Industry focused versus conglomerate venture capital in emerging markets of Africa

Submitted to: Wits Business School University of Witwatersrand Johannesburg, South Africa Master in Finance and Investment (2016)Venture Capital (VC) is a financial intermediation that is specifically well suited to finance and support the establishment and development of fledgling entrepreneurial enterprises. This industry is a need for the private sector, and it is the right fit type of PE platform for Africa’s developing economies. However, VC development in Africa is still immature and needs the correct strategies to succeed. Decisions that have to do with venture capital stages, products (industries), and geographical scope of investments, constitute some of the fundamental elements of the venture capital industry’s overall strategy. This has to do with whether VCs and angel investors specialize or diversify their investments according industry, stages and geography. This study is designed to investigate whether the investors in the venture capital industry focus on specific industries, regions, stage of venture development or they diversify their investments throughout these categories, in the emerging markets of Africa. Both primary data and systematic review of literature was used to determine what the participants of the market prefer and the reasons for their preferences. Interviews, questionnaires and secondary data were used to gain understanding of the preferences of individual investors and venture capital firms (VCFs). As much as the data collected was not enough due to the nature of the VC industry, the indication was that the VCFs in Africa do not specifically pursue an industry or stage. But when it comes to geographic areas they prefer the enterprises closer to them. However, the international VCFs that invest in Africa are very specific in terms of what industries, stages and geographical areas to pursue. In conclusion, there is still a lot that needs to be done in Africa, especially in making information available so that further studies can be done to understand and expand this exciting industry.MT 201

Crowdfunding's potential in the South African entrepreneurial ecosystem: Is there a role to play in catalysing venture capital?

The purpose of this research is to examine the potential influence crowdfunding could have on the early-stage financing ecosystem in South Africa. Particularly, how it could affect entrepreneurial deal flow as well as inform the venture capital decision-making process. The primary aim of this research is to explore the due diligence practices and perceptions of venture capital fund managers, angel investors and entrepreneurs to ascertain the extent to which crowdfunding can be incorporated into the South African entrepreneurial ecosystem and inform the investment process. The researcher, therefore, intends that this research enhance venture capital investment decision-making capabilities while adding to the existing body of knowledge on early-stage investing. Ultimately, it is hoped that the results of this in-depth study will accelerate the development of the venture capital industry in South Africa and unlock early-stage seed capital whilst promoting entrepreneurial activity and possibly providing insight and guidance to entrepreneurs faced with the challenging task of accessing financing. The researcher anticipates that the finding of this research will likely be of interest to players in the VC and early-stage new venture financing industry, including fund managers, investors, entrepreneurs and crowdfunding providers. The findings might impact the investment process, which has direct implications for capital providers, fund managers and fund seekers. Furthermore, this research might be of interest to researchers and those in academia concerned with this field, who might then conduct similar studies or decide to expand the research in new directions. By investigating crowdfunding's potential within the VC investment decision-making process, it is anticipated that the findings might be fed back into the marketplace and inform future VC investments in South Africa

Global Entrepreneurship Monitor 2008 The Netherlands

The Global Entrepreneurship Monitor (GEM) is a research program executed annually with the aim to obtain internationally comparative high quality research data on entrepreneurial activity at the national level. Over the years, GEM has expanded from 10 countries in 1999 to 43 countries in 2008. In this report, we focus specifically on entrepreneurial attitudes, activity and aspirations in the Netherlands. Hereby, we follow the entrepreneurial engagement ladder, consisting of latent entrepreneurship, earlystage entrepreneurial activity, established business activity and entrepreneurial exits. In order to measure earlystage entrepreneurial activity in a country, GEM developed the Total earlystage Entrepreneurial Activity rate. This rate includes both the prevalence of nascent entrepreneurs and that of owner-managers of young or new businesses. The group of nascent entrepreneurs refers to individuals within the adult population who are actively involved in their own new firm start-up, as full or part owner. The GEM data collection covers the complete life cycle of the entrepreneurial process. This cycle starts with personal assessments of attitudes and perceptions towards entrepreneurship. The life cycle continues with individuals who have the intention to start a business within the next three years (pre-nascent or prospective entrepreneurs). Next, the cycle refers to individuals at the point when they commit resources to start a business they expect to own themselves (nascent entrepreneurs), when they currently own and manage a new business that has paid salaries for more than three months but not more than 42 months (new business owners), and when they own and manage an established business that has been in operation for more than 42 months (established business owners). The aggregate of nascent entrepreneurship and young/new business entrepreneurship forms the TEA.

