Professor Serden Ozcan of the WHU Otto Beisheim School of Management from Germany is passionate about Venture Capital in Africa. Attending his master class was not only insightful but inspiring. The executive education class not only put context to what venture capital was but also provided ways in which African countries such as ours can apply some of the principals that can unlock value for entrepreneurs.
Venture Capital (VC) has evolved over the years. It cannot only been seen as the preserve of fund houses or lone investors who seek out small businesses that can potentially become the next Unicorn (a company valued at over a billion dollars). VCs are also being seen to emerge from large corporates that have seen it as a means to seek out growth through equity investments without the need to invest cash they have made organically. As an example, Prof. Dr. Serden discussed how companies such as Siemens, SAP, Bayer etc. are now being found in the VC space. The rationale for these investments is a response to disruptive businesses that have entered their business arena. Therefore, this allows these companies to seek out businesses in related industries so that they are a step ahead of competition.
Conversely, FiZ believes that the aforementioned approach is one that high net worth companies can also adopt when they stock piled cash. This could potentially yield the birth of home grown VC firms emerging from corporates in various industries. The only thing they will require is an investment in human capital that has the requisite skills in areas such as corporate finance and deal structuring.
Participants of the master class were also introduced to the concept of public corporate VC. Governments in Africa have often grappled with the challenge of raising capital for development projects. With most countries now seeing themselves being burdened by debt, one asset that has not been exploited is human capital. Prof. Serden suggests that with the evolution of technology and high investment in human capital around the areas of deal structuring, Governments can also play part in the VC arena. The model that is suggested is one where Government sets up an independent venture capital firm that is supervised by Government. This firm will be responsible for the four stages of Venture Capital. They will be responsible for fund raising. They will also pick the investments which can be aligned with government policy as regards to which sectors they wish to grow in order to create jobs. Management of the investment can be remotely monitored and a decision can eventually be made when to exit the investment once Government has made its return on investment and achieved its policy goals.
It is clear that the master class being offered will have participants leaving feeling empowered. When FiZ spoke to the Professor, we asked the question of how VCs can be lured into countries that have high interest rates for fixed income such as treasury bills which have seen domicile financial institutions starving local businesses of cheap finance by opting for these safer high return investments. His response was that the entrepreneurs needed to have a global view of their businesses. VCs will only enter an arena if they believe their investment will possess competitive advantage in that space from a global perspective. What small businesses need to understand, he added, was that because we live in a global community, it is only a matter of time before one’s big idea is faced with competition from a multinational corporation (MNC). Therefore, the VC allows these small businesses to achieve scale economies in the shortest possible time frame. With the penetration of mobile technology in Africa, the Professor believes that time is ripe for businesses to seek out VC.
Prof. Dr. Serden’s master class, attended by industry players form various sectors such as energy, fintech, financial and tax authority, among others will serve as good incubator and motivator for future events. Discussing some of the perils of accessing finance from one of the participants of the master class (owner of a Fintech) indicates that Zambians are ready for this alternative sources of finance. With interest rates still high for Zambian businesses, listening to Prof. Dr. Serden mentioning the negligible interest rates that are now prevalent in Europe, gave one the feeling that we are on different planets and the VC could be our savior. FiZ believes Venture Capital has been turned on its head by the WHU Senxsafrica Masterclass.