Twitter is fund raising

Twitter is looking to raise business investment of more than $100 million after valuing the company at $3 billion.

TechRadar reports that Russian technology investment firm, DST global is seeking to lead the funding round for the platform.

Twitter currently has over 175 million users and last year introduced a limited ad revenue model catering to around 40 advertisers.

Twitter founder Evan Williams said that the company has purposely kept its revenue model small to test and gain feedback from advertisers and users.

The company currently sells promoted tweets in Twitter search results, which appear in the promoted trends section.

Last year Twitter raised $100 million from investors like Insight Venture Capital, Spark Capital and mutual fund behemoth T Rowe Price, who then valued the company at $1 billion.

Williams also indicated that his company is in talks with Facebook for finding new ways for the two companies to work together. He also mentioned the company has managed to ink deals with Google, Microsoft and Yahoo.

Is distance an obstacle to venture capital?

Is it possible to get business financing from top investors if you have a business plan focussed on a venture outside Silicon Valley? If you land venture or angel investments from remote investors, expect to go back to investors often with an updated business plan for more rounds of cash. A recent study by  Indiana University finance professor Xuan Tian found that entrepreneurs who raised capital from investors located more than 25 miles away were forced to raise smaller amounts, with a shorter duration between each fundraising round, than those with nearby investors.

Comparing 28,000 venture-backed companies who raised funds between 1980 and 2006, Tian studied whether venture firms could use technology to monitor investments just as well from a distance. “We saw that visiting a company day to day made a real difference, and investors were willing to write bigger checks if they could do that,” he says. From Tian’s research, venture firms don’t necessarily abide by the so-called 20 minute rule, where venture capital firms typically want to invest in startups located within a 20 minute drive of their office, but a greater distance does make a VC hold on tighter to its purse strings. On average during this time period, firms raised 3.6 rounds of financing with 20 months in between rounds and $72.7 million in total.

Fundraising clearly takes a significant amount of time and money in fees, so Tian was surprised to see that firms with remote backers actually performed somewhat better overall when they raised more rounds of financing. To calculate performance, Tian looked at whether firms would go public and if they did, whether or not they delisted within three years. For entrepreneurs with investors more than 25 miles away, one extra round of financing meant they were 5% more likely to go public and 0.1% more likely to remain public three years later. Though Tian’s research stopped as of 2006, from perusing more recent data, he says he would expect the same trends to to continue now.

Tian studies entrepreneurs who successfully landed remote funding. How likely are entrepreneurs outside of major venture hubs to get VC and angel investments in the first place? The majority of venture funding, roughly 63% of $5.4 billion in the third quarter of 2010, was funneled into California, New York and Massachusetts, according to research firm CB Insights.  That’s down from 65% of second quarter 2010 deals and 70% of 2Q funding.

This week on his blog, Fred Wilson, a partner at Union Square Ventures, a New York early-stage venture firm, outlined the number of startup he’s invested in outside of New York, San Francisco, Europe or Chicago: ZERO out of 37 investments since 2004.

“We are focused on one thing, internet services of scale, and are wiling to travel to find them,” writes Wilson, whose startup investment lineup includes Foursquare, Meetup, Tumblr, and Zynga. Still, he admits that he only has a certain amount of time and generally traverses pre-ordained routes to find and see his startups. Wilson hasn’t counted out going elsewhere, noting that he goes to Boulder and Austin regularly and sees “opportunity in Seattle, LA, Boston, DC, Chicago, Toronto, and elsewhere.

Still, since venture capital returns aren’t giving too many managing directors private jets, most angels and VC can only go so many places so often so proximity to investors or at least proximity to an easily traveled route helps.

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.

New Private Equity Initiative for SMEs

Great news for SMEs looking for start-up or growth finance is that another new initiative, this time through private equity firm Trinitas is injecting further finance into promising business plans. The company has raised R430m to invest in high cash-generating businesses and wants to increase this to as much as R1bn in the next 12 months.

Executive director Andrew Hall said yesterday Trinitas had been raising funds for the past 18 months, in one of the "toughest ever environments" because of the global crisis.

It had found investors who were convinced there was value in the company's business model, which is focused on mid- capitalised companies.

