The one thing that draws investors to your big idea

Setting up a business is awfully easy. It may be that you have identified a niche that remains unexploited, or an ambitious project you have always harboured and think can make you some money. It could even be a hobby you convert into an income earner.

Find an appropriate name, register it, perhaps get an office (or work from home), get a website and voila, you are in business!

And then the hard part begins. Starting a business is one thing, nurturing it to growth and maturity is another.

Sitting in Lions’ Den – KCB’s reality TV show – gave me a glimpse into the Kenyan psyche like never before in my business life. There was something that underlined every presentation: a hunger and desire for enterprise, to make some money.

But just what makes a business idea tug at the mind of an investor? The answer is in responding to a need.

Investors are always looking for a good idea, and more importantly, a great executor. But it is critical that the idea you’re selling provides an answer to a problem.

A great thinker of our time, Myles Munroe, himself a successful entrepreneur, said any time you see a problem in society, it points you towards a business idea. Businesses solve problems. Period.

The capacity

An investor is looking for both an idea and the capacity to execute it. After agreeing to a deal on Lions’ Den, we later sought face-to-face interviews with entrepreneurs for clarity and to determine their capability to execute the ideas presented.

It is crucial to develop a certain level of emotional intelligence. Are you prepared to hear ‘No’ without allowing it to kill your dream? Are you capable of following through on the validity of an idea or what will make it better? Are you open to trying it out a different way?

A requisite element of any business is business valuation, especially when courting an investor. I must admit this is an area in urgent need of skilling. Many people value their business from an emotional perspective – they love their business ideas so much that they attach an imaginary value to it. But in essence, the impact of the business in society determines its value.

Think about it this way: If you close your business, how many people will realise you are no longer in operation? How many people will be affected?

In reality, there is no standard way of valuing a start-up, but financially, multiples of the firm’s revenue and profitability can help arrive at a figure. Although this may not be easy for start-ups without a track record, with some groundwork and proof of concept, it’s possible to see where the business is going.

So you have the idea, what next?

Secure intellectual property rights to safeguard your future. The Kenya Intellectual Property Institute (KIPI) can help determine if an idea is patentable. A lawyer would also be of great help, in addition to some basic online research.

You might have a business that looks good today but with little or no lifeline in the future. Look at potential opportunities, low barriers of entry and competition. The faster you get to market, the higher your chances of getting a share of the enterprise pie.

The writer is the managing director, enterprise division, Telkom Kenya.