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Tuesday, August 25, 2009

Google announces Venture Fund

The New York Times this week reported that Google will be launching its own venture capital arm investing in new and growing ventures around the globe.

Google, which has invested in many business start-ups over the years, announced late Monday that it is creating a venture capital arm whose main objective will be to turn a profit.

The group, called Google Ventures, is expected to invest up to $100 million over the next 12 months, The New York Times’s Miguel Helft reported. It will be overseen by David Drummond, who will continue in his role as senior vice president of corporate developing and chief legal officer at Google.

This is an almost natural progression of what Google has been doing for some time now and we will keep you posted on any further developments from the search engine turned venture giant.

Tuesday, August 18, 2009

Finding venture capital as an female entrepreneur

South Africa is seeing an increasing amount of woman entrepreneurs. The huge range of industries now including woman entrepreneurs is encouraging and these stats have now even been made official by organizations such as the global entrepreneurship monitor. But how do female entrepreneurs find business funding. Where and how do they source there venture capital or angel funding from. In an increasingly competitive business environment it’s crucial that woman know how to go about finding funding for their businesses.

Below are some important tips if you are a woman finding your way in the world of venture capital.

Network the Financial Industry

Women must be able to network not only among other women business owners, but with all who are involved in the financial market. Expand networking possibilities with other entrepreneurs, men or women, who have successfully won venture capital funding. Talk with others who are connected with the VC industry. A local entrepreneur club may be a great way to share ideas and get venture capital contacts for financing your business.

Study the Main VC Industries

VCs invest heavily in technology businesses. Many women entrepreneurs have a great retail business idea, but find it difficult to obtain VC funding when there is no model for large scale expansion and sales. If you want to get a business kick started with venture capital funds, be sure to study the industry of your business idea and discover if it is likely to be viewed favorably among VC firms.

Strengthen Your Idea

As with any entrepreneur or company vying for VC funding, your business idea must be solidly defined, marketable, and in demand. Discover a niche for your business idea that will allow your company to experience potentially huge sales. This may take time, trial, and error to narrow and focus your business idea to where it is attractive to venture capital firms.

Assemble a Winning Team

In order to give your business an edge in getting accepted for VC funding, you must have a winning team in place before you approach VC firms. Take the time to assemble a list of potential managers, directors and executives of your company that have the right experience in their industry and preferably in other startup companies as well.
Above all its important that you remain true to yourself. Be choosy when choosing venture partners even when you may feel that you are reaching the end of your patience. Don’t loose hope and if you have done your business plan, completed your feasibility study and have confidence in your business as a prospect, chances are that the right venture partner for you is just around the corner.

Thank you for the contribution made by to this article on where to find venture capital as an female entrepreneur.

Friday, August 14, 2009

More than Just Money - What VC's can really bring to the table

South African Entrepreneurs and business start-ups benefit hugely from joining forces with venture capital firms or even look for angel funding. Once you have your business plan and feasibility study done and are confident that this business idea is the way forward for you there may be numerous avenues for you to explore to get investment for a business.

Not only is there the obvious advantage of having cash in the business for research and development, marketing, product proto-types and all the other many business processes that benefit from an inflow of cash into the business, but the the other side of the deal, and in my view perhaps the best part of it is the expertise that the the business gains from either an individual or business who have been there and done it, more often than not, on numerous occasions.

There has been a number of recent Blog threads on the issue this year.

Recently on Venture Blog, David Hornik writes in More Than Just Writing a Check, about the enormous benefits that entrepreneurs can experience from working with the right VC firm.

Recently in the web strategy blog, Jeremiah Owyang in his thread entitled Beyond the Money lists the following benefits to working with a venture capital firm:

VCs Provide Startups With A Competitive Edge by Offering Additional Services:

Thought Leadership
VCs are required to anticipate future trends, and as a result they are highly connected, obtain information from a variety of sources, and have to quickly synthesize what’s next. Some of the VCs are more active in public, and are on the speaking circuit, and are sharing their ideas. Take for example David Hornick, who does a great job at this as he discusses why and how he’ll invest the $650mm they raised in high tech. Considering the recession this fund will fuel a great deal of innovation –even during a downturn.

Strategic Guidance
Often, VCs sit on the Board of Directors of their portfolio companies and provide guidance, direction, and access to other decision makers. This not only protects the VC to keep an eye on the company, but gives the entrepreneurs a chance to bounce ideas off senior and seasoned investors.

