The Uncomfortable Truth

The Uncomfortable Truth: Many Sierra Leonean Startups Are Not Yet Ready for Angel Investment, Let Alone Venture Capital

Sierra Leone’s startup ecosystem has made visible progress over the past decade. We have more entrepreneurs, more innovation events, more youth-led ventures, more technology-enabled businesses and growing interest from development partners, corporations, banks, angel investors and regional venture capital funds.

This progress should be recognised and celebrated.

But we must also confront an uncomfortable truth: many of our startups are not yet ready for angel investment, let alone venture capital.

The problem is not a lack of ambition. Sierra Leonean founders are imaginative, resilient and willing to build businesses in a difficult operating environment. The problem is that enthusiasm is too often mistaken for investment readiness.

A good idea is not automatically an investable business. A promising founder is not automatically an investment-ready entrepreneur. Winning a pitch competition, receiving a grant or completing an accelerator does not necessarily mean that a venture is ready to accept private capital.

The readiness gap

When investors assess a startup, they are not simply asking whether the idea sounds interesting. They want credible answers to fundamental questions:

• What specific problem are you solving?
• Who experiences this problem?
• How frequent, urgent and costly is it?
• What evidence proves that the problem exists?
• Who is willing and able to pay for the solution?
• What is the business model?
• What traction has been achieved?
• What are the unit economics?
• How much funding is required, and why?
• What measurable milestone will the investor’s capital unlock?
• Why is this particular team positioned to win?
• How can the business grow beyond its current customers and location?

Too many founders still struggle to answer these questions with clarity and evidence.

Their responses are often based on assumptions, aspirations and broad statements about the size of the opportunity. The pitch may be energetic and visually impressive, but the underlying investment case remains weak.

The recent READY Salone Investor Day, organised by the International Trade Centre through the READY Salone initiative, brought representatives from Launch Africa Ventures, Seedstars Africa Ventures and Ventureport to Freetown. Supported by KOICA and organised in collaboration with the Ministry of Communication and Technology, the engagement connected selected Sierra Leonean startups with experienced regional and international investors.

The event demonstrated both the opportunity and the challenge before us. Sierra Leone can attract serious investor attention, but attracting investors to the country is not the same as producing businesses in which they are prepared to invest.

To convert this growing interest into actual capital, our ecosystem must consistently produce ventures that are better diagnosed, better governed, better documented and better prepared.

Here is another uncomfortable point: it should not be the primary responsibility of government to make individual startups investment-ready.

Government has an essential role to play. It must create an enabling regulatory environment, invest in infrastructure and skills, improve access to information, support appropriate incentives and convene the institutions needed for the ecosystem to function. Government can catalyse the market, but it cannot substitute for it.

Investment-ready ventures must ultimately be built by disciplined founders, supported by capable entrepreneurship support organisations, professional advisers and experienced mentors, and tested by customers and investors. Investors themselves must also become more engaged in communicating their requirements and helping to develop a credible pipeline.

This is not an argument for government to withdraw from the startup ecosystem. It is an argument for clarity of roles. Government should be an enabler and catalyst, not the principal venture builder. If we expect ministries or publicly funded programmes to manufacture investment-ready businesses, we risk creating ventures that are good at meeting programme requirements but remain untested by customers, markets and private capital.

Governance begins before investment

One of my greatest concerns is governance.

Governance is sometimes treated as something a startup needs only after it grows, appoints a board or receives institutional funding. This is a mistake. Governance begins with how a founder records information, handles company money, reports performance and communicates with investors and partners.

I have sat in meetings where founders were less than honest about their revenues, customers or traction. In some cases, anticipated contracts were presented as confirmed sales. Expressions of interest were described as customers. Cumulative revenue was presented in a way that suggested current monthly performance. Numbers changed when founders were asked follow-up questions.

There is an important difference between founder optimism and misrepresentation.

Investors understand that early-stage businesses operate with uncertainty. They do not expect every experiment to succeed or every forecast to be achieved. What they do expect is honesty. A founder who says, “We tested the product with 50 people, ten paid and four returned,” is more credible than one who claims to have thousands of customers but cannot produce transaction records.

Weak financial records can be corrected. A poor presentation can be improved. A business model can be refined. But once an investor loses confidence in a founder’s integrity, the investment conversation is usually over- you are toast!.

We must therefore teach founders that governance is not bureaucracy. It is a form of investability. Accurate accounts, proper company records, clear ownership arrangements, basic internal controls and truthful reporting are signals that capital can be entrusted to the business.

Poor market understanding

A second concern is the limited understanding of markets.

Many founders describe their market using the total population of Sierra Leone, the number of mobile-phone users in Africa or the total value of a large global industry. These figures may describe a broad opportunity, but they do not show the market the startup can realistically reach.

Founders must be able to distinguish between:

• The total market that could theoretically use the product;
• The segment that the business is actually equipped to serve; and
• The share of that segment it can realistically capture within a defined period.

In investment terminology, these are commonly expressed as the Total Addressable Market, Serviceable Available Market and Serviceable Obtainable Market, TAM, SAM and SOM.

The greatest weakness is often in the SAM and SOM.

A founder may claim that every farmer in Sierra Leone is a potential customer. But can the business reach farmers in every district? Does it have distribution partners? Are the farmers willing to pay? Do they have access to mobile money? Does the product address the needs of rice farmers, cassava farmers, vegetable growers or all three? What proportion of those farmers can the company serve with its present team, technology and capital?

A credible market estimate must be built from the ground up. It should connect target customers, geography, price, purchasing behaviour, sales channels and the venture’s actual operating capacity.

