Document Type Master's Dissertation Author Sayed, Muhammed Fazlur-Rahman URN etd-07032011-125909 Document Title Effectiveness of South African public sector venture capital investment terms in managing risks and supporting entrepreneurs Degree MBA Department Gordon Institute of Business Science Supervisor
Advisor Name Title Ms T Pieterse Supervisor Keywords
- investment terms
- entrepreneurial support
- venture capital
Date 2010-11-10 Availability unrestricted Abstract
The venture capital (VC) contract prescribing various deal terms and conditions is considered vitally important to the VC investment process and should provide incentives for the entrepreneur whilst managing the venture capitalists (VCs) financial risk. This aspect of venture capital has not been extensively studied in South Africa especially amongst public sector funding agencies which have become an important source for early-stage VC funding.
The objective of this study was to determine whether public sector VC investment terms in South Africa have been effective in supporting entrepreneurs and managing risk. The effectiveness of government‟s VC intervention was gauged through assessing various perceptions of entrepreneurs and public sector VCs on typical deal terms and conditions put in place between them. The perception study focused on 14 terms or provisions in relation to its frequency of use, importance to stakeholders, effectiveness in managing risk, rationale for inclusion and acceptance by entrepreneurs.
The research found that VCs and entrepreneurs alike generally agree on the typical terms that should be included in the VC contract. Most of the terms which entrepreneurs considered to be important for the enterprise were also frequently used in VC contracts suggesting that the terms were generally effective in supporting entrepreneurs. Nevertheless, the research points towards a greater need for VCs to use incentivising terms such as the clawback provision in their contracts since the terms most frequently used were perceived to be effective in managing investment risk.
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Please cite as follows:
Sayed, MF 2010, Effectiveness of South African public sector venture capital investment terms in managing risks and supporting entrepreneurs, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07032011-125909/>
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