Trinitas Private Equity is being run by private equity experts John Stipinovich, Soteris Theorides and Mr Hall, who were also shareholders in the fund. Other shareholders are Sasfin and the black women's empowerment group Peotona, which has a 25% stake.

At its first closing in March, Trinitas Private Equity had raised R430m from five local investors from sectors such as banking and pension funds.

"We are happy with the level of interest by investors and ideally we want to raise more money and the fund is open for another 12 months to raise between R750m and R1bn in total, including the R430m we have raised," Mr Hall said yesterday.

Trinitas would focus on companies with enterprise values of between R150m and R1bn, because it believed companies in this segment had greater opportunity to create value for investors, including achieving organic growth in their sectors.

Mr Hall said the fund would invest from R50m to R150m over three to seven years in virtually any sector as long as it made business sense, particularly from a cash generation perspective. But mining was excluded because of its highly cyclical nature.

It had already invested R50m in a personal care and cosmetics manufacturer, Le Sel Research, a company based in Midrand and which makes products for customers such as Woolworths, Unilever and Aspen .

There were opportunities to invest, particularly in companies where management wanted to buy out the owners, or those in which the owners wanted additional capital and did not mind their shareholding being diluted.

Mr Hall said the recession had exposed small and medium-size companies who had overborrowed or expanded without any strategic intent, adding capacity which became idle overnight as demand collapsed. " Even when things are going well, it is better to keep the business lean," he said.

Source: Business Day

IDC may issue bonds to boost equity finance

Great news for South African entrepreneurs and new businesses with business plans waiting to be financed, is the information coming through today that South Africa's Industrial Development Corporation (IDC) may issue bonds and dispose of 26 billion rand worth of its stake in listed firms to raise money for new investments, its CEO said on Tuesday.

With regular banks in the country still not lending at the level required to stimulate the small business sector and especially new businesses starting up, the government wants to support the growth amongst entrepreneur with a much needed cash injection.

The state-owned development finance institution has been tasked by government to invest in the private sector to support economic growth and stem job losses after last year's recession.

The IDC lends to medium-sized businesses at more favourable rates and terms than commercial banks.

In a presentation to lawmakers in parliament, chief executive Geoffrey Qhena said the company needed 9 billion rand capital injection by 2015 to keep its equity/debt ratio below 60 percent and it would consider new sources of funding such as bond issuances.

"IDC's ability to attract other investors to projects and thus leverage more private sector investments could reduce its funding needs," he said.

"In the base case, IDC would need to raise 53 billion rand of borrowings (64 billion rand in the high road scenario)," he said, adding the company would dispose of 26 billion rand worth of shares it owned in listed companies.

The IDC who last year approved 1.4 billion rand in loans to companies distressed by a global and local recession has targeted the bio-fuels, automotive and energy sectors for investment and set aside 3.2 billion rand for 2011 to help companies hit by a recession.

Last year it approved 1.4 billion rand in loans to companies distressed by a global and local recession.

Source: Thomson Reuters

How to write a faster business plan

For many entrepreneurs, writing a business plan is a tedious process. Entrepreneurs are often more contempt with being practically involved overcoming real challenges than sitting down and writing a 30-40 page document. Unfortunately, a comprehensive business plan will almost always be a requirement from Venture Capital firms as it will allow them to get more of an insight into the issues present within the business business.

Before starting writing your business plan, do the research. Find out if there is a market for your product or service. See whether you are capable of filling that market, and that it is realistically profitable. You may discover challenges that will force you to rearrange your idea before spending weeks constructing a business plan.

Focus on Profitability

If investors and lenders are to be attracted to your business plan, you must show:

that your competition is large and plentiful, proving you operate in a large and growing industry
that you can outmaneuver that competition by niche marketing and setting up barriers to entry

Many entrepreneurs make the mistake of claiming they have no competition. This may or may not be true in your case, but investors don’t believe in one-business industries. Healthy competition is evidence that your industry is growing, which allows your business to grow within the industry.

The paradox is that you must show you can overtake said competition somehow. You can do this by proving a) you have identified and can master a niche market within that industry, and b) you have created barriers to entry (e.g., proprietary technology, exclusive information, a unique management team, etc.) This shows that your company is the only one equipped to fill the market need.

