We receive numerous enquiries requesting more information on our mandate, investment process and the general VC industry. We have compiled this list of frequently asked questions to provide you with more information and to assist you when applying to Invenfin for funding.
- What is venture capital (VC)?
Venture capital refers to equity funding for high-tech, high-growth potential business where growth is typically achieved through radical global scaling. Venture capital is further broken down into:
- Seed funding: Initial capital used for market research & product development (post proof- of-concept);
- Start-up funding: Capital to set up operations (staff, office space, equipment), commercialise IP and other activities.
- Development funding: Capital to further launch business, and grow market share to become profitable.
- Growth Funding: Capital to assist established but still high-risk ventures in expansion activities (international launch, new product/technology creation, accelerating production, acquiring competitors).
- What is Invenfin’s investment focus?
Invenfin seeks investments in products or businesses that are differentiated, meet a real need in a significant market and require commercialisation, to which we can add value through our resources and networks. For more on our investment focus, please read more here.
- What is Invenfin’s investment mandate/criteria?
For a detailed list of our investment criteria please read through the “What we invest in” section of our website and for more information on our investment mandate/criteria please read more here.
- What sectors does Invenfin not invest in?
Invenfin does not invest into property, mining ventures, infrastructure and manufacturing projects, franchises, service/consulting based or gambling/betting businesses. We are also a closed fund and do not invest funds on behalf of third parties. For more on our investment focus please read more here.
- Does Invenfin invest in ideas or concepts?
No, if your business is at concept phase or only an idea, it is too early stage for us. We require at least a working prototype or beta-tested version of software before we will consider a business for funding. This is what we mean by post proof-of-concept.
- Does Invenfin sign NDA’s or Confidentiality Agreements?
No, Invenfin will not sign and NDA or Confidentiality agreement before you submit a funding proposal. We see hundreds of proposals and many of them are very similar. You need to protect your intellectual property before you apply for funding. Once we have entered the detailed investigation stage of our assessment process we may consider entering into a non-disclosure agreement. More information on intellectual property can be found here.
- How do I protect my Intellectual Property?
You can protect your intellectual property with the help of an intellectual property specialist. Please read our intellectual property page for more information and resources.
- Does Invenfin invest in companies using licensed technology?
Invenfin does not invest in companies where the underlying technology is licensed from another company, especially if you only have the South African rights or a license for one territory/country. We invest into the intellectual property holding company where we can assist the company to commercialise this IP internationally.
- What is the Intellectual Property from Publicly Financed Research Act (IPR Act)?
The IPR Act refers aims to “provide more effective utilisation of intellectual property emanation from publicly financed research and development”. The IPR Act can be found here and more information is available from the National Intellectual Property Management Office (NIPMO) and from University technology transfer offices. This act is only applicable to certain intellectual property developed in South Africa using specific public funds.
- How much capital does Invenfin invest?
We typically provide between R2 to R20 million in equity funding for an investment during the first round, depending on the stage, industry and the business’s requirements. The amount of money raised, should be sufficient to allow the business to develop the product or service and cover operations for at least 18 – 24 months. Before you apply for funding you should have a clear idea of how much you need to raise and what you intend to spend the money on.
- Does the full amount get invested in the company upfront?
No, Invenfin invests against a set of predetermined milestones. This staggered investment approach means that portions of the total funding or investment amount are provided once specific milestones have been achieved. The components and timing of each milestone is jointly decided between Invenfin and the investee company.
- How much equity will Invenfin require?
Invenfin requires a significant minority shareholding which is between 26 – 49%. Typically we look to hold between 30-45% equity in an investment in exchange for the funds we invest into the business.
- How will Invenfin determine its equity stake in the company?
During the final investigation process and negotiations, Invenfin will determine the fair value of the investment based on the industry, stage, previous valuations and other factors which may be linked to the company’s future potential. This valuation is then discussed and negotiated with the current shareholders of the potential investment to determine the equity stake for the amount of money being raised.
- Does Invenfin provide loan or debt funding?
No, Invenfin does not provide loan or debt funding. All money that we invest into a business is in exchange for equity and is not repayable. This funding must be used to grow the business and not to exit existing shareholders.
- Does Invenfin co-invest with other venture capital firms?
Yes, Invenfin will co-invest with other venture capital firms as well as Angel investors.
- How do I submit my application for investment?
To submit an application for investment, please read though our investment criteria and complete our investment application form. This form and more information can be found on our apply for investment page. Once complete, please email it to ideas@invenfin.com
- What other documents will be useful in the fund raising process?
