Hybrid Investment Strategies

(Eric Halsey) #1

Louis-Antoine Muhire, is a Rwandan who made a new life in Canada as a Police Intelligence Officer. However, in spite of his success there, he decided to return to Rwanda to build a better remittance system, inspired by his own frustration sending money back home.

After three years of work, his company, Mergims, has now raised 4 rounds of funding and is valued at 5 million US dollars. To do that, he combined loans, grants, and investment to maximize his share of the company and his valuation. Here, he explains his strategy for doing that.

Up until now we’ve raised 130 thousand USD, in a period of almost 2 years, and we’ve given only 20% of the company. So those are the shares. In the beginning, most angel investors don’t take more than 10%, if you’re lucky they take 5%, if you’re really really lucky they take like 1%. And they tend to give like 20k. For us, it was less than 5%, which was good.

But, after that, I quickly realized some grants were available for me, where grants is the money NGOs give you so you can misspend. No, don’t do that. But it can add value in the company, move from the first floor to the second floor without taking equity.

So now once I realized there are some grants, I said I’m gonna focus on that money until I have something that can really raise more interesting money. And after that we’ve got a little bit before that the South African Investor helped us to raise a little more money with other angel investors, so we gave them some equity.

And after that we started to go to grants again, I think we’ve done three or four rounds of grants, 80 thousand, was also 20k, 20k, 20k from various organizations. Then we went to a competition, we won up to 35 thousand recently from Switzerland, after that there were some shares that had been given to other partners as a strategic shareholder where, for example, you give 5% to resellers of such services, it comes in with less complication in the long-term commitment.

So up until now, 20% is gone. Now we are raising our first seed round of 500 thousand dollars and we’re going to give 20% for that. Then 40% will be gone. Then we will need at least 3 rounds again. The next round after that, probably will be 5 million and I will give like 15%, and the last one hopefully will be a crazy one, like 100 million.

You have to follow with the traction you’re getting, and the more traction you have, the more users the more numbers you have, the more value is added in your company. But definitely don’t do the mistake of giving 50% of your company from day one. You’re dead. Already if you give 20% from day 1 you’re dead.

Because, you will need a lot of rounds, you will need 5 or 6 rounds to raise money before you start going public and now issuing another type of options that are not really direct shares from the company.

We’re open to what they call hybrid investment, this is when someone can come get equity and the other half can in loan. And then with an option that is we’re raising the other round, where we will be evaluating ourselves at 5 million, why we just give the valuation is we’re not sure of the exact amount we want to raise after this.

But we’re pretty sure, give the trend we’ve taken, we’ll be at least valuated at double of what we are valued at today. So that’s another thing people have to understand If I start saying, after this 500 we’re gonna raise 2 million, someone says “how do you know that?” But I’m sure we’ll definitely have a valuation that’s at least double.

Questioner: How are you sure?

Well, the trend, the traffic, the valuation, according to our financial projections. Once you know how much money exactly you need in working capital, because I’m taking us a little bit back, once you know how much traffic you’re gonna get, that’s the traction.