It takes money to make money
The situation is quite ironic. In order to make money you need to have money in the first place. Just let that sink in and marinade for a minute… That is the quandary that many would-be entrepreneurs find themselves in. For those of us who have small and big ideas often, the buck usually stops (excuse the pun) with whom you can convince to back your idea financially. And that, as they say, is where the rubber meets the road.
It becomes even more difficult, when your opportunity is situated in a different jurisdiction to the one that your would-be funder is used to. In that situation one has to come up with the wherewithal to “convince” such an individual or individuals of the merits of one’s proposals, which invariably requires a trip or two to the jurisdiction in question (usually at expense of the person needing the funding).
Investopedia defines “Seed capital” as “the initial capital used when starting a business, often coming from the founders’ personal assets, friends or family, for covering initial operating expenses and attracting venture capitalists.” (Read more: Seed Capital http://www.investopedia.com/terms/s/seedcapital.asp#ixzz4t1KIfrtL). It therefore stands to reason that the better one’s personal financial position, or the more “well-to-do” friends and family one boasts, the more likely one is to be able to get anything off the ground. Other definitions include the fact that seed capital is often used to fund “preliminary activities” such as market research and product research. (http://whatis.techtarget.com/definition/seed-capital). By deduction, by this definition, the more seed capital one has at their disposal, the more likely one is to end up with a product or service that can survive the often brutal marketplace, because one can – through research – eliminate a lot more of the risks associated with start-ups.
There is also another phenomenon that I have observed (please note that I cannot back this point up statistically, so take it with a pinch of salt): Those people who I have come across who used their “last savings” to start their business didn’t often make it in the long-run. I can postulate at least one theory as to why this might be: When starting up a business, especially in an industry that one is not 100% familiar with, there is often a need to “pivot”. By pivoting I mean shifting from one direction to another as a result of an obstacle or hindrance in one’s start-up program. More often than not, this pivot will have a cost implication which is usually not budgeted for. A slightly deeper pocket can manage several such pivots and still come out “smiling” while, if this was already your “last money”, any obstacle can become the death blow that has you scurrying back into employment. This phenomenon is akin to when a gambler starts betting IN ORDER TO recover his/her losses. This seldom ends well…
Unfortunately, all this does not ogre very well for some of us on this continent who often do not come from an environment where we can “take chances” (even calculated ones) with our family’s nest-eggs. As a result many opportunities which we shoud/could/would capitalize on in our own economies end up getting taken up by those for whom losing “a couple hundred thousand dollars” does not break the bank and can be chalked to “lessons learnt”. Because many opportunities are time-sensitive, for us it’s like being in a hundred meter dash with Hussain Bolt, but when the gun goes off, we realize that we are neck-deep in quick-sand. At Unmask Africa we want to help fix all that. Apply today.
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