Venture Capital

Table of Contents

Early and growth stage businesses typically engage us for Venture capital in South Africa and accross Sub Saharan Africa.

Venture Capital (VC) is a commonly used corporate or venture finance approach. Venture Capital Investors support entrepreneurial talent by offering access to funding and business skills in order to support the business in its growth strategies while them also increasing the value of the investment provided to the business. VC Investment is aimed at providing new businesses with the funds they require to grow quickly. Of course, VC firms expect a revenue from their investments; they seek out businesses with the potential for serious growth so that they can profit from sale of the company.

There are numerous deciding factors that help to make the decision; whether or not a company or business should seek venture funding.

How Does My Business Qualify For Venture Capital?

What else is required of the management team seeking VC in South Africa? Assuming the business plan is impeccable? VC firms are mostly looking for the following in a potential investment:

The team behind the business is crucial. Within Caban we believe it backing the team behind the business as the key priority. A solid team can drive a business even in a competitive field. 
a business with a large target market,  a scalable business model,  and the potential for healthy return on investment.

Finding the right VC firm is the final hurdle to overcome when trying to secure venture capital funding.

Most often, the preferences of VC firms revolve around their:The remainder of their investment portfolio, the total assets held by the business, location of the business, industry preferences, how long the business has been in operation and preferences of the partners.

VC preferences should be taken into consideration when a company is looking for funding.

Finding the right firm to work with can be difficult, but the rewards will be worth it. VC funding is often within the reach of companies that plan ahead and approach it methodically.

What is the Most Important Consideration In Venture Capital?

Simply said, the management of an organisation is by far and away the most significant component that astute investors take into consideration. First and foremost, VC’s invest in a company’s management team and the capacity of that team to carry out the business strategy.

What Are The Stages of Venture Capital Investment?

Seed or early Stage Investment 
 
Early stage or seed investment normally refer to money that will fuel a startup’s growth. At this stage, a startup’s leaders may not have a commercially ready product and are instead focused on convincing investors to back them. 
 
Seed money often goes toward product research and development. Money may be utilised for market research or team expansion. 
 
Start-up Funding
This stage resembles the seed investment round. With a market research and business plan in place, organisations sell and advertise their products to gain customers. 
 
At this level, companies likely have a product sample. VC is often used to hire more management, getting the service offering right, or collecting more data on the market and customers. At this stage the business might request additional funding for manufacturing, production, sales, and marketing. 
 
This may be the most expensive stage. As it expands its products and ads, the corporation may be edging toward profitability. 
 
 
Growth capital 
This stage has exponential growth. VC funding helps to expand the business to new markets and sometimes develop new and additional product lines. 
 
A startup with a commercially available product should be profitable at this point. 
 
Mezzanine or bridge funding

If the company’s products and services have gained popularity, it may consider going public.

Funds can be used for: 

  1. Price cuts to drive out competition 
  2. Funding the listing or IPO of the business
  3. Takeovers 
 
If all goes well, investors can sell their shares and cease their relationship with the company. 

Advantages of Venture Capital

Ideal For Business Expansion

This type of investment gives the company the opportunity to grow. This might not have been doable through other strategies like bank loans. Bank loans involve collateral, and the borrower is obligated to pay back the loan. In VC, however, the investors are willing to take the risk because they believe in the company’s long-term progress. As a result, venture capital financing is advantageous for start-ups with high initial costs and limited operating history.

The Provision of Guidance And Expertise

Aside from capital, investors can provide advice, expertise, and consultation to guide and support the business owner or executive team. Typically, a member of the VC firm is appointed to the start-up company’s board of directors. This means allowing the venture capitalist to actively participate in the company’s decisions. Venture capitalists’ expert knowledge and guidance can be beneficial because they have experience building and enhancing start-ups. They can assist in the development of strategies, technical support, and resources to ensure the success of a business.

Helpful In Building Networks And Connections

VC firms have a large number of business connections. These connections may be beneficial to the growth and success of businesses. They can assist in making alliances with potential customers or business partners.

Large Amounts Of Venture Capital Can Be Raised

Banks are often hesitant to provide large loans to businesses, and qualifying can be tricky. Venture capital, on the other hand, is available in amounts ranging from R100,000 for a seed stage start-up to even more than R250 million for even more seasoned start-ups in big markets. There is also a temptation for start-ups to increase VC several times, enabling companies to obtain a large amount of capital which would otherwise be unrealistic.

Are VC Firms Are Trustworthy?

The answer is a resounding yes. Regulators strictly regulate venture capitalists. They are usually governed by the same rules as other types of private securities investments. Furthermore, because a large number of venture capital funds are provided by depository institutions and banks, know-your-customer and anti-money laundering regulations may apply. It is unusual to see a VC engage in unethical behaviour.

Additional Resources
An investment firm can provide active support in a number of important areas, such as legal, tax, and personnel matters, which is especially important at a crucial time in the growth of a new entrepreneur. Two potential key benefits are faster growth and greater potential.

Personal Assets Don’t Need To Be Pledged
In most cases, you will not be forced to allocate additional personal assets to the expansion of your business. Whereas many start-up funding options require owners to pledge their homes as collateral for initial investment, the majority of venture capital agreements exclude the founder’s personal assets from consideration.

Increased Publicity & Exposure Are Likely
Most VC firms have a public relations team and media connections, and it is in their best interest to get media coverage for your business. Being associated with a company can often add a lot of credibility to a start-up, especially for innovators who haven’t built any other successful businesses. The greater publicity can result in getting attention by potential employees, customers, partners, and other venture capital firms who are interested in investing.

The VC business model used by the Caban Group also looks to secure access to high quality and reliable business services for the entrepreneur. Access to accounting, marketing, IT and logistics services for instance is seen as some of the key reasons entrepreneurs approach Caban.

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Venture capital south africa
Block I, Georgian Place, 18 South Road, Kelvin , Sandton, South Africa.
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