Macroeconomic impact on venture markets : Does the correlation exist?

Venture capital industry has been historically extensively researched due to its expanding size and the growing overall interest in it. However, macroeconomic perspective by its impact to the ventures growth potential and performance has been less at the center of previous studies. This study has concentrated on the macroeconomic environment and analyzed the potential consequences of its variations to the venture capital markets performance. The focus in the study has been on the United States venture capital markets due to its globally largest size, thereby providing strongest basis for finding significant outcomes within the research area. Furthermore, major risks affecting ventures are identified and key means for their management in the industry are presented. This study has identified multiple remarkable factors for risk mitigation at the portfolio level within the venture capital markets. The empirical section of the research process is conducted by gathering data from approximately 26 years of specific macroeconomic variables and United States venture capital variables. The empirical research is executed by utilizing regression analysis. The venture capital variables in the regression analysis consist of total amount invested, number of deals and average deal size within the United States venture capital markets. The macroeconomic variables chosen for the regression analysis consist of United States 10-year treasury bonds yield, Russell 2000 index, initial public offerings, unemployment rate and industrial production index. Overall, the principal era of interest and focus within the study includes the most recent covid crisis and previous economic crisis. The empirical findings of the accomplished analysis states that the United States venture capital markets are significantly correlated with the surrounding macroeconomy in certain aspects. Transitions within macroeconomy significantly affects the risk levels of ventures and therefore leads to risk mitigation or alternatively risk augmentation depending on investors risk preferences and defined risk-to-reward ratio. This provides essential insight to the venture capitalists decision making process regarding execution of ventures during perceived economic environment and eases evaluation of potential investments future growth prospects.Riskipääomasijoittamisen toimialaa on historiallisesti laajasti tutkittu sen laajenevan koon ja kasvavan yleisen kiinnostuksen vuoksi. Makrotaloudellinen näkökulma sen vaikutuksesta riskisijoitusten kasvupotentiaaliin ja suorituskykyyn on kuitenkin ollut vähemmän aiempien tutkimusten keskiössä. Tässä tutkimuksessa on keskitytty makrotaloudelliseen ympäristöön ja sen muutosten mahdollisiin vaikutuksiin riskipääomamarkkinoiden suoriutumisessa. Tutkimuksessa on keskitytty Yhdysvaltojen riskipääomamarkkinoihin sen maailmanlaajuisesti suurimman koon vuoksi, mikä tarjoaa vahvimman perustan merkittävien tulosten löytämiselle tutkimusalueella. Lisäksi tunnistetaan suurimmat riskisijoituksiin vaikuttavat riskit ja osoitetaan keskeisimmät keinot niiden hallintaan toimialalla. Tässä tutkimuksessa on havaittu useita merkittäviä riskien lieventämiseen vaikuttavia tekijöitä riskipääomamarkkinoiden salkkutasolla. Tutkimusprosessin empiirinen osuus on toteutettu keräämällä tietoja noin 26 vuoden ajalta tietyistä makrotaloudellisista muuttujista ja yhdysvaltalaisista riskipääomamuuttujista. Empiirinen tutkimus on toteutettu regressioanalyysiä hyödyntämällä. Regressioanalyysin riskipääomamuuttujat koostuvat sijoitetusta kokonaismäärästä, sopimusten määrästä ja keskimääräisestä kaupan koosta Yhdysvaltojen riskipääomamarkkinoilla. Regressioanalyysiin valitut makrotaloudelliset muuttujat koostuvat Yhdysvaltain 10 vuoden valtion joukkolainojen tuotosta, Russell 2000 indeksistä, listautumisanneista, työttömyysasteesta ja teollisuustuotantoindeksistä. Kaiken kaikkiaan tutkimuksen tärkein kiinnostuksen ja keskittymisen aikakausi sisältää viimeisimmän koronakriisin ja aiemmat talouskriisit. Saavutetun analyysin empiiriset havainnot osoittavat, että Yhdysvaltojen riskipääomamarkkinat korreloivat merkittävästi ympäröivän makrotalouden kanssa tietyiltä osin. Makrotalouden siirtymät vaikuttavat merkittävästi riskisijoitusten riskitasoon ja johtavat siten riskien lieventämiseen tai vaihtoehtoisesti riskien kasvattamiseen sijoittajien riskimieltymysten ja määritellyn riski-tuottosuhteen mukaan. Tämä antaa olennaisen kuvan pääomasijoittajien päätöksentekoprosessista koskien riskisijoitusten toteuttamista koetun taloudellisen ympäristön aikana, ja helpottaa potentiaalisten sijoitusten tulevien kasvunäkymien arviointia

