How Seed Engine works
Seed Engine is an innovative business accelerator programme that pairs seasoned entrepreneurs, venture capitalists, mentors and business coaches with start-up tech entrepreneurs whose distinctive and disruptive technology business concepts have passed an application and evaluation selection process in exchange for a 20% equity stake in the business.
The offering includes a 12-week business boot camp and R100 000 capital. A Demo Day gives the entrepreneurs an introduction to potential investors to attract further funding.
Seed Engine holds three programmes a year for up to ten dynamic, investable start-ups. The next one starts in September, and next year’s first programme starts in February.
How important is it to have a unique idea?
To be competitive in today’s market, you must have a novel business idea that sets your business apart from the countless others competing for consumer spend. The best ideas are different and unique in concept, and they meet a need.
That will result in high returns over a long period of time, which is what venture capitalists look for. If your idea has a shelf life, it must have high barriers to entry so that competitors can be kept at bay.
Venture capitalists are interested in innovation and disruptiveness – they want to know how much you’re going to annoy the big guys. They also want to see scaleability and international flavour.
Why is scaleability so critical?
Venture capital companies look for businesses that can achieve a multiplication of enterprise value in a relatively short timeframe. That means your product or service should be generic enough to be applicable to many people.
It should be able to grow quickly in other contexts and perhaps other countries. You need to be sure that if you ramp up the number of users or customers, it will show in the financials.
Scaleability means that the business has the potential to grow its revenue base significantly faster than its cost base.
What is the ideal composition of the start-up team?
I only look at teams of people, not lone entrepreneurs. The reason for that is that life happens – if the entrepreneur gets run over by a bus, you’re left with a business and no one to run it. I look for a team that comprises a CEO and a CTO – if a technology business does not have a chief technology officer, it will have to outsource all development which is expensive and makes it difficult to innovate.
Because we apply lean start-up methodology, we encourage focusing on continuous innovation through vigorous testing and a build-measure-learn-feedback loop.
Instead of spending a long time on development and only then allowing customers to use the product, the lean start-up approach provides customers with the minimum viable product as early as possible in the development process.
From there you iterate continuously based on ongoing customer feedback. To do that, the business has to be able to pivot swiftly when necessary to move from alpha to beta and to the final product. Only a business with a good team is able to do that.
The next most important function is marketing. When you have a CEO and tecchie working together, there has to be a marketing person who will understand your target market and potential clients.
What does a start-up need to do to attract funding?
First, have a business model that has been validated and tested and is suited to the business. The business model describes how the company makes money – it shows how you are monetising the opportunity you have identified, generating revenue and making a profit.
If you have multiple revenue streams, demonstrate how those can work together optimally.
Second, focus on financials. How well do you understand your cash flow? We don’t expect people to be experts, but they must know their finances and be able to prove that their key assumptions are thoroughly researched.
Passion is the third critical component. There is no way I can walk into an investors’ meeting and sell a venture as well as the owner would do, even though I may know a lot about their business. The founders need to demonstrate their passion and show that even if things do not go according to plan – which they won’t – the founders are married to their business regardless.