This much we know: South African entrepreneurs have their work cut out for them. The chances of their businesses failing within the first three years are between 70% and 80%. Unless they were fortunate enough to be among a small minority who has tertiary education in business science, they lack almost all the critical skills and knowledge required to establish, run and grow a successful enterprise. But perhaps their two biggest challenges remain ever-elusive seed capital and a lack of objective, professional, practical business advice.
This is the gap that has provided Cape Venture Partners (CVP) with a market. The company offers two critical services to high potential technology entrepreneurs: a contact base of potential international and local investors (including private equity funds, venture capital funds, angel investors and a range of institutions), and hands-on business advice and mentorship that accelerates the development of SMBs.
The company’s four partners – Geoff Hainebach, Tony Mallam, David Murray and Andrea Böhmert – have combined a wealth of experience in business with a specific focus in the technology field. Murray tells the story of how the business started: “Geoff was chairman of the Bandwidth Barn in Cape Town and Andrea, who is now a board member as well as the chair of CITI (Cape IT Initiative), was involved in interviewing all the entrepreneurs in the Bandwidth Barn to try and determine why, with such great technology concepts, they still weren’t managing to be successful.”
The answers they found were enlightening, to say the least. Murray elaborates: “Most technology entrepreneurs spend their time developing high-potential technology solutions. But as we all know, it takes more than a great product to make a successful business. And what we learned was that so many of them simply don’t know how to run a business – they know next to nothing about finances, accounting, marketing, sales, client service and there is nowhere they can turn for advice and input on these things. Even if they do manage to grow, they don’t know how to put structures in place to manage this growth.”
Banks are notoriously risk-averse when it comes to funding most SMBs, but particularly those in the IT space. “Add to this the fact that there are very few investors that offer early-stage seed capital and you can understand why it’s so difficult for these entrepreneurs to get their hands on the kind of money they need to set up and grow,” he says. However, Murray adds that while entrepreneurs’ complaints about the difficulties of accessing funding are a reflection of reality, their lack of understanding about what investors require doesn’t make the process any easier. “Because they don’t know what investors’ requirements are, they are totally unprepared to meet their requirements,” he explains.
The proof of Cape Venture Partners’ success lies in the track record of its clients. “Clickatell is one of our biggest success stories. Tony was the company’s first angel investor. It was started by Pieter de Villiers out of his dining room and today is one of the dominant bulk sms firms in the world,” says Murray. BizCommunity is another case in point. “We’ve been working with them for the past two-and-a-half years and in the last 12 months alone they have quadrupled their turnover,” he adds. The company has also been involved in training and mentoring historically disadvantaged SMBs which are participating in the Bandwidth Barn’s VeloCITI programme. “We’ve been showing them the basic ropes of business and some of them are really starting to take off. It’s very exciting to watch,” he says.
Looking back, Murray reflects on the challenges CPV experienced as a start-up itself. “Sourcing funding for early stage technology entrepreneurs was much harder than we thought it would be. Venture capital firms are more interested in later stage investment and South Africa has no formal angel investor network,” he relates. The company is currently in the process of raising its own early stage venture capital fund and Murray anticipates announcements on this in the near future. The news will no doubt be welcomed among the IT SMB community. But then, any growth in this business can only be good news for South African entrepreneurs.
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