Logic is a key for a investment winning Business Plan

A business plan is essentially a logical argument for why and how a business will succeed. The logic is as follows:

1. Opportunity: There is an unmet market need.
2. Resources: Your business has the resources to fill that need.
3. Methods: Explain how your resources will be used to fill the need.
4. Results: Show how you and your investors will profit from the way your business uses its strengths to fill an unmet market need.

Financial Assumptions: Spell It Out, From Seed to Exit

The imagination of the investor is where fundraising efforts go to die. Do not let them imagine. Show your figures. Explain revenue and cost projections, from the start of your business all the way through the liquidity events that will benefit the investors. Use industry research and case studies to support your pro forma (projected) financial assumptions.

Just Say No to Format Creativity

As sure as there is grammar in an English sentence, every business plan has a standard format. That format, in this exact order, is:

1. Executive Summary, 
2. Company Analysis,
3. Industry Analysis,
4. Customer Analysis, 
5. Competitive Analysis, 
6. Marketing Plan, 
7. Operations Plan,
8. Management Team, 
9. Financial Plan, 
10. Appendix. 

Yes, you can be creative in the content of your business, and the ways in which you go about marketing and running operations. Creativity is what allows entrepreneurs to win. But the format of the business plan must be absolutely adhered to.

Want to finish your business plan faster? Click here to gain access to the latest in business plan software to write for a faster and much more efficient business plan.

Find financing by searching cleverly

Although South Africa’s economy is already showing strong signs of growth and the economical difficulties of 2009 starting to feel like a distant past, may entrepreneurs are still finding it difficult to secure business financing. This, however does not have to be the case and as long as your business plan supports you and your feasibility study has shown that they there is potential in your market, as the saying goes, search and you shall find. To put it more poignantly, perhaps we can say, search cleverly and you shall find!

Here are a few things that you can do to ensure that you are indeed searching cleverly:

Pick your Market

The market is probably the most important factor driving the success of the start-up market as a whole. If there is a strong demand from your target market, even a just adequate product can succeed, as the “market pulls the product out of the start-up.

The reverse is seldom true. Even great products often don’t succeed in tough markets, and very rarely do they create new markets. So pick not only your battles, but also pick your battlefield.

  

Show Momentum

Unless you’ve invented a way to turn lead into gold, these days you must show paying customers or enthusiastic users to prove your value to potential investors.

There are several indicators you can point to in order to demonstrate that your business has real market traction:

• New customers/beta testers (do the dogs eat the dog food?)
• Short sales cycles (are customers eager to sign on the dotted line?)
• Renewal rates (once customers use the product/service, do they come back for more?)
• Press coverage (do you have positive write-ups in the press?)
• Testimonials (are your customers willing to testify just how your product solves their problems)
• Believe in your team
• It has become cliché to emphasize the importance of people as being crucial to the success of an endeavour. But in a start-up, the importance of having a good team is not nice to have – it’s a necessity.

Work with the right people

Hire people you can trust to do the right thing by your company, as if it were their own, after all it is! Unlike a large organization, there is no room for slackers or primadonnas at a start-up. Make sure you hire people who can envision a broad strategy, and back themselves to execute against it.

At all times, be wary of “experts.” Experts can tell you how to do something that’s been done before, and do it really well. For sure, this is important in certain situations. But never forget that the whole point of a start-up is to develop new solutions to existing problems.

Find Validation from the doubters

It is often said that nothing worth doing is ever easy. When you embark upon the roller coaster that is starting a new company, you will find many naysayers who will tell you that it can’t be done. This is actually a good sign--what they really mean is that they don’t know how to do it, and therefore believe that you won’t be able to do it either. Remember, if they did know how to do it, you’d already be too late.

The path of an entrepreneur is more often than not, a lonely one. Few people will be able to see through your eyes. So have a long-term vision that you can clearly explain and around which you can rally your team, and keep you focused during the challenges that inevitably arise.

Back your vision with a firm belief in innovation. Steve Jobs once said that innovation is the single biggest difference between a leader and a follower. As you innovate and your vision takes root in the market, you will often hear cries of denial bordering on protest--which is the most common reaction of a market segment that has been disrupted.

Believe in your idea but also don't be to afraid of change, remember that the market and demand is changing constantly so you may also have to.

Using the latest in business plan software technology can assist you with tracking changes in the market, taking advantage of new business opportunities and help you gain access to business finance fast.