Investors do not fund a large population. They fund a credible route to a defined and reachable market.

The path to scale is unclear

My third concern is scalability.

Many businesses can sell a product or service to a small group of customers. That is useful evidence, but it is not yet proof of a scalable venture.

Venture capital, in particular, is designed for businesses that have the potential to grow rapidly and generate returns large enough to compensate investors for the high risk of early-stage investing. This requires more than the possibility of opening another office, hiring more staff or entering another district.

A founder must explain what becomes repeatable as the business grows.

Can customers be acquired through a reliable channel? Can the product be delivered without costs rising at the same rate as revenue? Can the model expand to another city or country? Is the technology genuinely enabling scale, or is the company simply performing a labour-intensive service behind a digital interface? Are the supply chain, margins and management systems strong enough to support growth?

If every new customer requires significant manual intervention from the founder, the business may grow, but it may not scale.

This does not mean that every Sierra Leonean business should pursue venture capital. Many excellent enterprises are better suited to grants, concessional finance, bank lending, revenue-based finance, patient capital or traditional equity. A profitable local business is not inferior to a venture-backed startup. It simply has a different capital requirement and growth pathway.

The mistake is to present every new enterprise as a VC opportunity.

Angel-ready is not the same as VC-ready

We also need to distinguish between angel readiness and VC readiness.

An angel investor may invest relatively early, sometimes on the strength of a compelling problem, an exceptional team, early customer validation and a believable route to market. The angel may accept significant uncertainty and contribute experience, relationships and patient guidance.

A venture capital fund usually requires stronger evidence: meaningful traction, disciplined governance, a sufficiently large market, scalable economics, a credible growth engine and the potential for an eventual exit.

If a startup cannot maintain reliable financial records, identify its reachable market or demonstrate that real customers will pay, it is not ready for either form of investment. If it has achieved early sales but cannot show how the model can expand efficiently, it may be ready for certain angels but not for VC.

We do founders no favour when we push them prematurely towards investors. An unsuccessful fundraising process consumes time, damages credibility and distracts the founder from the work required to build the business.

We need stronger preparation, not more pitch events

Sierra Leone does not merely need more startups appearing before investors. We need more startups becoming investable.

That requires an ecosystem that places greater emphasis on:

• Problem diagnosis and customer evidence;
• Market segmentation and realistic SAM and SOM calculations;
• Financial records and unit economics;
• Corporate governance and founder integrity;
• Business-model testing;
• Repeatable customer-acquisition channels;
• Scalability and regional expansion pathways;
• Appropriate capital selection;
• Data rooms and investment documentation; and
• Clear use-of-funds plans linked to measurable milestones.

Pitching should come at the end of this process, not at the beginning.

A polished pitch deck cannot compensate for a weak business. Investor readiness must be treated as a structured development pathway rather than a two-day workshop on presentation skills.

At Innovation SL, we have therefore placed increasing emphasis on problem definition and evidence-led venture development. This readiness gap is also why I developed and published the YAGBA Problem Definition Framework.

YAGBA begins with a simple conviction: founders should not rush to build solutions, seek investment or perfect their pitches before establishing that they are addressing a problem worth solving. They must first demonstrate that the problem is real, sufficiently painful, poorly addressed by existing alternatives, commercially relevant and aligned with their own capacity to solve it.

Through its five dimensions-Your Context, Actual Pain, Gap and Gravity, Business Relevance, and Alignment-YAGBA helps founders replace assumptions with evidence. It is not another pitching tool. It is a discipline for determining whether the foundation of the proposed business is strong enough to justify building a solution and eventually seeking investment.

Capital should accelerate something that has been understood and tested. It should not be used to discover whether the basic assumptions behind the business are true.

These concerns are not new. Since 2018, I have been publishing and delivering presentations on Problem–Solution Fit (PSF), Product–Market Fit (PMF), Minimum Viable Product (MVP), Total Addressable Market (TAM), Serviceable Available Market (SAM), Serviceable Obtainable Market (SOM), and many other elements of startup and investment readiness.

Throughout this work, my message has remained consistent: investment readiness begins long before a founder enters a pitch room. It begins with understanding the problem, validating the market, establishing sound governance and building a business that can grow.

For more insights and resources on entrepreneurship and Sierra Leone’s startup ecosystem, visit www.startupsl.com.

Achallenge to the ecosystem

The responsibility does not rest with founders alone.

Entrepreneurship support organisations must resist the temptation to declare startups “investment-ready” simply because they have completed a programme. Development partners should measure more than the number of people trained and businesses pitched. Investors should communicate their criteria clearly. Banks and alternative finance providers should develop products suited to ventures that can grow but are not appropriate for VC.

Founders, meanwhile, must become more comfortable with evidence, discipline and difficult questions. They must recognise that an investor who challenges their numbers is not necessarily rejecting their vision. The investor is testing whether the vision has been translated into a credible business.

Sierra Leone has entrepreneurial talent. It has important problems waiting to be solved, underserved markets and opportunities for innovation across agriculture, finance, Climate change & Mitigation, energy, education, health, logistics and the digital economy.

What it does not yet have in sufficient numbers is a reliable pipeline of well-governed, evidence-led and scalable ventures.

That can change.

But it will require us to stop confusing startup activity with startup readiness, pitch confidence with commercial evidence and investor interest with investability.

The next stage of Sierra Leone’s startup ecosystem will not be defined by how many startups we produce. It will be defined by how many trustworthy, commercially disciplined and scalable businesses we build.

Only then will angel and venture capital become more than an occasional visitor to Sierra Leone. It will become a credible partner in the country’s economic transformation.