Alexandria Procter was one of our speakers at the Student Startup event in Cape Town, a few weeks ago. In case you missed it, you can watch Alexandria’s talk here.
Procter is the CEO of student accommodation marketplace DigsConnect that recently raised R12-million in a groundbreaking seed round for a student startup. I spoke to Alexandria about this remarkable feat, what happened and how she did it.
Alexandria, how would you explain the concept of a seed round funding to someone who has never heard about it before?
Companies generally raise funding in several rounds. Usually your first round is a seed round, followed by series A, series B, series C, then hopefully IPO is you go public. Nowadays it can be broken down further into pre-seed, series A1, series D, angel round etc, but those aren't really applicable to South Africa yet.
Funding can go towards setting up the company, making key hires, building a product, scaling, securing new markets - it depends on the round and the nature of your startup. Due to our political and economic landscape, South African investors are quite cautious and rather risk adverse, which makes venture capital extra tricky here. It's a relatively small market so once word gets out about your startup, everyone will know about you. Your reputation is everything, so it's important to be authentic, reliable, honest, hard-working and diligent.
What pearls of wisdom can you give entrepreneurs who are looking to go into this kind of fundraising?
I'd say a huge part of fundraising is about the entrepreneurs themselves. There's a million great ideas out there, but without the right people with the right attitude, the ideas will flop. It's almost impossible to do it alone, especially if it's your first rodeo. Be honest about what your weaknesses are, and look for partners that can make up for your shortfalls. This will make a strong team that will attract high caliber investors. Above all you need to look for resilience in individuals. You're going to be in a vice-like grip of pressure constantly, and you need to be surrounded by people that can handle that pressure well and not throw in the towel because they have a tummy ache.
How can entrepreneurs stay mentally prepared for a process such as this?
It's important not to let the investment change your attitude. Stay in a scrappy financial mindset. Don't splurge on silly things. When word gets out about a fundraise, especially for a startup with young founders, suddenly everyone wants to sell you things, be your friend, promise you the moon. Scrutinize every invoice fervently and don't be taken for a ride. Every rand is precious, and every time you waste that money it takes you a little further away from accomplishing your company goals. This is also important when it comes to hiring. As the saying goes, "hire slow!". Your company culture is key, and in the early days each person you bring on board will have a massive effect on the team morale and competency.
How do you know if your investors are “the one”?
We got really lucky with our investors. They're incredible. Finding the right investor is very similar to dating. You go to a few pitches, which are like first dates. You size each other up, talk about your plans for the future and see if there's common ground. But ultimately what makes the decision is if it just feels right. If you feel the chemistry. Before we met the guys that would become our investors, we had a couple pitches that slowly moved forward with a lot of legalities thrown in. When we met our investors, both of us knew immediately it was the right match, and we had a term sheet on the table within a couple days. Both of us were 110% in. That's how it should be.
Now watch CEO Fred Roed’s interview with Alexandria below: