Global Venture Capital Firms Target South African Businesses

A South African Venture Capital fund is in a big money bid, hoping to invest in the business plan and development of Neotel.

A South African consortium currently leads a $455.5 million venture capital investment bid, hoping to clinch the deal in the next few months

Big companies are now aggressively targeting South African business plans. Top economies of the world are turning their eyes to the region. Why? Because there are lot of investment opportunities there and a growing potential for a successful market. This makes South Africa an interesting target for venture capital firms.

New technologies and good communication are two of the strong fields where things can stir up rapidly. We can figure this out only by looking at figures. Internet penetration was only 10.8% in 2009. The costs for a 1 MB bandwidth are huge, even 100 times more than in US. Still, the demand is high and people’s need for communication is increasing every day. The proof: companies from the mobile industry are doing well and mobile Internet usage is increasing mostly in the urban areas. There is plenty of room for businesses to grow and for venture capital firms to invest.

One good example is Neotel, one of the largest network providers in South Africa who raised a $455.5 million loan from a local consortium to develop their network. Google, Microsoft or Intel who recently signed a deal with MTN Group, made their moves. As other emerging markets experiences showed, the presence of big names is building trust for other businesses to come and raise the needed money for the development of new projects.

Other industries are in demand for investments, for example: mining, constructions or even software development, all of them looking for five or ten figures funds. 10 South African startups are on the short list of Seedcamp for Seedcamp Week in London this year. Companies like 10Layer, FloCash or Obami have the chance to receive $30-50,000 as a first boost for their development. On the other end, Motjoli, a mining company is seeking for $1,5 billion to develop an Iron Ore Project close to Zwaziland.

These are just a few examples but there are many more out there. Actually, some of the local investors are really complaining that venture capital firms in South Africa are not so active as they would need and that local investors do not have always the force to support all industries and projects, even if there are positive examples like Evolution One Fund who recently announced they raised $94 million to invest in clean technology businesses.

Choosing a Venture Capital Partner

Finding the right venture capital fund to support you wityh your business may be a challenging task. There are 10,000 venture capitalists and only top 1% are any good. Be smart about smart money and learn from the top 1%.

What do some of South Africa's best venture capitalists have in common? How do they consistently obtain supernormal returns? How do they add value to entrepreneurs they have backed? Venture capital is an art as well as science and the best way to learn it is from successful masters.

The Way of the VC - Top Venture Capitalists on Your Board is essential reading for venture capital practitioners, including partners, principals, analysts, consultants and limited partners – both institutional and private. It could also prove useful to students of finance who want a better understanding of what goes on in the venture capital world.

Venture Capital funds are the fastest growing sector of the financial industry, and possibly the least understood. In this book, author Tan Yinglan provides a primer on what some of the world’s best venture capitalists have in common. How do the world’s top venture capitalists consistently obtain supernormal returns? How do they add value to entrepreneurs they have backed? Why is a top venture capitalist like a skilled chef?

The Way of the VC shows you what premier VC firms such as Kleiner Perkins, Draper Fisher Jurvertson, and Flagship Ventures look for in winning ventures and how they offer venture assistance, and how every entrepreneur can benefit from learning leading-edge techniques.

The Way of the VC offers you:

A “silver bullet” technique in near-perfect communication with VCs

A guide to coaching start-ups effectively

The ultimate entrepreneurial development manual

Insight and advice acquired by interviewing dozens of top-tier venture capitalists

An easy read

Translating what really goes on in a venture capitalist’s mind into structured processes that readers can use to promote their own ideas, this book will be an illuminating read for venture capital practitioners, including partners, principals, analysts, consultants and limited partners – both institutional and private.

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 startupbizhub.com to this article