Funding start-ups: a growth model
Genny Ghanimeh is a good person to talk to about funding start-ups. Two years ago she founded Pi Slice, an online crowdfunding platform that allows individuals and corporations to lend to MENA-based microfinance institutions.
This is social entrepreneurship at its best, seeing as there is a business imperative for the service. At least 26 percent of the region’s 370 million inhabitants live on less than $2 per day, making three million households eligible for a micro-loan but with no access to funding. Pi Slice facilitates the process of bringing these people into the system and allowing their talents to flourish. This makes good economic sense because it is not a charity or hand out — investments take the form of loans, starting from as little as $20.
For that you get to witness a business grow and develop and get your money back, while Pi Slice gets a service fee from the micro-financing institutions it has partnered with on money it has helped raise. Ultimately, everyone benefits from the capital flow from individuals and corporations that is directed towards promising start-ups.
Ghanimeh is not new to the world of finance. She studied engineering, has an MBA in finance and has also worked in investment banking. The idea for Pi Slice came after a trip to Tanzania, where she was told of someone who put their daughter into a private school for just $200. She then familiarised herself with the British peer-to-peer lending model, saw how it could be applied in the MENA region and now operates in Lebanon, Jordan and Palestine.
“Entrepreneurs are hardwired to believe that money is the only thing that matters, when it isn’t”
As with other entrepreneurs, Ghanimeh thinks peer-to-peer lending has a big future; not just as a source of revenue raising but as a vital test for the validity of a new product, idea or service.
“If you can’t raise money through crowdfunding then what interest is there from the market in general?” she says bluntly.
She also points to the extremely low default rates attributed to micro financing, which she thinks is because loans are drip fed to businesses, along with support and advice. Banks, she says, will provide a lump sum and some distant repayment date, which she thinks is a system that can set new businesses up for failure.
But that doesn’t mean crowdfunding should be the sole source of revenue for start-ups. Ghanimeh’s advice is to look for a range of backers and the different add-on benefits that each brings. She recommends starting with family and friends “who believe in you and what you are doing but never interfere with your business”. That’s not to say that accountability or hands-on input isn’t necessary. Outside experience is vital and therefore so are venture capitalists. “They provide constructive criticism and help you improve your weaknesses so you can target your product better,” she says.
Ghanimeh also argues that the process of meeting and presenting to venture capitalists is beneficial in itself. “There are many VCs in the marketplace, good ones too.” This is where old-fashioned networking also helps, attending events and conferences. In summary, new revenue models are useful, but so are the more traditional methods of making yourself known in the marketplace.
The mutually beneficial model of Pi Slice made Ghanimeh’s business a natural fit for The Venture competition (see box below). “I never really understood why social work and making money couldn’t coexist,” she says. Mindful of the network opportunities and the chance to learn about other social entrepreneurship models, she signed up. The prize money was the least of her priorities, and that brings us to her final piece of advice for start-ups who need funding. While many of us have a great idea that we think would work if only we had the money, Ghanimeh says this misses the point. “Entrepreneurs are hardwired to believe that money is the only thing that matters, when it isn’t. The most important things are the team you work with, the learning period, listening to clients and adopting sustainable models. When you have all this in place, then funding becomes self-evident. Money comes when you have a great idea.”
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