WE have seen a lot of graduates failing to find the jobs they had hoped for.
We have graduates failing to find anything just to consider it as work.
We have seen the graduates lacking capital to sustain their areas of passion in business.
We have seen financial entities shunning these graduates due to lack of experience or lack of great ideas that can be turned into business ventures.
We have bemoaned lack of collateral when it comes to borrowing funds from financial services.
We have seen unemployment rising to unprecedented levels and that has increased socio-economic ills.
This has troubled governments, private sector and the general population.
We have seen great ideas getting stunted growth leading to frustrations and disillusion in investors or those exhibiting entrepreneurial tendencies.
Thus, has led to more fantasies on being dealers than leaders in entrepreneurial activities leading to glutton and self aggrandisement to the detriment of the entire economy.
Where do you find patient capital that will have a long term view in equity investment without being usurious in nurture?
Where do you find an investor that is willing to take the risk with you and offer to “baby sit” an up-start through the growth phase?
Where do you find an equity investor that will run with you until initial public offer (if it will come to that)? Where do you find an investor that offers management expertise while you upscale from a start up? It is only the venture capital world you find such?
Definition
Investopedia defines venture capital as “financing that investors provide to start up companies and small businesses that are believed to have long term growth potential”.
It goes on to say “generally venture capital comes from well-off investors, investment banks and any other financial institutions.” It also argues that “venture capital does not always take just a monetary form, it can be provided in the form of technical and managerial expertise.”
Angel investors
These are normally a group of investors willing to invest in start up and are not as pushy as venture capitalists.
Angel investors offer funding to innovative enterprises and tend to be entrepreneurs themselves or executives or retired business people.
They are looking for companies, they are looking for well-managed, fully developed business plans and poised for substantial growth. These investors practise co-investing. They invest alongside a trusted friend.
Incubation/mentorship
Nurturing start-ups, mentorship management and infrastructure development has been the cornerstone of venture capital.
These provisions are being brought by venture capitalists to try to reduce the failure rate of start-ups.
The risk for venture capitalist is very high.
Moneys have been lost in start up investments and we are talking big monies here. It’s a gamble that the wealthy take or just investors willing to see business come up and be brands for the future.
In Zimbabwe you can bring together the following to create one fund: banks, insurance companies, tertiary institutions, pension funds, Government institutions, private funders and international development agencies.
The Minister of Finance and Economic Development, Professor Mthuli Ncube, has hinted plans to set up such funds, coupled with the Sovereign Wealth Fund. This is the light that is required.
Exit strategy
The venture capitalist normally cashed in on his investment through dividends, profit share or by being bought out by the start up once it reaches maturity stage.
In certain instances the start up could be sold to established companies and the investors cashed in based on the agreed terms.
In situations where there is an Initial Public Offer (IPO) the venture capitalist can decide to cash in or still remain a passive investor or shareholder.
Silicon Valley
The Silicon Valley in San Francisco Bay Arena in Northern California has perfected the art of venture capitalism in the world of tech and ICT.
It is considered an area of research parks, technology centres that supports innovation and entrepreneurship.
Is Africa ready? The question has been on for ages if Africa is ready for venture capitalism?
Are the start-ups hungry and or bold enough to position themselves for the future, which is ready for the taking?
Are venture capitalists innovative enough to tailor make solutions to upcoming entrepreneurial concerns? Are ideas being generated and pitched to people with patient capital?
Are the ideas generated of an unparalleled nature? Are the ideas commercially sustainable and not theoretical assumptions written on paper?
Are these ideas from many different facets of the community and offer solutions to the prevailing social-economic challenges at large?
Do these solutions come with creation of numerous jobs? The answers to the above tell a story of preparedness to embrace capital venture phenomenon.