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SME Volatility Upon Fuel Hikes in Southern Africa

“Fuel volatility comes at a delicate moment for African trade. As the African Continental Free Trade

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The Founder's Test: Investors Don't Back Ideas, but People When it comes to pitching for funding, most founders focus on their pitch decks, the business model and financial projections. And while all these factors are important, investors and funders are also placing emphasis on something else: the founders themselves. This is what is called ‘the Founder’s Test’. What is the Founder's Test? The ‘Founder's Test’ is an informal but important framework that funders use to assess whether a founder is worth backing financially and as a long-term business partner. For small to medium-sized enterprises (SMEs), knowing how to pass this crucial test is the foundation to securing not only capital for the business but also access to markets, long-term partnerships with an experienced network, and building a sustainable business. In this article, we look at the elements of the founder’s test, why it matters and how you can pass it. Key Elements of the Founder’s Test Here are some of the key elements of the ‘founder's test’. 1. Founder-Market Fit Most founders start businesses to solve a unique problem they have identified. Investors will want to see if you (and your team) are uniquely qualified to solve this problem. Key factors are: · Expertise: Does the team have direct, relevant industry experience, technical skills, or past entrepreneurial experience? · Personal Connection: Does the founder have an authentic, personal story related to the problem they are solving? · "Why You?": What unfair advantages (connections, insights, patents) do you have? 2. Resilience and Passion Starting a business is quite challenging. Most funders want to see that the founder can sustain the business for up to ten years. Investors want to see: · Deep Passion/Obsession: Intense curiosity and an obsessive need to solve the specific problem. · Grit: Evidence of handling intense pressure, overcoming roadblocks, and not giving up. · Long-Term Vision: A clear, ambitious vision for the future of the company. 3. Self-Awareness and Coachability Founders must have a good sense of self-awareness and understand what their limitations are. Most investors want to see teachable business owners. Key factors for investors: · Hiring Ability: The ability to attract talent better than themselves. · Handling Feedback: Being open to advice and mentorship while still owning the vision. · Self-Awareness: Knowing team weaknesses and supplementing them with co-founders or advisors. 4. Leadership and Execution Another thing investors want to see is if the founder can plan the business and lead the team to success. Key factors are: · Bias for Action: A strong drive to create momentum, make decisions quickly, and "get things done" without being told. · Selling Ability: Can you sell your story to employees, partners, and investors? · Trust in Others: The ability to delegate and trust team members, rather than doing everything themselves, to enable scaling. 5. Integrity and Cultural Fit Cultural fit and integrity are a critical framework of the test. Investors want to see: · Authenticity: Being honest and transparent in financial models and assumptions. · Confidence, Not Arrogance: A balance of passion and humility In emerging markets like South Africa – and Africa as a whole – the ‘founder’s test’ is usually seen in early-stage businesses. Early-stage investments are about the people behind the business, not just ideas. Founders who succeed are those who can adapt, scale and execute under pressure and ever-changing economic conditions. “Most entrepreneurs are very focused on working in their business and not necessarily on their business. By putting more attention on themselves and the overall direction of the company, they can increase investor confidence,” said Grindstone Ventures CEO Thandiwe Maqetuka. Common Reasons Founders Fail to Impress For all the successful funding stories we hear, there are many founders who did not make it past the first meeting. This is not because their business idea was weak, but because they (founders) could not meet the mark. Here are some reasons why failure is more common than success. 1. Founders Want to Do Everything Themselves One of the biggest traps founders fall into is the belief that they can single-handedly manage every aspect of their business. In the beginning, being independent can seem like the right thing, however, in the future it can lead to some roadblocks: · Trying to save money can cost more in the long run: Trying to do everything alone in the name of saving money can lead to a lot of missed opportunities, slow progress and in some cases costly mistakes. Instead of saving money, they end up sacrificing efficiency and revenue potential. · Constantly juggling roles and priorities: When the mental bandwidth of the founder is stretched, it slows decision-making, stalls productivity and stress snowballs into a long and frustrating cycle. This will affect the business and its potential to make profits. · Too much time goes on the wrong tasks: Answering emails, scheduling meetings, and handling admin may feel productive, but they pull focus from what really drives growth – strategy, innovation, and big-picture decisions. How to Prepare to for the 'Founder’s Test' Passing the ‘founder’s test’ is less about having all the answers, its more about being prepared, honest and strategic. Founders wanting to get past the first investor meeting, should do the following: Be Ready to Explain Founders need to be well-versed in the investor narrative. This means being able to explain why this idea, why now, and why they should back the idea. All these elements should be in the pitch deck and be part of the founder’s vocabulary. Prepare for Questions Investors will ask you hard questions that you need to answer. It’s not about answering them perfectly but rather about the details and preparedness displayed by the founder. When investors ask questions, founders should know that it’s not a bad thing. Typically, it demonstrates that there is genuine interest in the idea. Know the Numbers and the Market One of the most important aspects of pitching for funding is knowing the data that backs up the business idea and what the investor's objectives are. Knowing the market means founders can clearly outline the objectives of the business, its target audience and how it will meet its revenue goals. Additionally, knowing the objectives of the investor means founders can tailor their pitch to focus on what investors are looking for, the returns they expect and the timelines they work on. All these factors together can help any founder pass the ‘founder’s test’. Remember, it’s not only tech-enabled businesses that need to pass this test. Traditional SMEs looking for capital that also comes with access to experts and long-term partners, leading to a business that can scale sustainably.

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