Silicon Cape will die

Disagree quite strongly. Funding is not that difficult. And while exits in Cape Town aren't nearly as easy as in SF, London and Tel Aviv, it is not that difficult either.
 
It sounds like its difficult for VC's to get their money back after they invested, well in a South African context anyway. I wonder what the costs are to list on Alt-x? Would it be cheaper to list outside the country? I'll need to do some research as I have no knowledge on this topic.
 
Far too much emphasis is placed on start-ups seeking VC funding and not enough emphasis on bootstrapping start-ups. Entrepreneurs need to be taught how to fund their own start-ups. I've seen far too many entrepreneurs unnecessarily sell their souls to venture capitalists when they could have easily bootstrapped their businesses themselves had they been patient enough and kept 100% ownership of their businesses.
 
Nefertiti said:
Would it be cheaper to list outside the country?
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JSE provides incredible value for money. Remember SA is #1 for reporting and auditing. Not "good"...number one globally.

So listing outside of the country isn't all that attractive. More expensive and not necessarily better. Some companies opt for dual listings though - which often means more chilled rules on the second listing.

Plus if you list US side there is an unreal amount of red tape involved (SOX404 etc). Few people grasp just how much money you need to throw at that problem to make things work...
 
deweyzeph said:
Far too much emphasis is placed on start-ups seeking VC funding and not enough emphasis on bootstrapping start-ups. Entrepreneurs need to be taught how to fund their own start-ups. I've seen far too many entrepreneurs unnecessarily sell their souls to venture capitalists when they could have easily bootstrapped their businesses themselves had they been patient enough and kept 100% ownership of their businesses.
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Some VC requirements are scary and sometimes completely ridiculous. If we could bootstrap completely I'd be delighted but unfortunately I dont have a couple of mil lying around.
 
HavocXphere said:
JSE provides incredible value for money. Remember SA is #1 for reporting and auditing. Not "good"...number one globally.

So listing outside of the country isn't all that attractive. More expensive and not necessarily better. Some companies opt for dual listings though - which often means more chilled rules on the second listing.

Plus if you list US side there is an unreal amount of red tape involved (SOX404 etc). Few people grasp just how much money you need to throw at that problem to make things work...
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If that is the case why do VC's insist on listing, surely you can extract payment/value out of the company via other means. Like percentages of profits or sell your stake privately.
 
Nefertiti said:
If that is the case why do VC's insist on listing, surely you can extract payment/value out of the company via other means. Like percentages of profits or sell your stake privately.
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10 internet points says you're a programmer with little/zero exposure to the finance/VC world.
 
Nefertiti said:
Some VC requirements are scary and sometimes completely ridiculous. If we could bootstrap completely I'd be delighted but unfortunately I dont have a couple of mil lying around.
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The whole point of bootstrapping is that you don't need to have a couple of mil lying around. It's possible to organically grow your startup with minimal funding. Far too many startups rush into finding VC funding because they want to immediately start a business with a fancy office, the latest equipment, etc.
 
deweyzeph said:
Far too much emphasis is placed on start-ups seeking VC funding and not enough emphasis on bootstrapping start-ups. Entrepreneurs need to be taught how to fund their own start-ups. I've seen far too many entrepreneurs unnecessarily sell their souls to venture capitalists when they could have easily bootstrapped their businesses themselves had they been patient enough and kept 100% ownership of their businesses.
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There are many incubators in Cape Town.
 
deweyzeph said:
The whole point of bootstrapping is that you don't need to have a couple of mil lying around. It's possible to organically grow your startup with minimal funding. Far too many startups rush into finding VC funding because they want to immediately start a business with a fancy office, the latest equipment, etc.
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I agree with you up to a point. We've been bootstrapping ourselves so far and I personally prefer it. However we are getting to the point where we have to make big ticket purchases to serve our clients better and we cannot fund it on our own. Some companies wont be able to get by on bootstrapping only, especially in the manufacturing business. Well, that is consensus among my acquaintances anyway.
 
Nefertiti said:
haha... true :) but my comment/question still stand. Maybe we just met the wrong VC's?
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VC in the US sense does imply a early exit and there are few options aside from listing available to facilitate that (actually...can't think of anything comparable).
 
HavocXphere said:
Try to take on debt rather than equity where possible...especially if you think the company will fly.
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Yup - when I was starting my company in the early 00's, we ran our R350k overdraft at max for about 2 years, skipped every 2nd salary, personally stood surety to all the company debt, and are now a 2-dozen odd strong company with extremely healthy books, and are beholden to nobody.


I've watched the rise of the VC movement, and think it's more about Vulture Capital more often that not; almost gone are the days of personally risking your own financial position, it's so much easier to risk someone else's money; and you immediately have less to lose, so the urgency of a 100% self-owned and dependant venture isn't there.
 
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Nefertiti said:
I agree with you up to a point. We've been bootstrapping ourselves so far and I personally prefer it. However we are getting to the point where we have to make big ticket purchases to serve our clients better and we cannot fund it on our own. Some companies wont be able to get by on bootstrapping only, especially in the manufacturing business. Well, that is consensus among my acquaintances anyway.
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Sorry, I should have made clear I meant start-ups that provide services. It's obviously a lot easier to bootstrap a services company where there is very little capital outlay and your biggest expense is just your own labour. Manufacturing is a whole different story, although as mentioned above, debt to finance capital purchases is much better than giving away equity. A think the reluctance of banks to lend money to start-ups is one of the biggest reasons for the growth of VC funding.
 
at least with manufacturing it's easier to obtain loans b/c you have physical assets as security. For software or services startups, it's a lot harder and VC is often the only option. The problem with that though, imho is that SA doesn't really have the scale to support the ecosystem. Sure there are the few exceptions for companies that manage to grow overseas but that is even harder to achieve.

On a side note, i think also one of the underlying problems is that many (esp young) entrepreneurs aren't that business savvy and think that raising money is the same as cashing in. No kids, that's just the part where you double up on blood, sweat and tears, if you're lucky, the money comes later.
 
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