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Invest in the best

ENTREPRENEURS seeking venture capital (VC) financing are quick to invest in their products and business plans but don't spend enough time investing in their most important asset - themselves.
 
This was a point well made by Stephan Lamprecht from Venture Solutions on Wednesday, when he presented research conducted by his firm into the South African venture capital sector.

According to research findings, VCs reported receiving between 200 and 300 proposals each year. Of that number, just 15% were deemed worthy of interest to the investor and a paltry 6% were considered for a due dilligence.
 
In other words, your chances of even getting in front of the investor are slim to start off with.
 
Investor feedback was that a large percentage of the proposals which moved to the top of the pile were in fact those that came through their professional networks, as opposed to the shotgun approach of emailing a document and hoping for it to be seen.
 
Put bluntly, if you can't recognise your potential investor in the shopping centre or pub, you're going to find it very difficult to catch their eye with your investment proposal.
 
Before the VCs start sweating that I have just handed out a green light to be stalked, let me qualify the statement. Of those 200 to 300 proposals, many are being shopped around to multiple firms with little more than the "to whom it may concern" being changed.

If you don't actually understand what the VC firm is looking for in terms of the type of businesses it invests in, you can't complain that your document never gets read.
 
And the same principle applies beyond VC.

How to put yourself in the limelight
 
One of the questions I get asked a lot is why certain people are always getting airtime and space to comment in an article, whereas an equally intelligent person is ignored.

The short answer is that those who get the airtime invest in that particular professional relationship.
 
That doesn't mean getting yourself a PR agency to send gifts to journalists, but it does imply that if you want to be front of mind for reporters you need to provide insightful comment and be available and contributing to their work.
 
Another very underrated factor is the speed benefits brought about by knowing the right people.
Not so long ago I interviewed Allon Raiz from Raizcorp, and I asked him some questions about lessons he had learnt as Raizcorp grew.

He said that as his professional network spread further, things could be done so much faster. Instead of having to go through a call centre, he could contact a senior manager or CEO for a blunt, professional opinion.
 
Other factors are matters like access to technology, research and industry skills - all critical issues for small businesses and entrepreneurs.
 
Think of your small business like a basketball game. In basketball, you are always competing against the "shot-clock"; if you can't move the ball forward and sink it, it will be given to the opposition.

You could pass the ball backwards and forwards underneath your own hoop for the entire game and you would be punished. You need the guys who can move the ball around to drive you straight up the middle through the opposition.
 
I think it is some good advice from Stephan, and entrepreneurs who are seeking finance should take note.
 Build the people around you and try and find ones who can correct some of your own shortcomings, and you will give yourself a far greater chance of survival.
 
 - Fin24



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