FOR an SME seeking its first US$10 000 of external capital, the biggest question may be whether there is an investor willing to look at a business that small.
The Zimbabwe Entrepreneurship Exchange (ZEEX) investor qualification criteria suggest the potential answer is yes — its Deal Room can be accessed by individual investors with a minimum demonstrable net worth of US$10 000, alongside institutions and professionally or financially qualified investors.
Importantly, meeting any one of the qualifying criteria is sufficient for Deal Room access.
For an entrepreneur, this means the potential investor pool extends beyond traditional institutional capital to include individuals who meet financial or professional qualification requirements.
Institutional investor
The first category comprises registered funds, pension funds, insurance companies or similar entities.
These investors can qualify to access ZEEX’s Deal Room and evaluate businesses seeking capital.
For an SME, this opens the possibility of presenting its growth plans to institutions that have capital available for investment, rather than relying solely on traditional bank financing.
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A business seeking funding to expand production, enter a new market or develop a new product can therefore potentially place its proposition in front of institutional investors through the ZEEX marketplace.
Minimum net worth US$10 000
This could be particularly important for SMEs considering ZEEX.
An individual investor can qualify for Deal Room access by demonstrating a minimum net worth of US$10 000.
For an SME, that provides an indication of the potential scale of the investor pool it could access per pitch.
It means the business does not necessarily have to be seeking millions of dollars to find a potential investor. A qualifying individual could potentially be the investor on the other side of a smaller SME transaction.
For example, an entrepreneur seeking US$10 000 in growth capital could potentially be presenting that opportunity to an investor who meets ZEEX's US$10 000 net-worth qualification.
This does not mean US$10 000 is the minimum investment an investor must make, or that every investor will be willing to invest that amount. It is the minimum net-worth threshold for an individual to qualify for Deal Room access.
But for smaller businesses, the distinction is important.
It means the potential investor base is not built exclusively around institutions writing million-dollar cheques.
The door can also be open to individuals with the financial capacity and appetite to consider smaller, early-stage and growth-stage opportunities.
Finance or business qualification
Investment access can also be based on knowledge.
An individual with a degree or professional qualification in finance, accounting or business can qualify for Deal Room access.
For SMEs, this means their potential investor audience can include professionals who have formal training in understanding businesses and financial information.
The qualification is therefore not solely about the size of an investor's bank balance.
It can also demonstrate that the individual has relevant knowledge for evaluating investment opportunities.
Financial literacy certification
Another route is through a recognised certification demonstrating financial literacy competence.
This provides an alternative for individuals who may not have a formal finance, accounting or business qualification but have nevertheless demonstrated financial literacy through an appropriate certification.
For an entrepreneur, the important point is that ZEEX is creating several routes through which investors can qualify to access the Deal Room.
ZEEX financial literacy course
There is also a route created specifically by ZEEX itself.
An individual can complete the ZEEX-provided financial literacy programme to qualify for Deal Room access.
This potentially brings people into the investment ecosystem who may not already meet the other qualification criteria but are willing to build their financial knowledge.
For SMEs, that means the potential investor base can develop as more people become qualified to access opportunities on the platform.
What this means for SMEs
The significance of these criteria goes beyond investor qualification.
They show the range of people and institutions that could potentially be on the other side of an entrepreneur's pitch.
A business entering the ZEEX Deal Room could potentially be viewed by institutional investors, individuals with a minimum net worth of US$10 000, finance and business professionals, financially certified individuals and people who have completed ZEEX's financial literacy programme.
But access to investors is not the same as securing investment.
Once a business enters the Deal Room, the entrepreneur still has to make the case for why the business is worth backing.
That means having credible financial information, a clear business model, a defined use for the capital and a convincing growth proposition.
ZEEX can bring the investor and the entrepreneur into the same marketplace. The business still has to give the investor a reason to put money behind it.
