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Why entrepreneurs shy away from private equity investors
Intelligentsia
#1 Posted : Monday, March 29, 2010 6:34:38 AM
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Joined: 10/1/2009
Posts: 2,436
Main reason for Kenyan companies shying away from the NSE and the private equity investors have to do with fear of loss of control of the company and...even the fear of being kicked out of your very own company by the same board of directors you picked! But they also lose out on the new capital injection as well as new expertise/ skills that the new investors would have brought in and which could have taken the company to new levels of corporate performance.


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digitek1
#2 Posted : Monday, March 29, 2010 10:47:29 AM
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Joined: 2/3/2010
Posts: 1,797
Location: Kenya
there are no true venture capitalist in kenya. Everyone wants to join the gravy train when it has taken off. Most of these SME financiers demand so much in terms of security and equity that you are better off seeking help from family.
One the other hand they are a good conduit for jumping ship...as was the case for openview directors...
I may be wrong..but then I could be right
VituVingiSana
#3 Posted : Monday, March 29, 2010 11:46:23 AM
Rank: Chief


Joined: 1/3/2007
Posts: 18,097
Location: Nairobi
OpenView conned Access Kenya (or AK did a very poor job on Due Diligence)
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
QD
#4 Posted : Monday, March 29, 2010 12:28:27 PM
Rank: Member


Joined: 8/5/2009
Posts: 597
Venture capital are generally not for small enterpreneurs who are many in kenya. Also another deterent factor is the return period for aventure capital, riskiness as well the large sum of capital sometimes required
The problem with the world is that the intelligent people are full of doubts while the stupid ones are full of confidence
VituVingiSana
#5 Posted : Monday, March 29, 2010 1:00:29 PM
Rank: Chief


Joined: 1/3/2007
Posts: 18,097
Location: Nairobi
All the focus is on the entrepreneur... but a VC also risks his cash...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
anasazi
#6 Posted : Monday, March 29, 2010 1:43:33 PM
Rank: Veteran


Joined: 6/8/2007
Posts: 675
Actis capital is one Private Equity investor doing work in Kenya. However most of the businesses would not meet their minimum threshold, which I think is about 100M KShs for it to make sense to them.
Form is temporary, class is permanent
muganda
#7 Posted : Tuesday, April 06, 2010 7:12:28 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,905
Aaah had noted to respond to this one but just forgot. When I first read it, the article was very insightful and showed Carol Musyoka is reinventing herself mentored by the likes of Sunny Bindra etc.

Just two points:
1. Often the entrepreneur desperately needs the private equity/investor early on, in the business. Yes, the biz idea is beautiful and commitment neverending, but the beginning is always the most challenging.

Note also entrepreneur needs capital, is clueless on how to commercialise, and may have never setup a proper business. It needs experience and the private equity/investors bring it on board.

2. Time changes many things. The letter in the article seems to have been written in a later stage in entrepreneur's life. Joint efforts have succeeded in creating something worth keeping and entrepreneur has learnt to run a business - but it's not fun any more!

And they no longer hold equity investor on a pedestal as with time you know people's weaknesses.


Conclusion:
So the entrepreneur chooses to write Carol Musyoka's letter, in order to access 'fully, without restriction' the wealth they both created but process and controls keeps out of reach.

But the question begs, is the company better off in the end? Is the rate of growth maintained or perhaps other suitors appear? As with all things in this world, only time will tell.
digitek1
#8 Posted : Tuesday, April 06, 2010 8:18:45 AM
Rank: Veteran


Joined: 2/3/2010
Posts: 1,797
Location: Kenya
@muganda

What about the VC who is out to take over the business or ram throat his policies usually to the chagrin of the enterpreneur...take citadel RVR case for example

or the ouster of jobs from apple..remember the proverbial elephants snout in the tent.

@anasanzi..know of any private fund for <10m business? and not microfinanciers
I may be wrong..but then I could be right
muganda
#9 Posted : Tuesday, April 06, 2010 8:48:06 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,905
@digitek1, good questions. Most professional venture capital/private equity firm nurture entrepreneurs.

Note that in the case of RVR, it's obvious TransCentury has never run a Railway and doesn't have the money to do it alone. If they assumed the mantle, they'd actually look for another partner. Citadel on the other case...


And in the case of Jobs, Mike Markkula provided essential funding to create Apple. Steve Jobs suffered a period of self-destructive genius early 1984/5 leading to his ouster. I'd venture had he not had a chance to learn those hard lessons, he may well not be where he is today.

Excerpt:
I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Steve Jobs, Stanford, Jun 2005
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