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Venture Capitalism Around the World

When talking about entrepreneurship and venture capitalism, we tend to think no further than the well developed countries around the world – at least I do. I don’t tend to think about startup businesses in places like India, Sudan, or other still developing countries. Unknown to some, there is a whole network of companies that focus solely on helping fund ventures and companies in developing countries around the world. This blog post will look at a few of these Venture Capital Firms around the world, along with a few of the ventures that they have helped fund.

Acumen Fund: The Acumen fund is a company that raises charitable funds in order to invest in companies, leaders, and ideas that are tackling the problem of poverty around the world.Acumen became a business in 2001, and actually got its start through funding in a seed round. Some of the companies original investors were Rockefeller Foundation, Cisco Systems, and other individual investors.Instead of simply giving grants to people, Acumen wanted to be sure to invest in people who had the experience and capability to bring “sustainable solutions to big problems of poverty.” Overall, the companies goal was to create a venture capital fund for the poor, supported by philanthropists that were willing to take a risk and a bet on a new approach. Currently, the company is funding in six regions: India, Pakistan, East Africa, West Africa, Latin America, and America Latina.

Acumen Fund Investments: There are many investments that the Acumen fund has made around the world. One example is SEED. SEED is a company that manages low-cost private schools in India, helping to improve schools’ operations and instruction. Acumen has invested a total of 650k since 2015. Another investment that Acumen has made is in Insta Products, a company that helps provide micronutrient-rich foods in Kenya. This company has impacted 322k lives and raised more than 1.5 million dollars since 2008.

Gary Ghost Ventures: Gary Ghost Ventures works to eliminate poverty and strengthen communities through catalytic, early-stage investments in the developing world. In 2005, this company changes its focus to an impact investment approach, and in 2006 the Gray Matters Capital portfolio, which focused on mission-related investments. This Venture company is headed by president and CEO Arun Gore, a native of India who is well versed in the business industry all around the world.

Impact Venture Investments:

M-Kopa – A mobile technology company in Kenya that help locals acquire solar power products by offering creative payment plans and a distribution model that is customized to the need of each customer.

Babajob – A startup company that was founded and based in Bangalore. This company uses web and mobile technologies to help employers connect with the “Bottom-of-the-Pyramid” (BoP) informal sector workers (maids, cooks, etc.) in order to help combat poverty by helping those at the BoP find jobs to help support themselves and their families.

Companies like the Acumen Fund and Gary Ghost Ventures are doing much more than giving money to startups in developing countries. They are both helping decrease the gaps between developing countries and already developed countries. They are helping build leaders and entrepreneurs globally, and allowing them opportunities to not only run a successful and profitable business but to also solve crucial problems in our global society. Next time you think of startups, venture capitalism, or entrepreneurship, expand your definition and remember that this network of creating and funding companies happens all around the world!

Swimming with Sharks – The Accuracy of Hit Show Shark Tank

As I’ve stated plenty of times throughout my blog, I have an almost unhealthy addiction to abc’s hit show Shark Tank. For the years that I’ve watched as entrepreneurs either strike a deal or get eaten alive by the money hungry sharks, I have always been entertained. Often though, I find myself wondering how accurate the process is to everyday, “regular” startup fundraising. This week, I found the article Why ABC’s Shark Tank Is Entertaining, And 100% Wrong On Dealmaking, and decided to give it a read. The first thing that the article discusses is the bidding war that often goes on between the sharks. The author of the article, Steven Rosenbaum, said the following regarding the topic:

“Whether you present to partners in a fund, or a group like New York Angels, they’ll speak in one voice and they’ll invest on the same terms. So the idea that you’ll have an auction among partners or peers is simply fiction.”

Although my only experience watching pitches to investors is Shark Tank, l understand that this is something that doesn’t happen in a natural company’s pitch. It’s pretty evident that the auctioning on Shark Tank is simply added drama and entertainment for the consumer of the show. This statement from this author made me wonder whether or not the deals agreed upon were final or if there was a process that occurred after the show ended between the investors and the entrepreneur. This led me to the article ‘Shark Tank’ Star Robert Herjavec: Deals Fail Because Of Entrepreneurs, Not Investors, where Robert briefly explains what happens after the show and why deals sometimes fail.For this post, l was not really looking to dive in to why deals fail, instead, I was interested in what Robert had to say about the reality of the show. When talking about the show, Robert says,

“It’s really our own money, and so we go through that due diligence period and find out what’s real. At the beginning, if a deal didn’t close, it was because we didn’t close it. Now it’s the complete opposite. A lot of people come on and then change their mind. They get the publicity from the show and then don’t want to close. I would say 90 percent of the time now, it’s the entrepreneur [who backs out].”

this quote said a few things about the accuracy of Shark Tank. The first is that the sharks to in fact invest their own money and they do go through the due diligence process with each company that gets a deal on-air. On the other hand, according to Robert, not every entrepreneur that accepts a deal on-air, goes through with the deal when the cameras stop rolling.

