Factors influencing venture capitalist's project financing decisions in South Africa

Van Deventer, Albertus Gert (2008-03)

Thesis (MBA (Business Management))--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: Venture capital is a major source of funding for the entrepreneurial community and usually focuses on the early stage, more risk orientated business endeavours. This study explores and identifies the investment criteria used by South African venture capitalists in their venture screening and evaluation process and compares these criteria with the results obtained in similar studies abroad. By identifying the criteria that are deemed as important, venture capitalists can enhance their decision-making process and entrepreneurs can adjust their preparation for venture capital application to maximise their success rate. By alerting entrepreneurs of these criteria, some potentially flawed proposals can be corrected beforehand, hence enhancing the venture capital process for both the venture capitalist and the entrepreneur. By making use of a questionnaire, data was gathered from a population of 16 identified South African venture capitalists, of which 75% replied. The most important criteria was identified by evaluating the mean ratings assigned to them and was found to be, the entrepreneurs honesty and integrity, a good expected market acceptance and a high IRR. The data was further analysed using the Friedman two-way analysis of variance (ANOVA) by ranks test, the Sign test and factor analysis. It was found that the South African venture capitalists, just like their overseas counterparts, rate the entrepreneur and management team, as the most important category of criteria when evaluating new projects for investment. In addition, two lists of factors were identified by using factor analysis to reduce the criteria obtained from the questionnaire.

AFRIKAANSE OPSOMMING: Waagkapitaal is een van die belangrikste bronne van befondsing waarvan entrepreneurs gebruik kan maak. Dit fokus hoofsaaklik op besighede in 'n vroeë besigheid lewensiklus, waar hoër risiko aan die orde van die dag is. Hierdie studie identifiseer en analiseer die beleggings maatstawwe wat gebruik word vir waagkapitaal belegging besluitneming in Suid-Afrika en vergelyk die resultate met soortgelyke studies wat reeds in die buiteland uitgevoer is. Die besluitnemingsproses vir die waagkapitalis kan ook vergemaklik word deur die identifisering van die mees belangrikste maatstawwe en terselfdertyd kan entrepreneurs dit ook gebruik vir beter voorbereiding in hul aansoek om waagkapitaal. Deur entrepreneurs se aandag op die belangrike faktore te vestig kan potensiële swak voorleggings vroegtydig gekorrigeer word, wat 'n positiewe bydrae sal lewer tot die beleggingsproses vir beide die waagkapitalis en die entrepreneur. Daar is gebruik gemaak van 'n vraelys wat gestuur is aan 16 Suid-Afrikaanse waagkapitaal beleggers, 75% het die vraelys voltooi. Deur vergelyking van die gemiddelde waardes is vasgestel dat die belangrikste maatstawwe die entrepreneur se eerlikheid en integriteit, goeie verwagte aanvaarding en aanvraag na die produk en 'n hoë “IRR” is, daarna is die data geanaliseer deur middel van die “Friedman two-way analysis of variance (ANOVA) by ranks test”, die ”Sign test” en “factor analysis”. Daar is bevind dat die Suid-Afrikaanse waagkapitalis net soos sy oorsese eweknie, die entrepreneur en bestuurspan as die mees belangrikste afdeling van maatstawwe ag wanneer gekyk word na nuwe projekte vir beleggings. Daar is ook twee addisionele lyste van belangrike maatstawwe opgestel deur die aantal faktore te verminder deur faktor analise.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/795
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