Title: ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW BUSINESS VENTURES
1ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW
BUSINESS VENTURES
TK Wainaina
2- Today, there are more than 15 million
entrepreneurs in the US and 2 million
entrepreneurs in the UK actively engaged in
starting new businesses. -
- Most of these ventures never get off the ground.
Of those that submit their business plans to
venture capitalists, less than 1 will
successfully raise financing.
3DISCUSSION TOPICS
- What is the investor/venture capitalist looking
for? - What is the entrepreneur looking for?
- The New Business Road Test
- Sources of venture capital financing
4What is the Entrepreneur looking for?
- Peace of mind - escaping the emotional
roller-coaster - Soft equity or debt capital
- Financiers with staying power
- Value adding partners
- Unobtrusive partners
- (avoiding the investor from hell)
- The Bill Gates story
5What is the Venture Capitalist looking for?
- Peace of mind low maintenance investment
- Above average return on investment
- Clear exit mechanism (quick exit when disaster
looms) - Credible/high integrity entrepreneur
- Philanthropic outlet
- Corporate Governance
- The Bill Gates story
6The New Business Road Test
- A Must-Do before writing the business plan
- Why 9.9 out of every 10 new ventures fail to
raise funding - You want your venture to succeed the first time.
- The venture capitalist has hundreds of other
business plans to consider why should they
decide to invest in your venture?
7The New Business Road Test
- Gives the entrepreneur the opportunity to opt out
early and avoid impending disaster, before
investing time and energy in a business plan. - Provides a clear customer-focused vision of why
the venture makes sense from a people, market,
and industry perspective.
8The New Business Road Test
- The 7 key issues that astute investors examine
before investing - The 7 domains that characterise attractive,
compelling opportunities.
9The New Business Road Test
- Is the market attractive? macro-level
- no. of buyers, monetary size of market,
volumes sold. - Is the market attractive? micro-level
- focusing your venture one a segment of
customers in the overall market - Is the industry attractive? macro-level
- threat of entry, buyer power, supplier power,
threat of substitutes, competitive rivalry - Is the industry attractive? micro-level
- sustaining your competitive advantage (patents,
trade secrets, high cash flow
10The New Business Road Test
- People The Teams business mission, personal
aspirations and risk propensity - opportunities often assessed with certain
preconceived preferences on market, industry,
risk appetite - People The Teams ability to execute on the
Critical Success Factors - matching CSFs and industry, with teams
ability to perform on them. Dig, dig, dig into
the management team can they deliver? - People The Teams connectedness, up, down and
across the value chain - Network, network, network. The ability to
combine tenacity with a willingness to change
course.
11Sources of Venture Capital Financing(ranked by
probability best to worst and scale smallest
to largest)
- Family
- Friends
- Fools
- Investment Clubs/Groups
- High Net Worth Individuals
- Private Investment Companies FCS, IPS, Sameer
- Public Investment Companies ICDCI
- Development Finance Institutions (DFIs)
- ICDC, IDB, PTA Bank
The 3 Fs
Motivation is love support. Not to be mistaken
for confidence in venture!
12Sources of Venture Capital Financing(ranked by
probability best to worst and scale smallest
to largest)
- Private Equity Funds Aureos, Actis, AIG IF
- Multilateral Donors IFC, FMO, DEG
- Local banks
- Capital Markets
- Private Placements
- Public placements
13ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW
BUSINESS VENTURES
TK Wainaina