invenfin sca presentation

FINANCING YOUR START-UPAngel Investment & Venture Capital

Silicon Cape Academy

Alexandra Fraser June 2011

WHAT STAGE IS MY

BUSINESS AT?

Licensing Executive Society of South Africa

4

Positive Cash Flow

Market Entry of Product

Negative Cash Flow

Research

Development

Application Testing

Pilot Project

Pure Research No market testing & little dev - University or Research

Organisation

Development, Industrialisation &

Commercialisation Process Seed Stage Business

Market

Ready Start-Up

Business

Commercialisation

1. BUSINESS START-UP PHASES

1. BUSINESS START-UP PHASES

Seed Stage Start-up Stage Mature StageGrowth StageR&D

Funding Sources (relatively small investment amounts):Private Individuals/ Angel Investors; Seed Funding; Early Stage VC & Government Grants

Time

Gro

wth

Ris

k

Ava

ilab

le s

ou

rces

of

Fun

din

g

5

Funding Sources (relatively large investment amounts): Commercial Banks; Capital Markets, Later Stage VC &Private Equity

WHAT IS KIND OF

FUNDING IS

AVAILABLE?

2. FUNDING SOURCES

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Funding Sources

Private Individuals or Angel Investors

Government Grants

Seed Funding

Early -stage Venture Capital

Later stage

Venture Capital

Private Equity

Commercial Banks

Capital Markets

Funding Sources

Private Individuals

or Angel Investors

Government Grants

Seed Funding


Later stage Venture Capital

Private Equity

Commercial Banks

Capital Markets

Angel investor: usually an affluent

individual who provides capital for

a business start-up, usually in

exchange for convertible debt or

equity.

- Friends, Fools & Family

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2. FUNDING SOURCES ANGEL INVESTORS

Venture CapitalEquity funding for high tech, high growth potential businesses, with growth

typically achieved through radical global scaling.

1. Seed 3. Development2. Start-up 4. Growth

Initial capital used for market research &

product development

(post proof of concept).

Pre-revenue Source: Friends, Fools & Family, Angels & Seed

Funds.

Capital to set up operations (staff, office

space, equipment),

commercialise IP, & other

activities.

Pre-revenue Source: Early stage VC funds.

Capital to further launch business & grow market

share to become

profitable.

Mostly pre-revenue Source: Early stage VC funds.

Capital to assist establish but still high-

risk ventures in

expansion activities

(international launch,

new product/ technology

creation, accelerating

production, acquiring

competitors).

Post-revenue Source: Later stage VC funds.

Source: 2010 SAVCA Venture Solutions VC

Survey

Seed or Angel Series A Series BUSA:

Note: Average funding amounts for the USA cannot be directly

converted to Rand amounts as start-up costs in South Africa are

much lower.

FundingSources


Government Grants

Seed Funding


Later stage

Venture Capital

Private Equity

Commercial Banks

Capital Markets

Seed Funding: Funding for

research, evaluation and

development of a concept post

proof of concept

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2. FUNDING SOURCES SEED FUNDING

Funding Sources


Government Grants

Seed Funding



Private Equity

Commercial Banks

Capital Markets

Venture Capital: Equity

financing for often high risk

businesses in different growth

stages.

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2. FUNDING SOURCES VENTURE CAPITAL

Funding Sources


Government Grants

Seed Funding



Private Equity

Commercial Banks

Capital Markets

Private Equity: Equity

financing for growth and

development, buy-out, buy-in

or replacement capital

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2. FUNDING SOURCES PRIVATE EQUITY

3. FUNDING SOURCES EARLY STAGE

Seed Stage Start-up Stage Mature StageGrowth StageR&D

Time

Gro

wth

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ANGEL VS VENTURE

CAPITAL FUNDING?

4.ANGEL VS VENTURE CAPITAL FUNDING

Key Differences

Source of funds

Deal Size

Stage of Development

Industry &

Geographical Focus

Ease of obtaining funding

Cost

Motivation

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HOW DOES EARLY

STAGE FUNDING

WORK?

5. EARLY STAGE FUNDING

Investments are typically:

High Risk

Uncertain future

Information asymmetry

Soft Assets

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Milestone based investment

Significant minority shareholding 26-49% of equity often required

Potential of significant return on investment ( to compensate

for the high risk)

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Application

Initial Assessment

Detailed Investigation

Investment Decision

Due Diligence

Invest-ment

YES/NO

YES/NO

YES/NO

YES/NO

YES/NO

Funding on meeting

milestones & Business

Support

5. EARLY STAGE FUNDING

WHAT DO FUNDERS

WANT?

