From Grant to Investment Readiness | ARK Group International

In short

A grant leads to investment when it is used to remove a risk that worries investors, and to build the evidence, systems and track record they check. Plan this before the grant starts: name the risk, agree what the grant will prove, keep clean records while it runs, and approach investors with the results well before the money runs out.

Winning a grant can feel like the finish line. For a growing business it is closer to the start. The grant pays for a stage of work, and what that work proves decides whether investors follow.

This guide is for founders and leaders of growing businesses, social enterprises and charities in Africa that hold a grant, or expect to, and want it to lead to investment rather than to the next grant. It explains what investment readiness means, how to plan and run a grant with investors in mind, what investors check, and how to tell when you are ready to approach them.

Key takeaways

Investors back evidence rather than promise. A grant is most valuable when it pays to prove something an investor would otherwise doubt.
The work a grant demands, from costed budgets and reporting to due diligence, is the same work investors ask for later.
A grant can open the door to more funding. Start-ups given £5.5 million in grants by the GSMA Innovation Fund between 2021 and 2024 went on to attract £35.8 million in follow-on funding.
It takes time. Freetown Waste Transformers was in talks with its investor for 12 months before a US$3.9 million investment was agreed.

What does it mean to be investment-ready?

A business is investment-ready when it has the track record, numbers, governance and documents an investor needs to reach a decision. That is not the same as being a good business. Strong businesses are turned down every day because an investor cannot check what they say, or because putting their paperwork right would take longer than the investor is willing to wait.

Readiness has four parts:

Track record. Proof that the business works: customers who pay, results that repeat, and a team that has delivered what it promised.
Numbers. Accounts that are up to date and reliable, and forecasts whose assumptions are written down.
Governance. Clear ownership, sound decision-making and the controls that show money is managed properly.
Documents. Everything an investor will ask to see, organised so that it can be found quickly.

Readiness also depends on who is investing. A lender wants to know that the business can repay from its cash flow. An equity investor wants to see how the business will grow and how the investment will eventually be returned. An impact investor wants a return and evidence of the difference the business makes. Being ready means being ready for the kind of investor you plan to approach.

Why a grant is a good bridge to investment

Investors weigh risk against return, and many businesses with real impact fall on the wrong side of that calculation because something important is unproven: the technology, the demand, the supply chain or the team’s ability to deliver at scale. A grant can pay to prove it. Because a grant does not have to be repaid, the business can test and learn without the pressure of repayments or new shareholders. This is the logic of blended finance: grants and other low-cost money take the first risk, so that private investment can follow.

The evidence supports it. The GSMA Innovation Fund gave £5.5 million in grants to 33 start-ups between 2021 and 2024 (opens in a new tab), and by August 2024 those businesses had attracted £35.8 million in follow-on funding, about six and a half times the grants. The GSMA treats follow-on funding as a key sign of investor confidence in a business model. Nine of the ten businesses that raised the most had also won grants from other funders.

A grant can also become a trap. A business that moves from one grant to the next without building income or attracting investment has not reduced its risk; it has postponed it. Freetown Waste Transformers, a waste-to-energy company in Sierra Leone that ARK advised, avoided this by planning, for every grant it applied for, how delivering it would lead to stronger trading income after the grant ended. The case study ARK co-wrote with ODI Global (opens in a new tab) describes the team as conscious of avoiding grant dependency.

PlanName the risk investors see, and what the grant will prove.If it fails hereThe grant is spent but proves nothing investors need
DeliverRun the grant, measure the results and keep clean records.If it fails hereResults that cannot be checked
PrepareGet accounts, governance and documents ready for scrutiny.If it fails hereStalls at due diligence
InvestedInvestors commit on the strength of what the grant proved.

How a grant leads to investment

Plan the route to investment before the grant starts

The most important decisions are made before the first payment arrives. Work through these steps while you are choosing grants and writing applications, not after the money is spent.

Name the risk. Ask what would stop an investor from saying yes today. Unproven demand, untested technology, an unreliable supply chain and thin financial records are the most common answers.
Agree what the grant will prove. Turn the risk into a result you can measure by the end of the grant: a number of paying customers, a cost per unit, a level of output or a signed contract.
Choose grants that fit the business. A grant that pulls the business away from its plan costs more than it brings. Why grant applications get rejected explains how funders choose, and why fit matters most.
Set out what comes after. Write down how the results will lead to more revenue, lower costs or investment, and roughly when. This is your defence against grant dependency, and investors will ask for it.
Budget for readiness. Some funders will pay for accounting systems, training or advice alongside the main project. Ask, and include the cost in the grant budget where it is allowed.

