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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

Financing Innovation

Darryl Aberdein

BrainWorks Management (Pty) Ltd

November 2004

red vs green
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

the right finance at the right time
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

survival tactics
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

sources of finance
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

sources of finance1
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

investors want
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

contacts
Contacts

Darryl Aberdein

darryl@brainworks.co.za

www.brainworks.co.za

083 390 7559

© BrainWorks Management