Great Business Models Will Find Capital

Great Business Models Will Find Capital

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The results of FNB and Endeavor SA’s annual “State of Entrepreneurship” conference have been released in the second edition of The Entrepreneurial Dialogues. Focusing on six key industry sectors, including IT & Biotech, Agribusiness and Tourism and Hospitality, the conference also discussed a number of universal issues facing entrepreneurship in South Africa, including the importance of finding the right funding partner and how a good business model will find capital.

Focus on customers, not cash

One of the key points agreed upon by the main panelists was the fact that there is an overemphasis on the importance of capital amongst early-stage entrepreneurs. The main panel, which included Discovery CEO Adrian Gore, GIBS lecturer Greg Fisher and Endeavor SA MD, Malik Fal, agreed that finding and retaining attractive customers is far more important for start-ups than chasing capital. In fact, if a business focuses on getting customers and succeeds, capital should naturally follow.

“If you have a successful product and a successful company early on, you will find the capital you need,” said Gore. “On the other hand, if you are working too hard to raise capital, it probably means something is wrong with your business model.”

In general, the panel reached the conclusion that the South African economy does not produce enough ‘disruptive’ entrepreneurs and that large companies are seldom challenged. This could be the result of a lack of competence, competitiveness and drive amongst the entrepreneurial community rather than structural capital problems.

Finding good funding partners

For those with businesses that do attract funding partners, the panel discussed the importance of finding a good partner for the success of the business. Overall, funding partners should have a long-term outlook, be tolerant of the possibility of failure and be patient with regard to drawing cash from the business. The partner shouldn’t only be a source of funding either. They should provide mentorship, emotional support and friendship. Entrepreneurs who find a partner willing to believe in the future and upside of their business when no-one else did must be prepared to share their success with the funder as well though. Entrepreneurs who ask their funding partner “When the timing is right and I need you less, can I buy you out?” are short-sighted, unfair and likely to cause problems in the long run.

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