3 Trampolines is a blog opportunity to contribute to the We Are White River community and will be a short summary of lessons learnt in my journey on developing www.abebaflowers.co.za and hopefully notes to other start ups.
In light of recent announcements that the South African economy has entered a technical recession (again), starts ups should not see this as a stumbling block but rather an opportunity to sell a vision of growth to investors. History has fortuned the bold in uncertain times and this is proven with the industrial revolution in 1860 to 1870, where companies such as JP Morgan Bank, Standard Oil and American Tobacco thrived for various negative and positive social-economic policies of the government of the time. Dotcom Crash of the late 90’s where companies such as Amazon, Apple and Paypal survived and flourished including the most recent mid 2000’s housing market crash, where companies such as Tesla, Instagram and Facebook bloomed with breakthrough technology. Granted all the examples above are of companies based in America, but the environment and opportunities that allowed them to flourish are relevant to White River and South Africa as a whole including the mix of private and public investors at certain stages of development.
Starting at the retail end of your venture is the best way to break into any industry, find a product that resembles yours and begin to sell it physically and online. This will provide you with a base line for finding suppliers, customers and realities of your start up. Angel Investment Capital is usually friends, family and frontrunners who invest in you as person rather than your business. It is easier to find people you don’t know to invest in your company after you’ve proven that your own money and families money is in the game. The Angel Investment Network, is a fantastic online platform to find such high net worth individuals whom are wiling to take risks for return on average above 25% to 30% per annum with a 12 to 24 month turn around. Government institutions such as NYDA provide grant funding of up to R50 000 per annum for equipment purchasing and not liquid capital, thus it would be wiser to approach them once your start up is active as to not be held idle by internal approval bureaucracies.
Seed A capital is just the repetition of the above but at a higher cost and lower return on investment rate such as on average above 20% to 25% per annum with a turn around of 5 to 10 years. The Angel Investment Network is still a reliable platform to access global private investors, it is highly unlikely that institutional venture capital would invest at such an early stage business and bank loans would not be advisable but most likely necessary in your personal capacity to keep operating. Government funding available at this stage would be the Department of Trade & Industry (DTI), MEGA (Mpumalanga Economic Growth Agency), Small Enterprise Finance Agency (SEFA) and Industrial Development Corporation (IDC). The funding rounds continue to Seed B, C etc with the goal for most companies to trade publicly on a stock exchange.
In conclusion there are various forms of funding available, but for start ups to be successful, we need more high net worth individuals to stop taking low risks on franchises and start taking high risks on concepts and morale characters. Government funding is a complex sale, it requires stacks of useless paper filling, time delays, criteria box ticking and engagement with opportunists whom may have ulterior motives. These risk are present in the private sector as well so investors must do their due diligence, be prepared to lose money but not confidence. Starts ups must walk the talk and understand that your reputation and financial records are worth their weight in gold.
Founder & CEO
Why 3 Trampolines – In my opinion, most start ups will need 3 good bounces to make 1 great leap.
This blog is the opinion of the writer and does not necessarily share the views of the host provider.