"How do you find a venture capitalist in Silicon Valley?" the old adage goes. "Kick a tree and one will fall out," is the reply.
The joke continues that the entrepreneur is to take the money from the VC, make millions off of it, and then go and wait in a tree. Judging by the scarcity of VCs and plethora of entrepreneurs at this month`s First Tuesday event, South African VCs do not grow on trees.
First Tuesday is a monthly get-together of the South African IT industry, consisting of venture capitalists, entrepreneurs, and other interested parties looking to capitalise on the South African IT industry. This month, the organisers rounded up a few of the scarce VCs for a Q&A panel.
The firing line featured Martin Sacks of CorpCapital, Greg Morris of Evolve, Taita`s Duarte da Silva, Marc Tapnack from TribeOne, and Dave Frankel from IS. Discussion revolved around business plans, how to approach the VC, how to find the right VC for your business, and what to do with a VC once you have one in your corner of the ring.
The general consensus from the panel is that a VC is not a bank. "You should be looking for a partner," says da Silva. "There should be a merging of intellectual capital." The word "chemistry" came up a lot throughout the evening, and the overall sentiment is that without it, you are not going to have a successful partnership with your VC. Capital should come second to this concern.
To find out if the VC you wish to approach has the right chemistry, you should research any prospective investors carefully. "Find out about your VC," says Frankel. Tapnack agrees: "There are different horses for courses," he says. "Know who you are pitching to."
As to doing the pitch, the VCs advise entrepreneurs to keep it short and simple. "Take your business plan, halve it, and then halve it again. Leave your financial models at home," advises Sacks.
Frankel suggests that no business plan should be longer than 20 pages or 12 slides. "Every business plan we see will have R40 million in revenue," he jokes. The VCs do not want to hear about IDC and Gartner statistics, either.
The final word of advice is to be persistent with the VCs. "The squeaky gate gets the oil," says Morris. Frankel adds: "Don`t listen to bozos who tell you it can`t happen."
So for all you entrepreneurs (and I know you`re out there - I saw you all at First Tuesday), keep kicking trees, and maybe one day you`ll be the one waiting among the branches.
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