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Financing Innovation

Financing Innovation. Darryl Aberdein BrainWorks Management (Pty) Ltd November 2004. Red vs. Green. I have another idea…. I made a small profit. I am looking for a client. I am selling to visionary clients. I am STILL busy with product development.

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Financing Innovation

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  1. Financing Innovation Darryl Aberdein BrainWorks Management (Pty) Ltd November 2004

  2. Red vs. Green I have another idea… I made a small profit I am looking for a client I am selling to visionary clients I am STILL busy with product development I am understanding the market by consulting I am busy with product development I am assessing the market I have a working model There is an opportunity I have an idea © BrainWorks Management

  3. Organizational Development Model(acknowledgement to OTCC) © BrainWorks Management

  4. The right finance at the right time The Blue Route You may end up owning 100% of nothing Friends and Family Boot-strapping The Pink Route You may end up as an unhappy employee in your “own” company Government Grants Visionary Clients Business Angels Try to postpone outside finance until you can negotiate from a position of strength!! Venture Capital Cash flow Trade Sale Banks © BrainWorks Management

  5. Survival Tactics • Be in a “bootstrappable” industry – consulting, outsourcing services for business; anything sold by subscription. • Avoid low margin retail businesses (with high working capital) • Offer consulting services in order to fund development • Consider licensing someone else’s product or technology • Locate in offices where landlords are “tenant desperate”, work from home • Do it yourself – become multi-skilled • Sell “incomplete” products to visionaries • Start part time • Utilize friends network • Get prompt payment from customers and delayed terms from suppliers • Give out equity in lieu of salaries, sales persons earn high commission, low salary © BrainWorks Management

  6. Sources of Finance • Development Financial Institutions • Khula – loan guarantee fund, two equity funds – www.khula.org.za • IDC – mostly manufacturing assets – www.idc.co.za • Grants and subsidies • Innovation Fund – major R&D projects – www.innovationfund.ac.za • EMIA – export marketing assistance – www.thedti.gov.za • SPII – product development – www.spii.co.za • Competitiveness Fund - www.thedti.gov.za • THRIP – academic/industry R&D – www.nrf.ac.za/thrip • SMEDP - www.thedti.gov.za © BrainWorks Management

  7. Sources of Finance • Commercial Banks • Listing on Stock Exchange - www.altx.co.za • Private Equity • Angels • Venture Capital – www.savca.co.za • Incubators – www.godisa.net © BrainWorks Management

  8. Investors want… • somebody who can sell something - and preferably the CEO! • a bottoms-up sales projection. • an “unfair advantage”. • some team skin in the game. • some economic sacrifice (and low overhead!). • passion - some “fire in the belly” • team depth. • reality in the financial projections. • valuation reasonableness. • respect for the competition. • a segmented market target. • evidence of customer interest. © BrainWorks Management

  9. Contacts Darryl Aberdein darryl@brainworks.co.za www.brainworks.co.za 083 390 7559 © BrainWorks Management

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