Basic Words that Might Help You Understand Venture Capital

Venture capitalists keep talking about things like seed-stage venture, leading a round of funding, LPs and exits. If you are planning to meet venture capitalists in the future, there are some basic words that you need to learn in order to keep up. Here basic words that will be helpful to know.

Bootstrap: This is a situation in which an entrepreneur starts a business with little capital. A person is said to be bootstrapping when he or she tries to found a company from personal savings or from the operating incomes of the new company.

Exit: This is a point at which an investor sells his or her stake in a company to realize his or her gains (or losses). Normally, exist occurs when a company either is bought by another company or goes public.

Fund: This a pool of money that investors use to finance companies in exchange for equity. The money comes from investment banks or wealthy investors.

Limited partners or LPs: institutions and groups who provide venture capitalist firms with money to invest. They include high-worth individuals, university endowments and pension funds.

Lead A round: The venture capital who “leads” a round of funding sets the financial and legal terms for the investment. A lead investor is the one contributing the largest amount of cash and help in finding other investors.

Seed: Seed capital is the initial funds used when starting a company, often coming from the founders’ personal assets, family or friends, for covering first operating expenses and attracting investors.

Series: These are stages of venture funding, usually occurring after a seed round. These series include Series A, Series B and Series C.

References

https://www.marketplace.org/2017/09/07/tech/venture-vocabulary

https://www.techrepublic.com/article/glossary-startup-and-venture-capital-terms-you-should-know/

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Startup Funding Deals in Africa Are Entering the Million-Dollar Era

The first decade of tech startup funding in Africa has been led by early-stage and angel investors. Most of that funding was modest: usually ranging from 10,000 to $50,000. Still, it was adequate to help entrepreneur get off the ground with limited market capacity and infrastructure.

Even after tech incubators began to proliferate around big cities, big deals were uncommon, and $1M-plus deals were a myth. However, over the last one to one and a half years, that has been changing.

According to research by Partech, African venture capital funding topped $560M, up 53 percent year on year, in 2017. Compared with 77 rounds in 2016, 124 startups participated in 128 funding rounds last year.

A regular flow of Series A fund deals are coming to maturity, as the major startup ecosystems move to the next stage of development. Last month, TradeDepot, a Lagos-based software-as-a-service platform, banked $3M in Series A funding. In Kenya, Africa’s Talking, an information technology company, raised $8.6M in Series A funding led by Social Capital, IFC World Bank and Orange Digital Ventures.

More deals of this size are expected in Africa. Although there have been options for seed funding (at most $500,000) and from private equity funds (at least $10 million), there have been a small number of options for funding between $1M and $5M, an important stage for young businesses looking to scale.

References

https://www.theatlas.com/charts/S1dpnqcDz

https://qz.com/1211233/how-much-did-african-startups-raise-in-2017-partech-disrupt-africa/

Three Online VC Resources for Investors and Startups

If you are looking for information on venture capital, you often required to surf though the clutter on the internet. Although you may find what you are looking for, it is easy for you to experience information overload. Today, I will suggest online VC resources for investors and startups.

1. Wikipedia

Wikipedia is arguably the most comprehensive and reliable site to find description of VC firms online, without paying for a subscription. Although the site might not give you a ton of advice, almost all the big venture capital firms are listed on this page.

2. The Funded

The Funded is very comprehensive and include a blog, top VC list, discussion forum, banned VC list, a section where an individuals can rate their “Entrepreneurial DNA” to see how they stack up, information resource links, VC news, and much more. The Funded claims to have more than 20,000 CEOs among their members, making it one of the top online resources for people who are looking to fund or get funded.

3. Crunchbase

If you don’t have an account set up on Crunchbase, you are missing a lot. In a nutshell, this site is a powerful crowdsourced data pool that is used by investors, advisers and startup owners to see who is getting funded and for how much. Data can easily be downloaded in spreadsheet format.

Other online VC resources for investors and startups that you might be interested in include Venture Beat, Microventures and NVCA.

References

https://www.fundingnote.com/blog/top-online-vc-resources-startups-investors-358

https://www.linkedin.com/pulse/10-must-visit-online-vc-resources-ivan-widjaya/

Understanding Series A Round Venture Capital Financing

A series A round is the name given to a company’s first major round of venture capital funding. The name typically refers to the class of preferred stock given to investors in exchange for their investment. Usually, it is the first series of stock after the common stock and common stock options are issued to company founders, friends, family, employees and angel investors.

Traditionally, series A rounds are a critical stage in the funding of new companies. The capital raised during a series A is commonly intended to capitalize the company for a half year to 2 years as it performs initial marketing and branding, develops its products, hires its initial employees, and undertakes early stage business operations.

