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.

Venture Capital Focus on Growing Firms Says Shuttleworth

'Venture capital is better spend on existing and growing firms' This is the opinion of South African venture capital company HBD, which is still strongly associated with information-technology entrepreneur Mark Shuttleworth. The organisation expects to have disbursed some R100-million by year-end as part of its second fund, launched in late 2006.

CEO Julia Long tells Engineer-ing News that it is currently interrogating several potential investment opportunities, mostly in high-technology companies, but not necessarily information-technology enterprises.

Its so-called ‘HBD Fund2’ will run for two years, with Shuttle-worth having made some R150-million available to the initiative. However, Long says it is possible that more than R150-million could be disbursed over the period, citing a possible investment figure of R200-million.

Unlike the initial HDB fund, or ‘Fund1’, which focused on pure start-up-type enterprises, the current facility is seeking to finance more “mature” businesses that already have products, services and customers.

Long says the idea is to fill a gap in the South African capital market by offering equity funding to enterprises that are keen to either accelerate domestic growth or embark on an internationalisation endeavour.

Given this greater level of maturity, the size of the investment tranches has also been raised to between R10-million and R25-million – Fund1’s limit was set closer to R10-million. “By contrast, the companies we financed between 2000 and 2005, when Mark set aside R70-million for venture capital, were generally at a far less developed stage, some even at the concept stage,” Long explains.

She argues that there is still a desperate need for ‘angel investors’ to support start-ups, but that, following a broad-ranging analysis of the South African environment, HBD (short for ‘Here Be Dragons’) decided there was greater opportunity and less risk slightly further up the value chain.

She says the fund is open to just about any sector, excluding direct investments into real estate and agriculture, and hints to the fact that HBD is in the final stages of a due diligence involving an investment into a leisure-and-entertainment enterprise that offers a “unique” restaurant experience. It is also interrogating an equity position in a logistics enterprise.

To date, though, capital from Fund2 has been deployed in only two instances: an investment into EDH, which develops products and services for the sport, defense and industrial- inspection markets, including a radar-based solution used by broadcasters to track and display shots made by golfers during tournaments; and an investment into a company called incuBeta, which is an Internet search-engine marketing business, with a turnover of R50-million a year.

Long says its basic criterion remains that the companies be established and domiciled in South Africa.

She anticipates that HDB will remain invested in the companies for a period of about five years, and says its partners accept upfront that HDB will be seeking to make a profitable exit at some point. These exits can take various forms, from selling the business to similarly-styled entities, through to an initial public offering, most probably through a listing on the JSE’s small- company board, AltX.

The company has already exited from some of its initial investments made during the roll-out of Fund1, but Long admits that most of these have been conducted at a loss.

“We are acutely aware of the risks involved and don’t take them lightly. But our assessment is that, if we invest in ten companies and spend R100-million in the process, just one might turn out to be core. But that core investment will offer a return that more than covers the upfront investment with a healthy return, with the balance of the disposals offering a bonus over and above that return,” she concludes.

This may be a typical move by venture capital funds in the current economic climate trying to limit their risks and increase returns from businesses already proven to be successes in the market. Despite the importance of business finance being available to this market segment it should not be forgotten that with many banks trying to do the same the investors and banks in South Africa should not forget the army of entrepreneurs hoping to bring their own ideas to the market. Both Shuttleworth and the growing firms his company now invest in was at some stage a start-up and was it not for someone investing in these businesses at early stage they to may not have been in the position they are in today.

Starting a business with Venture Capital Funds

Both Venture capitalists & Business Angels are really just investors in your business providing business finance together with experience, business links and support. This is because the objective is still the same. The business or individuals involved will normally be reviewing tons of business plans until one is found that have some synchronicity with the values and objectives of the funder.

Venture capitalists & Business Angels will normally find you through a combination of ways. As an entrepreneur looking for business funding you may be found either through joining a network of investors, sending your business plan to investors that you know of, or in some rare cases they may find you, either through a referral or recommendation from someone else.


Once contact has been made and a background check has been done, the management team will contact the entrepreneur so a meeting can be set to talk more about the idea that was envisioned by the person. If everything sounds good, then the funding will take place similar to how a student in school is able to get a grant in order to conduct the project.
The difference here is that the Venture capitalists & Business Angels will hold a certain percentage of shares in the business. This means a team of people will be working with the entrepreneur in seeing things through. This is done to protect the investment given by the company to ensure its success in the long term.

One of the industries being funded regularly by Venture capitalists & Business Angels is the information technology industry. Despite that, the chances of someone in another field who would like the same thing to happen is still possible because there are also companies out there looking for the next big break.

Everyone becomes a winner when VSs, business angels and the entrepreneur sign an agreement and turn that idea into a reality. This is because despite the risks involved in starting something new, the determination of the entrepreneur and the experience of the Venture capitalists & Business Angels can easily tackle the bumps on the road by steering clear from it.

Venture capital funding is when a startup business or an existing one needs funds from outside people to sustain or keep it growing. While there are banks that can help do this, it is easier to deal with private individuals since the interest rates are not that high and these supporters become strategic partners.

So where do you go for venture capital or business finance? Depending on where you find yourself, most countries today will have venture capital associations or networks where business investors and entrepreneurs are introduced and do business. Do a google search for business finance, venture capital or angel finance in your country and you are likely to be taking the first step to gain funding for your new business.

How To Open A Business Using Venture Capital Funds

Both Venture capitalists & Business Angels are really just investors in your business. This is because the objective is simmilar to what it will be for any other investor. The business or individuals involved will normally be reviewing tons of business profiles until one is found that have some synchronicity with the values and objectives of the funder.

Venture capitalists & Business Angels will normally find you through a combination of channels. As an entrepreneur looking for business funding you may be found either through joining a network of investors, sending your business plan to investors that you know of, or in some rare cases they may find you, either through a referral or recommendation from someone else.


Once contact has been made and a background check has been done, the management team will contact the entrepreneur so a meeting can be set to talk more about the idea that was envisioned by the person. If everything sounds good, then the funding will take place similar to how a student in school is able to get a grant in order to conduct the project.
The difference here is that the Venture capitalists & Business Angels will hold a certain percentage of shares in the business. This means a team of people will be working with the entrepreneur in seeing things through. This is done to protect the investment given by the company to ensure its success in the long term.

One of the industries being funded regularly by Venture capitalists & Business Angelss is the information technology industry. Despite that, the chances of someone in another field who would like the same thing to happen is still possible because there are also companies out there looking for the next big break.

Everyone becomes a winner when VCs, business angels and the entrepreneur sign an agreement and turn that idea into a reality. This is because despite the risks involved in starting something new, the determination of the entrepreneur and the experience of the Venture capitalists & Business Angels can easily tackle the bumps on the road by steering clear from it.

Venture capital funding is when a startup business or an existing one needs funds from outside people to sustain or keep it growing. While there are banks that can help do this, it is easier to deal with private individuals since the interest rates are not that high and these supporters become strategic partners.

As an entrepreneur, attracting venture capital funding of course also holds many other benefits for your business. You only need to speak to a business owner who has been there and done that to know that VCs, not only will provide you with the funding, but as their money is on the line, you will gain, experience, valuable contacts, a much needed confidant when times are tough.

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.

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.
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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 www.ventureden.com to this article on where to find venture capital as an female entrepreneur.

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.