02.10.2009 14:55:27

Investors Network Team

When looking for funding, entrepreneurs may often become confused with the various funding sources available. With the term Venture Capital becoming an everyday term for business finance in some circles its important to distinguish between venture capitalist, business angels and other types of business finance providers.

A venture capitalist(VC) is a person who provides equity financing to companies with high growth potential. The money that a venture capitalist invests in a company is called venture capital. Venture capital firms are often limited partnerships that comprise a few venture capitalists. Each venture capital firm manages a venture fund, which is often comprised of a large pool of money--anywhere from R25 million to R1 billion--that the firm invests in growth companies. A venture capital fund consisting of third-party investments can finance enterprises that are too risky for debt financing. Each VC firm invests in several companies and this group of companies is called the firm’s portfolio companies or portfolio.

Most VC firms have different kinds of executives: general partners, limited partners, venture partners and entrepreneurs-in-residence apart from associates and office staff. General partners are the primary investment professionals in a firm. General partners collaboratively manage the firm’s venture fund. Limited partners are the individuals who invest in the venture fund. Venture partners bring in deals and receive income on deals they mark. General partners on the other hand receive income on all deals.

Venture Capitalists | VC | venture capital | Venture Capital in South Africa | SA Venture Capital

03.09.2009 11:08:32

Investors Network Team

For many entrepreneurs, the availability of business finance plays an important role when coming up with new business ideas. Is your idea fundable? Will you be able to find a venture capital firm, business angel, bank or financing institution to support the business plan financially. This may not be the very first thing you think of, yet in the end it may be one of the telling factors when choosing to move forward with a specific business venture.

Before looking for business finance, you may want to consider the following. Using the latest in business plan software will help you to do manage a number of these processes automatically:

Do you need more capital or can you manage existing cash flow more effectively? 
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for  money under pressure. 

How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives. 
In what state of development is the business? Needs are most critical during transitional stages. 
For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs. 
What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.

Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods. 
How strong is your management team? Management is the most important element assessed by money sources. 
Perhaps most importantly, how does your need for financing mesh with your business plan? If you don't have a business plan, make writing one your first priority. All capital sources will want to see your business plan for the start-up and growth of your business.

Not All Money Is the Same

angel investors | venture capital | business finance

04.08.2009 11:11:40

botes

Venture Capital firms still looking to investment opportunities said Julia Fourie, CEO of Mark Shuttleworth’s venture capital company Here Be Dragons (HBD), based in Cape Town. In a conversation with Cape Business News where the differences with Venture Capital market in the US were discussed Julia said “The biggest similarity is in that the actual performance of the underlying companies is not as good as anticipated as a result of the tough economy. This is likely to result in longer holding periods before selling the companies, in order to deliver the returns required.”

“Where South Africa differs from the US is in that we have a less stable venture capital market, so the number of venture capital players is not expected to diminish in the next year. There are many new entrants that have mostly unused funds that they are still looking to invest.”

“Coupled with this, the crisis in the economy is not as severe in SA. Our banking industry has protected us to some extent and government has also stimulated the economy with new construction projects,” she says.

“The nature of venture capital is to invest in early-stage, rapidly-growing businesses – assisting them to grow and become more profitable – with a view to selling the investment to another partner within a three to five year period,” says Fourie.

In further positive news, she made it clear that Venture firms are very much still looking to invest in the business opportunities with strong business plans and potential locally. She commented that “Locally, we expect to see venture capital companies continuing to invest in the year ahead, as funds are available and the slow economy presents a window of opportunity to acquire companies at good value.”

HBD is looking to make at least one more investment of between R10 million and R25 million in local, early-stage businesses this year. The focus will be companies with innovative ideas with the potential to expand internationally.

“If we can partner with quality companies through tough times, there should be substantial rewards to be reaped in later years.”

“As HBD takes a three to five year outlook on the business potential of an investment, we not only focus on this year’s problems but also next year’s opportunities,” says Fourie.

venture capital | investment | business investment