Feed the Future
This project is part of the U.S. Government's global hunger and food security initiative.

Introducing New Entrepreneurs to the Investment World

The Feed the Future East Africa Catalytic Sustainable Agribusiness Investment (CSAI) project's objective is to promote innovative and sustainable business models in Kenya and Ethiopia. The team promotes agricultural practices and activities in supply chains that increase efficiency, improve resiliency to climate change and reduce greenhouse gas emissions, all with the goal of benefiting agribusinesses and the people who work for them. CSAI supports agribusinesses in a variety of ways to achieve those goals, including working with companies to help them attract private investment. While working with businesses, CSAI has noticed several trends about entrepreneurs that are new to the investment world that make it difficult to attract investors.

Inexperience With Investment

Many of the businesses supported by CSAI have never worked with an investor or have only worked with local banks. Helping this type of entrepreneur is one of the main purposes of CSAI, but there are some important consequences in terms of what should be expected from businesses. For example, the tradeoffs between debt and equity, the requirements for collateral, and how risk is shared under different investment structures are new to many businesses. Additionally, businesses are unfamiliar with the vernacular and types of questions coming from investors.

An important lesson for CSAI, therefore, has been to start with the basics and talk entrepreneurs through different options and their consequences. Future projects may find it helpful to develop a short “investment primer” so that this information can be easily communicated. Doing mock investor interviews also helps to prepare businesses to speak with investors.

Unrealistic Expectations

There is often a mismatch between businesses’ expectations for the amount of financing they can access and investors’ risk tolerance for providing investment. Businesses seek investment volumes up to ten times their annual revenue, which is far beyond what most investors feel comfortable providing. Many have asked CSAI to identify funding for totally new business areas, or “green-field” investments, where they do not have a proven track record. One business made this request without having any staff with experience in the area to be supported by the investment. Moreover, some businesses expect that they can receive investment within a few months and are not prepared for the lengthy and time-consuming process of getting an investor’s approval.

CSAI has found it helpful to address this issue directly with entrepreneurs and to manage their expectations so that investors are not scared off with unrealistic requests. The team has worked with businesses to develop funding scenarios or phased stages of investment. A business should prioritize its investment needs and how to order them if they are not able to get the full amount in the first go.

Grant-Based Business Models

The agricultural sectors in Kenya and Ethiopia are replete with international resources to support agribusinesses. Some of these programs provide grants directly to businesses. While this is a valid strategy to boost private enterprises in the countries, it has the unintended consequence of shifting companies’ business models to serve donors rather than their customers. Many of the businesses supported by CSAI are at a transition point where they could “graduate” from grant funding to investment financing. Businesses face a difficult mental hurdle and decision point at this time: Do they continue with what they know or do they re-orient their business model and take on the associated risk? Some businesses never make this transition. One business in operation for 10 years told the CSAI team “not to call back unless they had a grant opportunity.” This reaction highlights the risk that donors providing grants to potentially bankable businesses are crowding out private capital and preventing companies from developing a track record with private investors.

Programs that fund businesses via grants may consider how their support can encourage this transition in the medium or long term. CSAI has also found it helpful to be clear upfront that the program is not working with grants so as to avoid confusion.

Poor Financial Accounting and Reporting

Many businesses have poor financial accounting practices that do not meet international investors’ standards. Revenue is frequently underreported. Independent audits have often not been completed. And businesses often do not have financial statements readily available, causing delays as an investor evaluates them.

Accounting practices were not included as a priority for CSAI, but similar future projects should consider setting aside resources for this issue. Beyond helping businesses immediately by making them more bankable, improved financial accounting practices will help businesses in planning and overall business management.

Shortage of Human Resources

The businesses supported by CSAI often have small management teams without adequate spare capacity. They are, understandably, preoccupied with managing the day to day of their businesses managing staff, identifying new suppliers, finding customers, etc. Entrepreneurs also have to spend a substantial amount of time and money to cope with the often unfriendly business policy environment, where public entities do not reliably deliver basic services, as indicated in the low ranking of the target countries in the Doing Business report. Few businesses have a person dedicated to investor management; this responsibility is typically assumed by the company’s CEO. This means that businesses can be slow in preparing documentation requested by investors or other requests.

CSAI and projects like it can help to fill this human resource gap, but much of the effort needs to be made by the company itself. It is important to understand the management team of any business and whether they have the time and skills needed to communicate with investors.

Time Required to Gain Trust

Significant time is needed to build up trust between an entrepreneur and both the CSAI project team and investors. Some requests from CSAI or investors — particularly the sharing of financially sensitive information — can take months to respond to or are even flat-out denied.

Offering non-disclosure agreements to companies has helped but not eliminated this challenge. Other programs offering investment support should seek out companies that have established relationships with the project implementation team in order to take advantage of existing trust.


Collaborating with businesses that have little experience with investors can be a challenge, but it’s an important way that CSAI and other similar projects can support the agribusiness sector. If it was easy, then the project wouldn’t have much value! Nonetheless, the difficulties of working with this type of entrepreneur need to be well understood and accounted for. By recognizing potential obstacles ahead of time, CSAI can support businesses to get the most out of working with international investors.