6. REQUIREMENTS

Extraordinary Entrepreneur

Team & Plan

How does it make money?

Business Model

The Burning Need

The Market

Your Solution/ Product

Competitors & Barriers to

Entry

6. REQUIREMENTS

Strategic fit

Good introduction / Elevator pitch

Proof of concept

Unique offering

Sustainable competitive advantage

Actionable business & development plan -Focus

Realistic metrics

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WHAT DO I GET IN

RETURN?

6. THE PARTNERSHIP

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Money

Strategic Advice

Networks & Market Entry

Focus & Support

Credibility

Management Expertise

Attracting Additional Investment

Financial Controls

Governance

WHERE DO I GET

SUPPORT?

7. SUPPORT

1. Business Incubators

2. People with Complementary Skills

3. Industry Experts or Mentors

4. Local & Provincial Government

5. Parastatals

6. Internet

7. Entrepreneurial Networks

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WHERE DO I GET MORE

INFORMATION?

8. LINKS

Associations: South African Venture Capital Association (SAVCA) (www.savca.co.za)

Silicon Cape (www.siliconcape.com)

Entrepreneur.co.za (www.entrepreneur.co.za)

60 Seconds (www.60secs.biz)

South African Women Entrepreneurs Network (SAWEN) (http://www.dti.gov.za/sawen/sawenmain.htm)

South African Investor Network (www.investmentnetwork.co.za)

Enablis (www.enablis.org)

Support Services & Brokers: SABS Design Institute (www.sabs.co.za/index.php?page=designinstitute)

Entrepreneur Incubator (www.ei.co.za)

Cape Venture Partners (www.cvp.co.za)

Red Door Small Business Advice Centers (http://www.capegateway.gov.za/eng/directories/facilities/91768)

Quickberry (www.quickberry.com)

Shuttleworth Foundation (www.shuttleworthfoundation.org)

Powered By VC (www.poweredbycv.com)

Femtech (www.femafrica.com)

Endeavor (www.endeavor.co.za)

Bandwidth Barn (www.bandwidthbarn.org)

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8. LINKS

Government Funding: Department of Science & Technology (DST) (www.dst.gov.za )

Department of Trade & Industry (DTI) (www.dti.gov.za)

NRF (www.nrf.ac.za)

SPII (www.spii.co.za )

Thrip (www.nrf.ac.za/thrip/)

Technology Innovation Agency (TIA) (www.tia.org.za)

SEDA (www.seda.org.za)

Blue Catalyst (www.bluecatalyst.co.za)

IDC Venture Capital (www.idc.co.za/Venture%20Capital.asp)

Intellectual Property Information & Assistance: My Patent (www.mypatent.co.za)

Companies & Intellectual Property Registration Office (www.cipro.gov.za)

WIPO (www.wipo.int)

USPTO (www.uspto.gov)

Google Patent (www.google.com/patents)

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8. LINKS

Other Funding: Crowd Funding (www.crowdfunding.co.za)

Business Partners (www.businesspartners.co.za)

Invenfin (www.invenfin.com)

Hasso Plattner Ventures Africa (www.hp-ventures.co.za)

Intel Capital (http://www.intel.com/capital)

Acorn Private Equity (Technology Fund) (www.acornprivateequity.com)

Inspired Evolution (www.inspiredevolution.co.za)

Halls Investments (www.halls.co.za)

Vodacom Ventures (www.vodacom.com)

Convergence Partners (www.convergencepartners.co.za)

TEIM (www.teim.co.za)

Enablis (www.enablis.org)

4Di Capital (www.4dicapital.com)

Adlevo Capital (www.adlevocapital.com)

Triumph Investments (www.triumphvc.co.za)

GroFin (www.grofin.com)

Treacle Private Equity (www.treacle.co.za)

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QUESTIONS?

Crazy Ideas can still make it big!

Top 10 most unlikely business ideas which made it big:

1. Million Dollar Homepage

2. Online flea market

3. SantaMail

4. Doggles

5. Online Bookshop

6. LaserMonks

7. FitDeck

8. PositiveDating.com

9. Lucky Wishbone Co.

10. Silly Putty

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THANK YOU

Website: www.invenfin.com

Email: [email protected]

Twitter: @Invenfin

Telephone: 021 888 3395

invenfin sca presentation

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