One of the most uphill tasks of startup businesses and even large enterprises or businesses is financing the ongoing affairs of their businesses. For startups, most of the time, there is a greater difficulty because there is crowded field of people seeking the same funds.
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- General News of Wednesday, 11 April 2018. Source: ghananewsagency.org 2018-04-11 Ghana is the best country to host AU Space Agency - Prof Frimpong Boateng.
- The drama of Ghana’s 800MHz auction which began in 2017 with only MTN the only successful bidder, paying $67.5 million for 20MHz (2x10MHz) of spectrum, carried on in 2018. The regulator’s attempts to carry out a second auction were stymied by MTN’s insistence that any bidder must match the amount that they paid for the spectrum.
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Jerry Rawlings, From Coup-Plotter to Ghanaian Statesman, Dies at 73. After leading the country with brutal crackdowns, he helped Ghana blossom into a stable democracy.
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of 'exit.' The only essential thing is growth. Everything else we associate with startups follows from growth.
More especially, this competition has grown fierce because of the current financial climate. Ghana is on the path of economic recovery, and many of financial measures and metrics are seeing some positive trends. However, financing avenues for most startups have not largely been affected. Consequently, many startups have had to look for other avenues to start and finance the activities of their businesses. Largely, and in startup lingua, we often hear people mention avenues like venture capital, angel investing and bank loans. This has been the general talk by many small and medium enterprises, but is that really what the Ghanaian market has explored or worked with over time? Most of these things are mentioned in relation to startups not because they are what defines a startup, but because they are resulting effects when your business is truly a startup. We know now that not all startups are ‘startups’.
In my view, the Ghanaian small and medium market has been characterised by a few OTHER financing avenues and consequently, these measures can be improved to generate more returns for potential investors who will often be searching for alternative investments.
Funded or not, there a couple of significant costs startups have to bare: ongoing product development, hiring, cost of goods sold and getting a physical premise. Clearly, these among other reasons give rise to the need of startup financing.
How then can the Ghanaian startup be funded? I have observed that majority of Ghanaian small and medium businesses are financed largely by family & friends, accelerators or incubators, bank loans and in recent times, crowdfunding.
Family and Friends
Popularly referred to as informal finance, it is one of the major forms of financing in developing countries like Ghana. In 2006, for example, several million small companies from 42 countries raised over $600 billion from informal investors, and some entrepreneurs relied exclusively on informal finance. As the Wall Street Journal (2012) writes, “budding entrepreneurs” often turn to the “Bank of Mom or Dad” for a “dream-come-true interest rate.”
A survey by Lee and Persson, concludes that family financing is often the last resort for many small entrepreneurs. On the contrary and in my view, the reverse is over here in Ghana. Now let me hasten to add that, financing options like self-financing are often lumped together with what family and friends will contribute. Another distinguishing factor is what side of the financing do you want them to provide. They can either take an equity stake or loan this money to the growth of your business. Also, another key benefit of financing your operations from family and friends is that the returns expected by this category is not very high. However, not all social transactions, even among friends or relatives, operate on pure altruism. There are often families who treat such transactions as pure financial institutions would and this goes a long way to motivate startups to grow,
Loans and microfinance
Once thought of as the go-to option for many, a struggling economy amid high interest rates have made these options elusive. Personally, this option most of the time tips the scale in favor of the lender. Yet, the various types of lenders can prove as economically viable for some businesses. Assuming I’m building a community based solution and the benefit is evident with the respective backing of generating profit, it will be much easier for me to obtain a loan from a community bank as against a commercial bank. To a greater extent, microfinance loans typically target small business owners and can be a push for startups.
Startup Incubators and Accelerators
A startup incubator supports new ventures during the idea stage, providing access to the infrastructure and environment required for developing a Minimum Viable Product (MVP). With no offer of funding (and no expectation of equity in return), proven performance isn't a prerequisite, with incubators collaborating with their participants for anywhere from a few months to several years.
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In contrast, startup accelerators are a fast-track towards further funding. They offer capital in exchange for equity in your company (usually up to a maximum of 10%), and for a period of several months, provide a crash-course in growth and fundraising designed to accelerate your existing growth. After 'graduation', an accelerator's alumni are expected to have honed their performance metrics and pitch, and be ready to raise a full seed round. The latest poster boy in this field is OMG Digital, which was able secure funding of USD 1.1 million dollars.
Crowdfunding
The 'traditional' crowdfunding model operated by companies like Kickstarter is known as reward crowdfunding - allowing people to pre-purchase goods and services, in exchange for select rewards. Though great for hardware startups (like the Pebble smart watch), without a physical product to sell, this type of fundraising wasn't viable for software as a service businesses, until equity crowdfunding appeared.
Equity crowdfunding allows individuals to invest small amounts of capital in exchange for a small share in equity. While many equity crowdfunding platforms allow anyone the chance to invest, others offer the opportunity to contribute to venture capita led funding options. More of a hybrid funding model. In Ghana, where there is the ascendency of hardware startups and a few software as a service business, the proliferation of traditional crowdfunding model will go a long way to help the new entrant entrepreneur test that minimum viable product. For many, there is a general consensus that crowdfunding or hybrid models like equity crowdfunding have the ability to change the world, but this remains largely to fully maximized.