Entrepreneurship in Emerging Economies: The Creation and Development of New Firms in Latin America and East Asia

This report presents the results of a comparative study of entrepreneurship in Latin America and East Asia. It focuses on the process of creation of new companies. That process is analyzed at three different stages: inception of the entrepreneurial venture, company start-up, and its early development. From the initial motivation to become an entrepreneur to the contacts needed to help solve problems as the business gets underway and grows, a number of factors affect the behavior of potential entrepreneurs. This study aims to identify the leading factors that stimulate or limit entrepreneurship at each stage of the entrepreneurial process in Latin America and East Asia. These leading factors are analyzed, a number of conclusions are drawn, and policy recommendations are reached for promoting entrepreneurship in different socio-economic contexts.SME, Financial Services, Business Development, Public Private Partnerships, Industrial Policy

Required Characteristics and Composition of an Optimal Entrepreneurial Team

Objectives The main objectives of this study were to identify characteristics that are required in an entrepreneurial team from both the entrepreneurs and investors perspective and how each of these characteristics impacts the performance of the team. Summary This study analyzed the required characteristics of an entrepreneurial team by reviewing literature and by collecting data through a qualitative research. The data was gathered from interviews to three entrepreneurs and three business angel investors. Conclusions The results indicate that investors need to see that an entrepreneurial team has good dynamics even at the cost of diminishing diversity in the team. The relationship between founding team size and team performance is surprisingly significant in the sample group. Prior startup and industry experience is seen to be beneficial if the team members can gain valuable contacts and knowledge from their work. Ownership also plays a role in entrepreneurial team performance, and should be used as a flexible tool instead of deciding who gets what in the very beginning of the venture

Fostering Innovation and Entrepreneurship: Shark Tank Shouldn\u27t be the Model

For the past half century, innovation has driven the economic growth that has made the American economy the envy of the world. For most of this period, venture capitalists provided not only the capital that new innovative companies needed, but also the management expertise

Entrepreneurial Finance in Egypt: Examination of the Opportunities for a Venture Capital Industry from an Institutional Perspective

This thesis aims to generate an understanding on entrepreneurial finance in Egypt. Furthermore it explores the opportunities for a venture capital industry as a promising tool in entrepreneurial finance. As one of the MENA region’s emerging economies, Egypt is facing economic challenges and high unemployment rates. The Arab spring uprisings added to the pressures upon the economy of Egypt; however, it managed to ignite an entrepreneurial spark among the youth population. Access to finance is an evident hurdle facing entrepreneurship in Egypt. Thus promoting entrepreneurial finance as a growth engine in anticipation to overcome unemployment and slow rates of start-ups might be a plausible solution. Through utilising an institutional theory lens and its institutional determinants, regulatory, normative, and cognitive forces, were found useful to analyse the current entrepreneurial finance environment. This research is an exploratory research; it takes into account both the supply side and demand side of entrepreneurial finance in Egypt. It adopts a qualitative approach for in-depth understanding of the domain and a grounded approach in regard to data gathering for its limited availability on the subject taking the form of a naturalistic enquiry. In doing so it follows an inductive approach to understand the interaction among the supply and demand of finance and the determinants shaping it. This thesis built on secondary data supplied by current research and reports and the primary research conducted via in-depth interviews and participant observations and analysed it from an institutional perspective. According to the findings of this research, it was plausible to argue that the regulatory pillar was held most accountable for the under development of entrepreneurial finance in Egypt. The normative and cognitive pillars both have supportive and inhibiting factors. However, the overall effect of normative and cognitive pillars could be positive if policy makers were able to factor in the cultural and normative forces in policies promoting entrepreneurial finance. The thesis further suggests policy recommendations to enhance entrepreneurship, entrepreneurial finance, and a vivid venture capital industry in Egypt

Women in enterprise : a different perspective

According to this detailed study of UK women and entrepreneurship produced for RBS by Aston Business School, women do not have any individual or collective entrepreneurial deficit. Instead, this report finds that it is a combination of challenge and choice. Whilst there is clearly a cultural challenge, women also choose to use entrepreneurship differently