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Private equity is capital that is put into your business in return for
a share of the profits and ownership of part of the business. Venture
capital is a form of private equity that focuses on relatively high-risk
businesses, in the expectation that the profits will be above average.
Typically, a private equity or venture capital investor does not want
permanent ownership of your business. They want to "exit" your
business within five to seven years by selling the shares you gave them,
and they want a return on investment of at least 35% per year. In other
words, if they invest R1 million in your business, they want to get at
least R2,75 million when they sell their shares in five years' time.
Not many small businesses have the growth potential to appeal to these
kinds of financiers, but it is always worth enquiring to see if your idea
ignites the imagination of others. South Africa does not have a very well-developed
network of venture funders, but the list below will give you a starting
point.
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