The most common topic discussed in the South African start-up community has been around the lack of venture capital (VC) or the ease of access to venture capital in South Africa. I am no VC expert, however I have had my fair share of discussions with them as well as people who have had experience in the VC game.
In the venture capital game it’s all about increasing the return on their investment in your business. Unfortunately, South Africa’s internet population can hardly be considered a market in global terms and we also lack a VC eco-system. Therefore, your start-up needs to be thinking global from day one.
If you are thinking global and raising venture capital, please start thinking about raising in dollar / euro conversions. While R5mil is a lot of cash, globally it would be considered as angel funding. It doesn’t make sense to raise angel funding under the label of venture capital.
I also get the feeling that entrepreneurs in South Africa are some how excited by the hype of venture capital and think it’s their best bet. I urge you to please take a look at the types of funding available to you. I would rather consider early stage venture capital once your product / service needs the capital to expand rather than to keep it a float or build a prototype.
The most important advice I can share is that you should build something tangible and don’t go looking for venture capital with a concept. If your product or service is already generating revenue then you are in an even better position to negotiate. The more risk a VC has to take, the less negotiating power you have.
There are many articles and blog posts on the internet about venture capital, however the best I have come a cross is a talk by Guy Kawasaki. I suggest you watch it over here.
Do you have any thoughts on VC in South Africa?