- Invenfin investment application form. This form and more information can be found on our apply for investment page.
- Pitch deck. If your initial application is successful, we will invite you to a pitching meeting. More information on pitching and putting together a pitch deck can be found here.
- Full business plan. Once we have completed our initial assessment process we will ask you for more information on specific aspects of your business. More information on business plans can be found here.
- Detailed development and funding plan. We will want to know how much money you are raising, what you will achieve with this funding and how long it will last for.
- Comprehensive competitor analysis. This is a very important document and significant time and effort needs to be spent on this aspect of your business. We will want detailed information on who your competitors are both locally and internationally. We will want to know how you are differentiated from a customer’s perspective, what your sustainable competitive advantage will be and what the barriers to entry are. Please refer to our resources section for more information on market and competitor analysis.
- References. We will also want to speak to your existing customers and suppliers to get a better understanding of the industry, the market demand and competitors or alternative solutions.
- How long will it be before I receive a response to my application?
The first stage which includes a basic review of applications takes approximately 2 weeks, by which time you should have had a response from a member of the Invenfin team. More information on our assessment process can be found here.
- What does Invenfin’s investigation process entail?
Our assessment or investigation process goes through a number of stages where we will ask you for specific information and investigate the various aspects of your business. More information on our assessment process can be found here.
- What does due diligence entail?
Due diligence is a detailed investigation or audit of a business and/or people before an agreement is signed. Invenfin’s due diligence process reviews the financial, governance, intellectual property, human resource, market and legal aspects of an investment and identifies any potential risks. This only occurs after an investment decision has been made by Invenfin’s board. More information on our assessment process can be found here.
- How long does the assessment process take from application to investment?
Our assessment or investigation process goes through a number of stages where we will ask you for specific information and investigate the various aspects of your business. This takes significant time and may take a few months. More information on our assessment process can be found here.
- Will Invenfin invest in my business if it is based offshore?
Yes, Invenfin can invest in an offshore company, but we need to invest into the main holding company which owns the intellectual property. We still typically look to invest in businesses which are based in South Africa or are using South Africa as a test market.
- Does Invenfin have a geographical focus?
We look for companies who are preferably based in South Africa or are using South Africa as a test market. We will consider applications from entrepreneurs based in other countries, but we because we are very hands-on in our investment management, we like to be as geographically close to our investments as possible.
- Does Invenfin invest funds on behalf of the general public or third parties?
No, Invenfin is a captive investor and does not invest funds on behalf of any third parties.
- Will Invenfin invest into a fund-of-funds or provide funding to me for a number of projects at once?
Invenfin does not invest into other investment funds (fund-of-funds) nor will we provide capital to invest into a portfolio of businesses. Each application and business requesting funding is assessed on a case by case basis and goes through our standard assessment process. More information on our assessment process can be found here.
- How will Invenfin help my company grow?
If Invenfin invests in your business, we will not only provide financial assistance but will be an involved partner, offering strategic advice; management expertise; legal, governance, and risk management services; focus and support; mentorship and access to our contacts and networks. We will also assist you in raising additional investment should this be needed.
- How involved is Invenfin with it’s portfolio companies?
- Why would I want to give up a stake in my business to Invenfin?
The advantages of Invenfin investing in a company will depend on the nature and stage of the business, also the industry, but we only get involved in companies where we believe that we can add value. Some of the advantages of having Invenfin as an investor include equity funding which has advantages over debt funding; being an active partner and shareholder; leveraging our experience and networks for the benefit of your business; helping you to grow and exit your business providing all shareholders with potentially significant financial return.
- If I never want to sell my business, will Invenfin still invest?
Invenfin, like most investors will eventually want to exit an investment. This will require that we sell our share of the company to another entity or the entire business to exit the investment.
- What is Invenfin’s typical exit strategy?
Invenfin’s typical exit strategy is through a trade sale or licensing agreement to a large, established company in the relevant industry. This is how most venture capital and private equity exits are concluded. Very few businesses are exited through listing on a stock exchange.
- Where else can I apply for funding if my application to Invenfin is unsuccessful?
SAVCA, the South African Venture Capital Association has a full list of funders and contact details on the website. It is important that you apply to the fund which is most relevant for your business and that you meet the investment criteria before you apply.
- Where can I find more information on the South African Venture Capital or Start-up Industry?
For news, information, surveys and membership details the South African Venture Capital industry, please visit the SAVCA website. For more information on the start-up industry, networks and events please visit the Silicon Cape website.