Opening the Way for International Investors

Opening the Way for International Investors

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When Zach George arrived in South Africa for the FIFA World Cup in 2010, he had already spent a decade working as a top investment banker on Wall Street in corporate finance and was looking for something new — a way to make a difference.

What he wasn’t expecting was to find it in Cape Town. “The market for entrepreneurship in South Africa is huge — and growing rapidly. I’d never seen anything like it before outside of Silicon Valley. Without second thoughts, I sold my flat and furniture in New York without returning home. This was where I wanted to be.”

What are you currently doing in South Africa?

I run the pan-African operations of U-Start — a boutique advisory firm that puts professional entrepreneurs in touch with international investors (VCs, angel investors, corporate and family offices, investment funds) focused on innovative, high-growth, and scalable projects, together with providing them with the right business tools and resources to succeed.

I also provide specialist business and financial advice to senior management teams at corporations, impact investment funds, enterprise development institutions, foundations and NGOs. I try to set aside time to mentor and train entrepreneurs as well.

What’s the secret sauce behind U-Start?

It’s based on an excellent investment network. Many investors are interested in developing markets, but unfamiliar with local conditions and businesses. There isn’t enough international in-person understanding of entrepreneurs and businesses available in South Africa.

U-Start has developed a large network over the years. On the investment front, we have close personal and business connections with European family offices, venture capital and angel investors through our head office in Milan, and I was involved in enterprise risk management, strategic corporate finance and mergers and acquisitions at global financial services firms in the US.

 

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On the entrepreneurial front, we work in partnership with top South African accelerators, incubators, entrepreneurial associations and academic institutions. I wanted to help create a bridge between the two.

How does U-Start work?

We have a basic model that allows businesses to list for six months for R450, or a whole year for R750. This gives them access to funders and international markets; however what I quickly realised when I started working with start-ups was that many businesses that have potential aren’t investor ready because they lack certain crucial elements. For this reason, the site is full of free resources that will assist you to get your proposal investor ready.

We’ve given free access to members of our partner associations and businesses that come to us from renowned accelerators and incubators in Africa. We also organise conferences, seminars, workshops, investor clinics and opportunities for businesses to get the help and resources they need.

What’s a major misconception you are often faced with?

Many entrepreneurs don’t think that capital can be broken down into different types and functions, and may appeal to different investors.

An entrepreneur who is looking for R2 million in capital for example will approach just one type of investor or alternatively send a carbon copy of their application to a range of funding sources.

However, that R2 million may be broken down into R1 million for capital expenses like equipment, machinery or research and product development, R500 000 for operating and running costs, and R500 000 for working capital.

Venture capitalists and angel investors will usually fund capital costs and development, provided there is demonstrable proof of concept and an identifiable market and value proposition. They don’t need returns immediately, and an equity investment with a three to five year investment horizon would typically suit this type of deal.

If an enterprise has a social or environmental proposition, government agencies, NGOs, foundations and corporate social investment funds are better suited to fund operational and running costs. What they are interested in is that the enterprise stays afloat, maintains employment and even hires more people.

For working capital, approach banks or enterprise development institutions. For every R1 you spend with suppliers, there is an associated cash flow outlet via sales, which suits more risk-averse financial institutions.

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