Being Part of The Family
Access is important. When I meet with startups, it’s important to know who invested in them, as it indicates their network. If you watch carefully (real carefully) you can see that startups that share the same investor use each others products, exchange executives, and are talking to each other. They often have offsites

Ancillary Services
Some VC firms have education teams and marketing teams that provide a broad range of services to the portfolio companies who don’t have the resources to hire full time marketing staff. In fact, I’ll be doing a workshop with Giovanni Rodriguez in the near future for a VC group. Recently I held a dinner discussion with Allegis capital and Scale Venture Partners, to meet their portfolio and discuss market trends.

Umbrella Branding
Perhaps the most under utilized is the benefit of being part of the brand of a well known firm. There are certain firms that are known for investing in certain verticals, or have a track record of success that lights my eyes up. Companies often tout their investors in briefings, especially if they are a top tier firm.

Parties… eerr um Networking
Ok, that’s my polite way of saying great parties, well networking too. During the height of the economy, some VC firms flew the executives of their portfolio companies out to a one week retreat in Hawaii. Also, some of the best parties in all of Silicon Valley are at August capital –social media networking nirvana.

Recruiting and Fundraising
I added this bullet after the fact, after seeing how David Hornick has added to the conversation it’s too important to pass up. VCs offer additional services like recruiting, which I’d be so bold to say is often executive placement of the right folks. Secondly, they help with fundraising, which I would assume would be for additional rounds of investment, I would expect that this would often mean a solid reference from one investor to the next.

Entrepreneurs should weigh all benefits
Of course, with the top tier VC firms, there are certainly considerations, getting backed by a very successful VC firm may mean they have more influence over the terms, may drive the direction of your company, and ultimately, may have more equity of the company. I encourage you to think about the other services, network, and events that your VC will offer you, find out by observing or talking to companies in their portfolio.

VCs offer more than just funding
VC should continue to provide thought leadership in their space, discussing in public why they are raising money, where they anticipate market growth, and how they plan to invest. This not only attracts new investors for their fund, but gives branding cover for their portfolio, and the folks in the industry, like me, visibility on the next trends. What they do beyond the investment makes a different –I can see it.

Most of these sounds like an offer you would seldom be able to refuse. Remember though that if you do go down the road of looking for a venture capital partner to go into business with, do your homework, ask for references and check out the FAQ's on the topic on the SA Investors Network site.

Monday, August 10, 2009

How to become a venture capitalist

How do I become a venture capitalist? A common question asked by graduates, professionals and entrepreneurs who may have been through the process of finding venture capital to grow their business. Venture capital is of course not for everyone and you need to be certain of your motivations of why to enter this are of business.

If you have the money to invest and has the appetite for high-risk, high-return investments, you might consider investing in new, rapidly growing companies that have potential to bring you large returns.

People and companies that do this are called venture capitalists. They help small and fledgling companies take off by providing them capital as well as technical and administrative inputs, usually, at their startup stage.

How Does Venture Capital Investing Work
How do you become a venture capitalist? If you are an individual, you can act alone and become an "angel investor" providing low-level financing and management expertise or you can partner with another investor or become part of a group of people and institutions funding a corporation.

If you are pursuing the plan with a partner or a group, you basically start a firm first, which is usually structured as a partnership or a corporation
The venture firm, as your group will be called, will form a pool of funds by seeking capital commitments from other investors and institutions to raise a pre-determined amount of money. This happens with the firm seeking out prospective investors and sending them prospectus about the capital raising. Out of the capital commitments solicited, a fund will be created, which will become the legal entity transacting business in behalf of the investors. The process could take weeks to years. The fund is usually structured as an LP or an LLC, which has a fixed lifespan, usually up to 10 years.

The venture firm will have to decide whether it wants to invest the fund in a particular industry or area or invest across industries, in various locations and in companies at different stages of development. The venture firm might also choose to concentrate on acquisitions or helping failing companies get back to financial health (turnarounds).

The venture firm considers various investment opportunities presented to it. The firm then conducts due diligence to choose an investee company (usually among many, which could be a hundred). Typically, the firm will be given shares in the investee company and members of the venture firm become managers or directors of the company. The capital commitments will be during several stages of the company’s development.
The firm may decide to do another round of rounds of fund raising for other investments.

Venture firms anticipate investments to generate returns in three to five or seven years. Usually expected return on investment is 20-40%. The maturity of the investment is heralded favourably by an initial public offering of the company or a sale or merger, which shows it has gained enough footing to be able to attract investor interest.
As a venture capitalist, you help many companies get through their startup stage, while helping create jobs and fuelling the economic growth of the country.

If you are looking for venture capital in South Africa or want to try your hand at becoming a venture capital professional visit the investors network site and see if you can start your bright future in business investment today.

Thank you for the contribution of to this article