Private companies meet venture capital firms and private equity investors in several ways, including investor conferences, warm referrals from the investors’ trusted sources and demo days where companies pitch directly to investor groups. However, today equity crowdfunding is becoming more established and companies are increasingly raising part or whole of their Series A round online using sites such as SeedInvest and Onevest in the U.S and Seedrs in the UK.

Series A rounds are widely reported in business press, industry reports, blogs and other media that cover the technology industry. Some also also occur in non-technology industries. They receive investment from investment banks, angel investors, public agencies, corporate investors, and others.

References

http://www.startupfreak.com/what-does-series-a-series-b-series-c-funding-mean-in-startups/

https://www.rocketspace.com/tech-startups/how-startup-funding-rounds-differ-seed-vs.-series-a

Venture Capital investment in financial technology reaches record $27.4B high

Financial technology (FinTech) startups continue to draw the interest of VCs around the world. Venture capitalists continue to see great potential in fintechs which are offering user-friendly financial products and services through innovative technology: online lending platforms and digital payments services being the foremost among them.
In 2017, confidence in financial technology s accelerated venture capital financing to a record level of $27.4B – a growth of 18% from 2016. The growth in financial technology investment has been driven by a surge in deal value in the UK, US and India.
Last year, the value of capital investment deals in the US jumped to $11.3 billion, an increase of 31% from 2016. India saw a quintupling of investment to $2.4B last year. Globally, the volume of FinTech deals rose greatly, from around 1,800 in 2016 to nearly 2,700 in 2017.
In the UK, financial technology industry shrugged off the Brexit vote last year, attracting more than double the amount of venture capital investment in 2017 than in 2016. Fintech companies such as OakNorth and TransferWise raised $1.8 billion of venture capital investment in 2017, up more than 150% from $704 million in 2016.
According Julian Skan, senior managing director in Accenture’s Financial Services practice, much of the growth, mostly in the UK and U.S. has been driven by big new investment flows from the Middle East, China, Russia and other emerging economies.
References
https://www.consultancy.uk/news/16707/venture-capital-investment-in-fintech-reaches-record-274-billion-high
https://www.ft.com/content/75a4425a-0b63-11e8-8eb7-42f857ea9f09

Three Popular Venture Capitalist Firms in Africa

Many startups in Africa are showing great potential for profitability and growth. The only problem is that they lack capital to get established. Africa does not have many home-grown VCs. However, many international venture capitalists firms have invaded the continent and have equities in various promising companies. The following are three popular venture capitalists in Africa:

Gold Venture Capital Limited

Gold Venture Capital Ltd. is located in Ghana. It is one of the most successful venture capital companies in Africa. It focuses on providing fund to education, agribusiness, financial services, extraction services, health care, telecommunication, real-estate, construction, tourism, and manufacturing in West Africa.

Fusion Capital

Fusion Capital is a real estate developer and private equity firm that is designed around the needs of local businesses in the emerging economies. It is part of Fusion Group of business based in the UK. Fusion Capital serves small-medium businesses in Kenya, Tanzania, Uganda and Rwanda.

eVentures Africa Fund

eVentures Africa Fund helps investors in the Europe to fund African internet-related companies. It is dedicated to mobilize capital and experience in Europe to invest in small- and medium-sized companies. The company also offers development support such as experience, network, and knowledge as well as business applications.

References

https://answersafrica.com/venture-capitalists-africa.html

https://answersafrica.com/venture-capitalists-africa.html

Black Female Founders to Benefit from Venture Capital Fund

A venture capital firm that aim to promote underrepresented founders such as women, members of the LGBTQ community and  people of colour launched a new $36M fund that will invest in black female founders.

In an industry that is dominated by men, it is hard for female founders to find investors who look like them.  That is the reason why Backstage Capital, a venture capital firm that aim to help underrepresented founders, was started. The firm mission is to provide early seed financing to groups that are massively underrepresented.

According to Arlan Hamilton, the founder and managing partner of Backstage Capital, investing money, resources, time, belief,  access— all of that — into black people, all people of color, Latinx people, and women is something that should be encouraged.

Last year, female founders received just 2.2 percent of the $85B invested by venture capitalist. As Fortune has previously reported, the percentage is even less for black females, who earn less than 1 percent of the total funding each year.

Other venture capital firms that aim to mainly fund underrepresented groups include The Helm, a venture capital firm that invest in female founders and entrepreneurs, and Aspect Ventures, a female-focused firm founded in 2014.

References

https://www.recode.net/2018/5/6/17324506/backstage-capital-fund-invest-black-women-founders