Freetown Waste Transformers shows how this works. Its biodigesters turn organic waste into electricity and fertiliser, but they depend on a steady supply of sorted waste. Before applying to the GSMA Innovation Fund, the company worked with ARK to judge whether the grant fitted its business. The grant paid for DortiBox, an app that lets homes and businesses book waste collections and shows collectors where to go. According to the ODI Global case study (opens in a new tab), the app dealt with a major risk in the business model and made the business more attractive to investors in the long term.

Run the grant as if an investor is watching

Delivering a grant well matters to the funder. Delivering it in a way that builds evidence matters to every funder and investor who comes after. Five habits make the difference.

Keep the accounts current. Record grant money separately, reconcile it every month, and prepare monthly management accounts as well as annual accounts. Accounts that are months behind are one of the quickest ways to lose an investor’s confidence.
Measure what investors care about. Track the funder’s indicators, and also revenue, customer numbers, repeat purchases, cost per unit and margins. These are the figures an investor will ask for first.
Report honestly and on time. A funder’s report records what you did and what happened. Delays and setbacks explained clearly build more trust than results that cannot be checked.
Strengthen governance as you grow. Put ownership in writing, form a board or advisory board, keep minutes of decisions and adopt the policies funders ask for. Each of these will be checked again before anyone invests.
Use the funder’s network. Some funders introduce grantees to investors, partners and each other. The GSMA presented Freetown Waste Transformers to investors (opens in a new tab) and connected it with other businesses it had funded.

A grant report written for a funder is the first draft of the evidence an investor will ask for.

Grant due diligence is good practice for investment due diligence. Freetown Waste Transformers had been through a significant number of due diligence checks in its grant applications, and the ODI Global case study (opens in a new tab) records that this helped prepare it for the checks made by Climate Fund Managers, the impact investor that later agreed a US$3.9 million investment.

What do investors check before they invest?

Before investing, an investor carries out due diligence: a structured check of the business, its people and its risks. When Climate Fund Managers assessed Freetown Waste Transformers, its checks covered the team, business model, technology, governance and macroeconomic environment (opens in a new tab), and its team made several visits to Sierra Leone to see the work in action. Most investors work through a similar list.

What investors check, and what to have ready
Area	What investors want to know	What to have ready
Team	Can these people deliver, and who makes the decisions?	Roles and experience, an organisation chart, the hires you plan to make
Business model	Do customers pay, and does each sale make money?	Sales records, prices, cost per unit and margins
Financial records	Are the numbers reliable, and what are the forecasts based on?	Management and annual accounts, and a financial model with its assumptions written down
Operations and technology	Does it work, and will it keep working at a larger scale?	Pilot results, performance data, key suppliers and contracts
Governance and legal	Is the company properly run and legally sound?	Registration documents, a record of who owns what, board minutes, policies and licences
Impact	What difference does the business make, and how is it measured?	Impact data, and how it is collected
Wider risks	What could go wrong outside the business?	Your view of market, currency, regulatory and political risks, and how you will manage each

Investors also judge the founders. In interviews the GSMA carried out with 15 investors (opens in a new tab), they said they look for founders who show resilience, determination and a willingness to learn, and who build a capable team rather than trying to do everything themselves. They put healthy unit economics ahead of rapid growth. They advised founders to research each investor’s recent investments before approaching them, and to keep a pitch to 10 to 12 slides covering the problem, the solution, the market and the team.

Which investors suit a business after its first grant?

Most growing African businesses need modest amounts by investment standards. Small and growing businesses are commonly defined as firms with between 5 and 250 employees seeking roughly US$20,000 to US$2 million (opens in a new tab), the gap known as the missing middle. Different investors serve different parts of it.

Kinds of investor for growing African businesses
Investor	What they usually provide	What they look for
Angel investors and syndicates	Equity or convertible loans, often at an early stage	Committed founders, early traction and room to grow
Impact investors and funds	Equity, loans or finance repaid from revenue	A financial return alongside measured social or environmental impact
Impact lenders and banks	Loans for working capital, equipment or growth	Reliable cash flow to repay, and security or a guarantee
Development finance institutions	Larger investments, often through funds and local lenders	Scale, strong governance and international standards
Diaspora investors	Equity or loans, often through networks or platforms	A return, a visible impact and a connection to home

The kind of money matters as much as the amount. Among the ten GSMA-funded businesses that raised the most, equity made up almost half of what they raised (opens in a new tab), and a mix of grants, debt and equity a further 11%. Debt lets founders keep control of the business, but lenders often limit what it can pay for: they may lend to grow one part of the business, but not for marketing or salaries. A business with steady revenue may be better served by a loan than by selling shares.