In conclusion, you need your investor, just as much your investor needs you. In the book, Get Backed by Evan Baehr and Evan Loomis, there is an overwhelming emphasis on this mindset whenever these two parties; the investor and entrepreneur, sit at the proverbial fundraising table. Most of the time, when this mindset is not rooted in either minds, one scale of the balance tips towards another.
What is an open space? These two little words have very powerful meanings in human settlements. The Concise Oxford English dictionary defines open, among others, as allowing access, passage or view, not closed, fastened or restricted ; exposed to the air, or to view; not covered or protected etc. The same dictionary defines space, among others, as a continuous area or expanse, which is free or unoccupied. Thus an open space can be described as a continuous area which is not occupied that allows access, passage or view and is exposed to the air or to view. What have open spaces got to do with human settlements or villages, towns and cities? A lot.
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Health concerns when building
There are very good reasons why a developer cannot built on the entire plot of land that he or she has acquired. One of these reasons is health. Any building would have to be able to facilitate and allow the free movement of air (natural ventilation) as well as carry away any foul odour. That is one reason why somebody from the health department sits on the Technical Sub-Committee that recommends the approval of building plans in the various district, municipal and metropolitan assemblies. It is for the same reason that setbacks or specified spaces are left from the walls of buildings to the fence wall and also from the front wall to the street. Such open spaces also include courtyards in individual houses.
The house can be regarded as a microcosm or a smaller version of a human settlement. In that respect, human settlements also need spaces to literally breathe. Such spaces can be open spaces. Open spaces can, therefore, be referred to as the lungs of human settlements. They allow human settlements to function effectively and come in different shapes and sizes. Even in the most metropolitan of cities in the Western world such as New York, Frankfurt and London, large open spaces, which could be public parks with trees and landscaped areas, sometimes with water bodies, are found in abundance. Golf courses also follow in the category of open spaces. These public parks also have furniture such as benches, paved walkways and beautiful sceneries where many inhabitants spend some time away from the daily stress of life.
Where are the open spaces/parks?
Interestingly, our former colonial masters left open spaces and/or public parks in some of our human settlements and some indigenous settlements across the country also had their versions of these open spaces. What has happened to these spaces? Many of them are non-existent today. In many human settlements in Ghana, plots of land earmarked for open spaces have been sold as plots to developers by chiefs in league with officials of the Lands Commission, Town and Country Planning Department and politicians. Even plots of land originally assigned to the Parks and Gardens Department, the body responsible for seeing to the development and maintenance of these open spaces, have suffered the same fate. The story goes that after the June 4, 1979 revolution, the Kumasi Golf Club was nearly turned into a cassava farm to benefit the proletariat so that the bourgeois 'rich men' who played golf would have to find their course elsewhere. Fortunately, that did not happen and the golf course is still existing.
The city of Kumasi used to be known as the 'Garden City of West Africa', an accolade allegedly bestowed on the city by no other than the Queen of England when she visited the city. What do we see today? Road construction to service the ever growing number of vehicles has meant the felling of several trees which used to line the streets in the municipality. The so-called Children's Park at Amakom is now a den for vagrants and criminals. Fortunately, the renovated Rattray Park in Kumasi has come to fill a huge void in the city, despite some subtle opposition from some residents.
The Efua Sutherland Park in Accra is in no different shape and it looks like the place now performs better as funeral grounds on week-ends than as a place for children to spend quality time. The Monkey Hill Sanctuary next to the Paa Grant Circle in Takoradi, unfortunately, is a forest reserve that cannot be used by the public. Many more such parks as the Rattray Park in Kumasi, perhaps not on the same scale, are needed across the length and breadth of Ghana. This is because open spaces facilitate better health and afford places for relaxation, socialisation and human watching.
Sadly, many educated people do not seem to appreciate the need for open spaces in human settlements in Ghana. They, therefore, see nothing wrong with the huge concrete jungle that is being created in human settlements in Ghana. Many people have simply developed a routine of moving from their heavily barricaded houses to their work places in the mornings through heavy traffic and returning to the same way in the late evenings. Weekends are spent at so-called 'spots' or pubs with alcoholic beverages and pork, guinea fowl or chicken and that is all that life is about. Coupled with rare medical check ups, is there any wonder that many notices announcing the death of people - and these days, many young people - now scream 'What a shock?' Yes, week-end walk is better than a sedentary life without any exercise but the presence of open spaces in Ghana's human settlements will also go a long way in improving the health of Ghanaians. Can a Member of Parliament take this crusade up so that open spaces are mandatorily located in all the districts across the country?
The writer is Past Dean, Faculty of Architecture and Building Technology, KNUST
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Past Head, Department of Architecture, KNUST. E-mail This email address is being protected from spambots. You need JavaScript enabled to view it.