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ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW BUSINESS VENTURES

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Title: ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW BUSINESS VENTURES


1
ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW
BUSINESS VENTURES
  • August 19th 2004

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.

3
DISCUSSION 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

4
What 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

5
What 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

6
The 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?

7
The 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.

8
The New Business Road Test
  • The 7 key issues that astute investors examine
    before investing
  • The 7 domains that characterise attractive,
    compelling opportunities.

9
The 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

10
The 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.

11
Sources 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!
12
Sources 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

13
ATTRACTING INVESTMENT CAPITAL TO FINANCE NEW
BUSINESS VENTURES
  • August 19th 2004

TK Wainaina
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