Diaspora investors are another source. ARK’s research in Ghana found them more patient about returns than other foreign investors, and keen to see the difference their money makes. How UK-based diaspora investors can back growing businesses in Africa explains the routes they use.

An investment readiness checklist

Before you approach investors, check that you can say yes to each of these. Where you cannot, the gaps are your plan for the next few months.

Accounts. Monthly management accounts are up to date, and annual accounts are prepared, and independently reviewed or audited where you can afford it.
Financial model. Forecasts show revenue, costs and cash for the next three years, with every assumption written down.
Evidence of demand. Sales records, contracts, repeat customers or signed orders show that people pay.
Unit economics. You can explain what each sale costs and earns, and how that improves as you grow.
Ownership. A table shows who owns what, shareholder agreements are signed, and the company owns its brand, technology and other assets.
Governance. A board or advisory board meets, decisions are minuted and the key policies are in place.
Compliance. Registrations, licences and tax filings are up to date.
Impact data. Results are measured the same way every time, and can be checked.
Risks. The main risks are written down, each with what you are doing about it.
A clear ask. You know how much you need, what kind of money, what it will pay for and what it will achieve.
Documents in one place. Everything above sits in an organised folder, often called a data room, that you can share quickly.

How long does it take to go from grant to investment?

Longer than most founders expect. Freetown Waste Transformers waited almost four months for the decision on its GSMA grant, which involved a full proposal, due diligence and interviews. Its conversations with Climate Fund Managers then ran for 12 months, with ARK advising, before a US$3.9 million development investment was agreed in 2022. If that first phase succeeds, a further US$20.3 million could follow to scale up.

Three things follow. Start talking to investors while the grant is still running, so that the results arrive as the relationship matures. Plan your cash flow so the business does not depend on an investment closing by a particular date. And look after relationships for the long term: the GSMA found (opens in a new tab) that a first investment can lead to further investments from the same investors.

Mistakes that keep grant-funded businesses from raising investment

Chasing grants for their own sake. Funding that does not fit the plan uses up the team’s time and proves nothing an investor needs.
Treating reporting as paperwork. The grant report is evidence. Written carelessly, it becomes evidence against you.
Letting the accounts slip. Catching up on a year of bookkeeping during due diligence slows everything down and raises doubts.
Measuring only what the funder asked for. Investors want commercial figures too, and they are hard to rebuild after the event.
Waiting until the money runs out. A business that needs investment urgently negotiates from weakness.
Approaching the wrong investors. An investor whose focus, size or sector does not match will not invest, however good the business.

How ARK helps businesses become investment-ready

ARK Group International works with growing businesses in the gap between grants and investment. In Built to Scale, ARK’s accelerator, founders define their ideal investor profile, shape an investment offer that addresses the risks investors worry about, and bring their work together into a funding and growth roadmap built on blended finance principles. An eight-week sprint is followed by a 12-week implementation period, so the plan is put into practice rather than left on paper.

ARK also advises businesses as they raise investment. Freetown Waste Transformers is one example: ARK helped the company judge which grant fitted its business, then advised it through the 12 months of talks that led to its investment.

Frequently asked questions

How can a grant help a business attract investment?

By paying to prove something investors would otherwise doubt, such as demand, technology or a reliable supply chain, and by building the records, systems and track record investors check. A grant that leaves the business with evidence and stronger income makes the next investor’s decision easier.

Should a growing business seek a grant or investment first?

It depends on what is stopping investors today. If an important part of the business is unproven, a grant can pay to prove it without giving away ownership. If the business already has steady revenue and a clear use for the money, investment or a loan may be the better next step.

What documents do investors ask for during due diligence?

Usually up-to-date management and annual accounts, a financial model with its assumptions, registration documents, a record of who owns the company, shareholder agreements, board minutes, key contracts and policies, licences, tax records and impact data. Keeping them together in one organised folder speeds the process up.

How long does it take to raise investment after a grant?

Often a year or more. Freetown Waste Transformers was in talks with its investor for 12 months, including due diligence and several site visits, before a US$3.9 million investment was agreed. Start conversations while the grant is still running.

Can relying on grants put investors off?

It can. Investors are reassured by grants that proved something and led to stronger income, and wary of a business that moves from one grant to the next without a route to revenue. Show what each grant achieved and what it led to.

What is a data room?

A data room is an organised folder, usually online, holding the documents an investor needs for due diligence: accounts, the financial model, legal and ownership records, contracts, policies and impact data. Preparing one before approaching investors shows that the business is well run.

From grant to investment: how African businesses use grant funding to become investment-ready