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Venture Capital Today
Venture Capital (VC) generally provides funding for innovative start-up businesses that have been trading for less than 12 months. Funding is provided by individuals or companies with a vested interest - whether financial, developmental or philanthropic - in the successful advancement of entrepreneurial opportunities in a country. The VC company acquires shares in the entrepreneurial venture and in addition to the invested funds, the venture capitalist assists with entry to market, marketing, strategy and the commercialisation of prototypes and concepts.
Businesses with innovative, marketable and patentable new technology are the most common investment choice for VC companies. Venture capitalists normally keep their investment in the entrepreneurial business for a limited period, after which they sell their shares, ideally for more than they bought them, and invest the profits in other young businesses which offer capital growth potential. Normally the entrepreneur has the first option to purchase the shares from the VC firm but they could also be sold to other VC firms or other businesses. A typical investment period will vary between three to eight years.
South Africa's VC industry is relatively under-serviced. There are a limited number of true VC firms in the private sector. Angel investors, or high net worth individuals who take a stake in start-ups, also play a role in the industry, but on a relatively small scale. The biggest local player is government's Department of Trade and Industry through a range of initiatives including the IDC and Umsovumbu. The industry is regulated by SAVCA (South African Venture Capital Association). www.savca.co.za.
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