This is completely false. Grant funders are not profit-oriented or interested in equity. Grant funders prioritize impact. Yes, some startups are for profit. Still, grant funders funding for-profit startups are mission-aligned and impact-driven, and social returns carry meaningful weight as well.
A good example is some USAID grant opportunities. While the majority of their grants are for nonprofits, they also offer funding to for-profit startups in some cases. Irrespective of the category of the startup, USAID never considers profit or revenue but social impact. Debunking this myth serves to orient African startup founders to embed social good directly into their venture design from the outset. This is because even for-profit funders prioritize impact over profit.
Myth 6: Africa is Devoid of Startup Funding Opportunities
Finally, there is a common myth that funding opportunities are scarce or non-existent for African startups operating in Africa. In another twist, it is believed by some that African startups have no chance of securing international funding. The reality is that numerous viable local and international grant opportunities exist for African startups who invest the effort to search for them. Searching for opportunities can be a daunting task but smart startup founders now use GrantsForMe to land opportunities they uniquely qualify for. With the existence and adoption of GrantsForMe to search for grants, the notion that substantive startup funding opportunities are non-existent in Africa can finally be put to rest for good.
Africa brims with mission-driven startups ready to catalyze change, yet many lack funding to launch and scale their impact. Myths and misconceptions often deter founders from pursuing grants, their most promising funding source. By debunking these myths, we empower leaders to pitch boldly, quantify impact thoughtfully, and secure the capital required to bring solutions to life.
With clearer perspectives, Africa's changemakers can now sharpen their focus solely on crafting compelling proposals, quantifying potential, and opening doors to funding. The time for ideas without action has passed; the era of funded impact has dawned. Africa's boldest visionaries now have the keys to bring their world-changing ventures to fruition.