Work experience: – current – CEO and co-founder HAVAIC – early stage venture capital – previous – over 10 years investment banking and capital raising experience at Rand Merchant Bank and Standard bank – specialisation – investing in and raising capital for first time issuers in the capital markets having raised more than USD10 billion of finance for a myriad of issuers ranging from start-ups to multinationals to governments to projects such as power plants Achievements: – 2 Bankers Awards – African deal of the year Education: – Honours, Business Science, UCT
Funding life cycle – the role of VC and other funding sources
Companies require over the course of their lifecycles changes in funding strategies, funding sources and the approach to accessing these sources. Obtaining funding is hardest when companies are young and relatively unproven. However it is important to note what investment terms are agreed to early on in the companies lifecycle can have consequences to accessing capital in the short, medium and long term. As such it is important for such companies to seek both sound advice and investment from trusted investors from early on. In terms of the funding cycle, in general instances, new company entrepreneurs are compelled to turn to friends and family for funding once they have exhausted their own resources. This often takes shape by way of personal loans underpinned with some sureties. As they gain traction – either in terms of demonstrating the viability of their concept / demonstrate a prototype they are able to access more formal forms of capital. This capital can be more formal in the sense of the structures that investors typically use, but also in the added value the providers of that capital bring, for example advisory roles and Board seats. Early stage companies especially benefit from support from incubators and venture capital providers. Incubators create collaborative environments in which start-ups can interact and provide access to service providers which enable the companies to access qualified advice. Venture capital providers seek to facilitate introductions to prospective clients, assist in the formalisation of internal processes and bring strategic thinking into the decision-making or goal settings of the companies. Firms seeking funding from venture capitalists or participation in incubation programs need to consider the softer issues as well as considering financial issues: their needs to be a trust in the venture capital provider’s ability and willingness to nurture the business. The capital used takes on increasing variety of forms as more sophisticated / informed investors seek to manage the risks to which they are exposed – for example preference shares relative to ordinary shares. They also seek to defer key decision points through the use of hybrid financing. For example convertible loans allow capital providers to defer decision as to whether they wish to be long-term participants while allowing for preferential treatment in the event of failure. Once the company has demonstrated further traction by way of profitability and steadily increasing cash flow, the company can start moving away from the above sources of equity like capital and approach the likes of traditional funders such as commercial banks to provide leverage, i.e. serviceable debt, into the business. Here companies can consider bank loans and when large enough bond finance. Throughout this funding lifecycle, it is also important for the entrepreneur to have a clear view of where the company is going and what their exit is, i.e will they exit to a VC, sell to a trade buyer or even consider an IPO. Understanding this will inform the funding strategy and funding positioning in the market, and what steps need to be taken early on to ensure long term funding and business success.