We are extremely privileged to have a team of full time MBA students from the Cape Town Graduate School of Business that have chosen springleap to analyse as their company analysis project.

Speaking to these dynamic & motivated individuals, together with having finished the 3rd chapter of Frank Furness’s EXCELLENT book on becoming a business tiger, got me thinking about growing springleap even faster than it is. It also has got me strategising about our long term business model.

So this morning, we spent an interesting 2 hours being partially grilled by a company that assists companies to raise their venture capital funding.

In the current economy, funding of any sort is extremely difficult to close, and not a day goes by that I don’t get contacted by someone looking for advice on how to raise venture capital or angel funding. Recently I looked back at the blog posting I did after I was featured in the Sunday Times on an article on Venture Capital & Angel Investing, and was ASTOUNDED by how many people have requested information from me on raising funding JUST from this posting.

To summarise my views on raising funding, here’s the “Eric Edelstein process to raising money in South Africa”, starting with the easiest and ending with the hardest. I say South Africa, as raising money in every country is very different.

Here in order of ease is the “Guide to funding your business”:

1. The self funded round - using savings or putting credit cards together or mortgaging the house

2. The Friends & Family round - convincing Aunt Maggy to invest her pension fund in your venture

3. The Angel investors round - convincing wealthy private individuals how you are going to make them even more wealthy

4. The Venture Capital Funding round - where you can finally afford to pay yourself a decent salary

However, because we live in South Africa, Venture Capital in SA is totally different to Venture Capital in the UK or the US. There they invest in Start-up’s.

In SA, venture capital is more like private equity - they are not investing in start-up concepts with great potential to become the next skype or facebook. In SA, Venture Capital firms are looking to invest in companies that have already proven themselves, and want to expand (which usually means taking the model out of a South African only marketplace into the global marketplace).

So if you have the next amazing concept, before hitting those VC firms with your next Mark Zuckerberg world takeover, go through the list. Invest some of your own money, build up the concept, move to the friends and family money round, or jump to an angel investor if you are lucky or smart enough to find one…

…and only after you’ve gone through the stages, and have your business up and running, should you approach the South African Venture Capital firms. You’ll save a lot of time and energy focussing on building your business, and when the time comes for you to really expand, you’ll give away far less equity than if you go them to early AND you’ll have a business they might actually consider investing in.

And if you’re a friend, family, or an angel, get in touch with me before we reach level 4 - and we’ll try our best to make you rich!