The second aspect that Rosenbaum touched on in his article was the importance of a company’s valuation. Kevin O’Leary, who is described as the “Simon Cowell” of Shark Tank always attacks entrepreneurs about there outrageous valuations. Again, l think this adds a dramatic aspect to the show that keep people watching. Although valuations can be important, I don’t think that all investors make it the most important aspect of a pitch they listen to. More importantly, often times, the valuation is directly linked to revenue by the sharks which certainly is not the only way to value a company.

Overall, I think Shark Tank gives the average consumer a fairly reasonable inside look at the entrepreneur and investor world. Although Shark Tank exaggerates aspects of the show and doesn’t fully close a negotiation on camera, it is expected that characters and situations will be over the top for entertainment purposes. It’s a fun and great show to watch, but I wouldn’t recommend any true entrepreneur to base their pitch on what they’ve seen on abc’s Shark Tank.

Building an Empire: Creating a Start-up that Doesn’t Fail

Let me begin this post by saying that when we speak of failing, we are not talking about the road blocks that are inevitable for a new start-up. These things are almost essential in building a successful company. Without road blocks, a company has little opportunity to learn from its mistakes and grow as a business. Instead, this post will talk about ways to help the prevention of your start-up business failing entirely, having to close its doors and no longer run as a live business. The article that helped focus this week’s post is one written by Nicole Fallon titled, Beating the Odds: 4 Steps to Startup Success. The article features four pieces of advice to help a start-up overcome the hurdles which include: Build your Niche, Create Interest in your Start-up, Be Proactive about Market Changes, and Stick to your Strengths. The main thing that I got out of this article was to stick to your company’s core while adjusting to the market. As an avid Shark Tank watcher, this made me think about some businesses that did just that, and one business in particular came to mind, The Home T, a company that “helps you show off your home state pride, stylishly” through “insanely soft” shirts. This was a company who was simple, and stuck to their niche market, they did not try to expand to compete with other clothing brands like Sean John or Calvin Klein. Ryan, the CEO, stuck to the company’s strengths, soft, simple, stylish t-shirts that displayed a state outline and the word, “Home” across the chest. He had a large interest in his company, even giving his own Story about his own home on the company’s website. Although the company did not end up getting a deal on the Shark Tank episode (I will post the link below for all my other avid watchers), the company still shows to be a successful one, getting people to sport their Home T’s all across the nation. This article gives a good starting place for many investors, as there is a great number of people that create a business and want to tackle a million things rather than being incredible at one specific area that they have a high interest in. Although this won’t guarantee start-up success, it will absolutely help reduce the chance of failure.

P.S. Blog – Investors do not always equal start-up success

The Home T company was one that was unsuccessful in reaching a deal with any of the Shark Investors on Shark Tank, yet the company continued to grow and be successful in the market. While doing my research on The Home T company, I stumbled across another interesting articled titled, “I turned down 3 offers on ‘Shark Tank’ — here’s what I learned” written by the company’s founder Ryan Shell. Ryan talked about three important things that he learned after the show. The first, Know your numbers, it is tough to compete with the sharks, or any investors for that matter if you don’t understand the numbers of your business. Also, knowing your stuff makes you look like that much more of a expert in your business; and you should in fact, be an expert. The second, Manage the Sharks (or investors in our case). Use questions asked to help convey your story, don’t get too flustered and lost in the shuffle so that major pieces to your story are left out. Lastly, Don’t be Scared to Push Back. Not getting a deal with an investor is not the end-all-be-all, something we have seen in this company’s case. If you know your stuff don’t be afraid to negotiate and push back with investors or even say no to a deal if it is not right for your business. Overall, when thinking about success with your start-up do not automatically jump to the conclusion of money, investors, backers, etc. equal success because in many cases, they do not.

Want to Watch The Home T’s Pitch on Shark Tank? Check it out Here!

Fund Thy Neighbor – P2P Lending in the Startup World

If you don’t already know, peer-to-peer (P2P) lending has grown tremendously with the growth of social sites, and the ever growing fact that people are becoming more and more connected via these technologies. P2P lending is known as, “the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.” (Wikipedia). With startup funding being a constant issue, P2P lending has found its way to the startup realm. The article, How Peer to Peer Lending is Financing Top Startups, discusses some of the positives about P2P lending and why it may be more beneficial than going to a bank for a traditional loan. The main reason discussed in this article was that many banks are looking for companies that are slightly more established and getting funded can be a difficult and almost impossible process for startups. Getting funded through P2P lending is close to borrowing money from a family or friend, just through a much larger network than those most people generally have available to them. Peer-to-peer funding is something that I think every business should look into, as it is a cheap and often effective way to find some of the funds for a business venture.

