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Early-stage venture capital in South Africa: Challenges and prospects

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  • Jones, Morgan
  • Mlambo, Chipo

Abstract

The aim of this paper is to assess which factors impact the development of early-stage venture capital in South Africa. Factors identified for other markets and countries are explored and their relative importance in South Africa determined from the perspective of market participants. These include venture capital and private equity fund managers, government institutions, intermediaries and university research coordinators. The study used both an online survey, to capture a broad representation of opinion, and interviews, for in-depth responses. There was broad consensus among respondents with regards to the key factors requiring attention, which include the lack of funds targeted at early-stage investments, the lack of specialised fund managers, and the low entrepreneurial skillsets in the country. Through a detailed analysis of the responses, certain measures are proposed that can enhance the development of early-stage venture capital in South Africa such as engaging more with angel investors and improving the cooperation between the different market players in the sector.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42890.

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Date of creation: 07 Dec 2009
Date of revision: 21 Nov 2012
Handle: RePEc:pra:mprapa:42890

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Keywords: early-stage; venture capital; entrepreneurship; investment; South Africa;

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References

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  1. Marco Da Rin & Giovanna Nicodano & Alessandro Sembenelli, 2004. "Public Policy and the Creation of Active Venture Capital Markets," Working Papers 270, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Laura Bottazzi & Marco Da Rin, 2002. "Venture capital in Europe and the financing of innovative companies," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(34), pages 229-270, 04.
  3. A. E. Fernández Jilberto, 1991. "Introduction," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 21(1), pages 3-9, April.
  4. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
  5. Steven N. Kaplan & Per Strömberg, 2004. "Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses," Journal of Finance, American Finance Association, vol. 59(5), pages 2177-2210, October.
  6. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
  7. Van Deventer, Bart & Mlambo, Chipo, 2008. "Factors influencing venture capitalists' project financing decisions in South Africa," MPRA Paper 24970, University Library of Munich, Germany, revised 28 Feb 2009.
  8. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
  9. Hady Farag & Ulrich Hommel & Peter Witt & Mike Wright, 2004. "Contracting, monitoring, and exiting venture investments in transitioning economies: A comparative analysis of Eastern European and German markets," Venture Capital, Taylor & Francis Journals, vol. 6(4), pages 257-282, October.
  10. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
  11. Dossani, Rafiq & Kenney, Martin, 2002. "Creating an Environment for Venture Capital in India," World Development, Elsevier, vol. 30(2), pages 227-253, February.
  12. Gil Avnimelech & Morris Teubal, 2004. "Venture capital start-up co-evolution and the emergence & development of Israel's new high tech cluster," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(1), pages 33-60.
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