As the world keeps transitioning through different phases, the way businesses function need to transform as well, which is natural and necessary as evolution. To stay competitively pertinent, it is the call of the day that companies, corporations, or SMEs align themselves to these changes and are proactive in their nature. Constant innovation in business is no longer a luxury but a necessity. Today we are in the midst of an interesting climate change that is the venture capital industry; it has now started to expand in regions like MENA, the Asian sub-continent and Africa. Funding for early-stage startups is now more available than ever before. Of course, with an increasing number of startups, this is still a tough space, with VCs funding a handful of the numerous proposals they are swamped with daily. No wonder 90% of the successful startups still bootstrap today.
“Constant innovation in business is no longer a luxury but a necessity.”
At times we lose grip on the overall opportunities that startups landscape due to many reasons, but the most fundamental one to be addressed is the perception that a VC operates like a gambling platform, where the extent of a VC’s relationship with a startup is an abbreviated transaction reduced to a handover of funds with hopes of future valuation. Over the years, the Private Equity industry has upgraded itself into active management of assets and portfolios, giving more control to investment firms to transform the startup into a successful venture with better value escalations. The same model is now being implemented in the VC space. At ASA Ventures (ASA), we believe in the same principles as other venture groups: choosing the right opportunities with all the elements of probable success; but we are also certain that just the investment decision is not enough to drive value.
In establishing businesses, entrepreneurs draw on basic and applied research. Initial financial funding is typically provided by the entrepreneurs themselves as well as family, friends, and angel capitalists. But there is a gap between starting an entrepreneurial firm and the large-scale deployment of its products and services. At times, this gap proves to be the valley of death for many entrepreneurs and good ideas. If a VC’s role is more transformative, these trends will gain momentum with fundamental adjustments, and growth in the future becomes certain with profitable outcomes.
ASA differs from traditional venture capital companies and funds by virtue of involvement in its investments. We set strategic goals and objectives, define the methods of marketing and execution, and constantly evaluate performance, all required to achieve the success that all involved parties seek. With greater involvement in firms at their earlier stages of technology development, and in others, at a later phase of technology commercialization, we create sustainable achievements distinguishing us from the traditional VC approach. We try to paint an accurate picture of the realities of VC funding as it has evolved during the last decade.
“With a model where the VC is more than just a stockholder… the startup has a far higher chance of transforming into a successful sustainable business.”
Traditionally the role of a VC is to provide entrepreneurs with funding, just to bridge the gap in their cashflow requirements. In filling this space, VCs take on great risk in that the entrepreneurs they support frequently fail. The complete write-off of investments with no or little return to investors is common. Even if a satisfactory exit occurs, it may not be very successful and neither the general and limited partners nor the original startup team earn a great deal. With a model where the VC is more than just a stockholder, that is, it becomes an operating partner and patron providing strategic support all along the way with proven tools, plans, and technologies, the startup has a far higher chance of transforming into a successful sustainable business. This will then stimulate a major breakthrough, one that has the magnitude of transforming the market, economy, and society.