Investing in a Start-Up: Essential Questions to Ask

In lieu of this weeks material, my blog post this week will be discussing important topics and questions to think about when investing in a business. Although I am no investment guru, I stumbled across a few articles this week that made me think about all the important things to consider before investing your personal or a VCs money in a start-up business.My favorite article that I read this week was 65 Questions Venture Capitalists will Ask Start-Ups, by Richard Harroch. I will spare your time and refrain from discussing all 65 questions, as you can read them another time, but one thing I do love about this particular article is how it places sets of questions into 12 different categories. Those categories are as followed:

Overview (of the company)
Market
Founders & Teams
Products & Services
Competition
Marketing & Customer Acquisition
Traction
Risk
End Game
Intellectual Property
Financials
Financing Round

Thinking about particular questions in these 12 categories is something that I see as essential when considering making an investment. The specific questions you chose to ask may… WILL vary based on the company at hand, but I think these subsets create a simple and effective foundation for an investor at any level. Many of the other articles I read followed these same or similar categories. The article 100 Questions Investors ask Startups When Pitching use the same categories, although many of the questions differ from the first article.

Other than these two articles, most of the articles share their 5, 8, and 12 essential questions to ask before investing in a startup, and each of the articles truly offers a different set of questions from the last. Does this inconsistency mean that there are no meaningful questions to ask before investing in a startup? Absolutely not. What it means to me is that each investor or group of investors is looking for something slightly different in a company. The article Why People Invest in Startups has an excellent excerpt that explains my last stated point perfectly:

No Two Investors Are Alike

While not quite as diverse as snowflakes, very few investors are exactly alike. Some invest on their own behalf or on behalf of an entity. Some want to be actively involved in the startups they invest in (and will only invest in those instances where they feel they can add value), while others are simply looking to diversify their portfolios. Investors in our network routinely express a wide range of preferences regarding investment amounts, industries of interest and disinterest, company stage, valuation, geographic location, revenue generation, and various founding team characteristics.

Investors and VC firms decide to invest in companies for different reasons, and these reasons are ultimately what is going to help these individuals and groups formulate the questions they will ask to a prospective startup company looking for funding. As stated earlier, I believe the 12 categories above are an incredible starting place for investors interested in funding a startup, but the questions that you decide to ask will depend on an investors reasoning for investing and on the company being questioned. Although there are a plethora of “Essential Questions to Ask” articles circulating the web, only you as the investor can decide which questions will produce the best answers for you, your money, and your future in business!

Continue reading “Investing in a Start-Up: Essential Questions to Ask”

Self Funding – Smart Idea or Sleeping Disaster

While trying to figure out what to write this blog post about, I stumbled across an article titled, 10 Reasons Why I Self-Funded My Startup and So Should You. Based on everything I’ve read thus far, and everything we’ve talked about in class – none of which involved self-funding – I thought this article would be an interesting read. Before even reading the article, I had a few questions for myself. Who could really fund an entire start-up ALONE? Are there other benefits to different kinds of funding, other than the money? Is fund raising really that bad? I decided I would go ahead and entertain myself by reading the article, thinking that maybe the author, Jon Yongfook would make some interesting and valid points.

The following are the 10 reasons why Jon self-funded his business and thinks you should too:

You are forced to focus on revenue
You don’t waste time raising funding
You don’t answer to anyone
You learn the value of money faster
Early stage investing is rife with dubious characters
You feel free to grow organically
you learn what really matters
You’re in good company (bootstrappers)
You work on something that truly interest you
You increase your leverage for future fundraising

Throughout the article, I though Yongfook made some good points. When you are funding your own business, you get to remain in full control and don’t have to answer to the many investors that will be helping you fund your company. Many entrepreneurs get into creating their own business so they no longer have to answer to a boss, and often time investors can seem like just that. I also agreed with Jon’s point that “you are in good company.” When funding your own business, it is almost inevitable that you will end up connecting with individuals who are also funding their own business. This small network of people can help self-funders find ways to be more successful and solve problems that are unique to their situation.

Although Yongfook made some good points in the article, I think more often than not he is simply discussing trade-offs that occur when one decides to self-fund versus fund raise. For example, he talks about not having to waste time with fund raising, and while this may be true, the times pent fund raising now has to be spent finding alternative ways (taking on extra jobs) to fund the startup. Also, even though those that self-fund don’t have anyone to answer to, they are missing out on possible mentoring and advising experience that can come from seasoned investors. a perfect example of this is ABC’s hit show Shark Tank – I know, not the most educational example. Many people participate in this show not only to get their business funded, but also to gain the expertise of a business savvy “shark”, in their respective field of business.

In my opinion, a company can be successful whether they decide to self-fund or raise funds through other means. I think it is most important for each entrepreneur to evaluate the status of their startup, and decide what is the most reasonable and beneficial way to raise money.Ultimately, each entrepreneur will need to look at the pros and cons of each and decide which route is best for their particular company and personal situation.

References:

http://yongfook.com/10-reasons-why-i-self-funded-my-startup-and-so-should-you.html