Venture Capital


22
Jul 10

How Venture Capitalists Calculate Valuations

One of my favourite blogs about venture capital called Both Sides of the Table, written by Mark Suster who has recorded a brilliant video about How VC’s Calculate Valuation Differently from Founders?

I think this is one of the most important videos any entrepreneur should watch, if he or she is raising capital for their business. Everyone always focuses on the skill of successfully pitching venture capitalists. However, once your pitch is successful, you get down to the details and if you aren’t careful about understanding the term sheet and keeping future rounds in mind, there is potential for making grave mistakes.


25
Feb 10

Thoughts on Silicon Cape in Gauteng

The Silicon Cape Initiative has gained significant traction and coverage since it’s initial inception and launch event, which attracted several high profile speakers and attendees from all over South Africa.

The basic vision for the Silicon Cape Initiative is to establish both a brand and geographical region, in this case the Western Cape, much like that of the infamous Silicon Valley where technology innovation and investment can flourish.

However the focus on this initiative benefiting the Western Cape has left some entrepreneurs from other parts of South Africa feeling a bit left out. As an entrepreneur from Johannesburg, I actually don’t feel left out at all and I will share why.

Firstly, the organisers of the Silicon Cape Initiative invited me to attend the event as an entrepreneur from Johannesburg and to sit on the entrepreneurial panel discussion. Besides being personally involved, I feel that this demonstrates that initiative does have a keen interest in supporting entrepreneurs outside of the Western Cape.

Secondly, as an entrepreneur building a start-up that has global ambitions. I find that South Africa doesn’t have a strong technology brand in the global start-up and investment scenes abroad. Indeed we have several successful global entrepreneurs and start-ups from South Africa, but nobody is really shouting “I can’t wait to see what comes out of South Africa next!”.

Therefore the fact that the Silicon Cape Initiative is attempting to boost the profile of a region within South Africa is a good enough reason for me to support it. I have no doubt that once someone looks within the Western Cape, it won’t be long before they look at South Africa as a whole. Before we moan about where the focus is, lets get people from abroad focussing here first!

Thirdly, the geographic distance between the Western Cape and Gauteng is really minimal when compared to Silicon Valley and Boston, New York or Atlanta where several other start-up hubs reside. We can do business in both provinces and until the Western Cape receives regulatory benefits (tax benefits, etc) we really have no reason to feel excluded. I would suggest everyone who can and is willing should get involved.

On that note, Marc Ashton and Catherine Luckhoff are planning on organising a Silicon Cape event in Johannesburg sometime soon, so if you are interested please keep an eye out over at the Silicon Cape website.


23
Jun 09

Thoughts on Venture Capital

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?