#1Open Capital Demystifying Investor Readiness March 2023 Open Capital SNV#2What is investor readiness? Overview Investor readiness is the capacity of an enterprise to "understand and meet the specific needs and expectations of investors," and plays a critical role in shaping whether a business receives investor funding. Key factors Business Viability Demonstrate that business is sustainable with a sound business model, unique value proposition and qualified team. Investor Material Business plans, financial models, investor teasers and memoranda should make a compelling case for investment in the business. EEP Africa offers 2 routes to investor readiness: • Business Development Support (BDS) - Services offered at various stages of business needs through skills transfer or business advice Investment Facilitation (IF) Service that seeks to connect investors and businesses looking to raise capital and preparing them for investment Open Capital#3Why is Investor Readiness important? Understanding your business better Engage better with investors Accelerate the capital Investment-ready businesses understand their capital needs and are aware of the capital available to them. Such businesses are best placed to manage external financing. An investment-ready business can raise external capital more easily as it is prepared to meet the right investor, as well as their needs and expectations. Open Capital raising process DE Businesses will have their documents and information prepared in advance, which will shorten the due diligence process and minimize other process delays. SNV#4What are investors looking for? Understanding of impact with a monitoring plan to track progress Impact Market landscape Clearly defined governance Governance mechanisms and controls Business model Defined capital requirement Investment ready business Capital outlined in an investor teaser and memorandum Team need Clearly defined target market, the competition and risks Proven and efficient processes implementation of the model Competent and motivated team with clearly defined roles in the business and partnerships to ensure Well-defined growth strategy with Growth Traction Positive trend in the financial and detailed financial projections and a business plan strategy to-date operational indicators that are regularly monitored Open Capital SNV#5What to expect from your investor Understanding investor focuses After understanding their capital needs, businesses should familiarize themselves with the investor landscape and use key factors to help the most relevant investors Open Capital Geography Sector focus $ Ticket size Capital type Key resources for finding investors include investor networks (e.g., Global Impact Investing Network), business databases (e.g., Crunchbase), investment events (e.g., Sankalp) and/ors 3rd party investment support (e.g., Open Capital) SNV#6What does the full investment process look like? Deal closing B disbursement Investor identification & engagement Investment readiness Open Capital 7 6 1 2 3 Identify the capital need Develop investor material 5 4 Continue due diligence Initial due diligence Determine capital structure Identify and contact relevant investors 8 Negotiate a term sheet Facilitate legal documents, closing 9 Execute growth plans and disbursement SNV#7What type of investment should I be seeking? (1/2) . Sweat equity/bootstrapping Business inception Company just began operations with 1st iterations of the product Typically funded by the founder, family or friends. Choose to or can't access commercial financing at this stage • . Grants Not yet commercially sustainable Commercial financing may not be suitable Several non-commercial funding sources exist (e.g., grants for TA, subsidies, etc.) Cheapest form of money but often with hidden costs "free money" isn't free - Company maturity Open Capital Self/Family/friends DFIs/Foundations/Gov't Aid SNV#8What type of investment should I be seeking? (2/2) . . Equity Early stage Key steps; post- prototype, "proof-of concept", post- revenue High risk appropriate for friends and family, angel investors, market experts • Quasi-equity Growth phase New challenges in execution; scaling quickly and successfully Medium risk sought by venture capitalists Open Capital Angel investors Debt Mature growth • Mature companies meeting all previous . Company maturity Venture capital challenges Potential for rapid growth exhausted, but is low risk Private equity & markets SNV#9Open Capital Questions? SNV