Mentor-driven capital is creating value for startups by sharing the knowledge, experience, and network gained over the course of a career, actively supporting founders to maximize the return on investment. Through mentoring, business angels offer more than just money.
We are looking to grow the pool of corporate leaders, mentors and investors that support promising entrepreneurs across the African continent. We are taking applications for the 2019 edition of the Make-IT Mentor Driven Capital Program. The program is – at this time – only working with mentors in Lagos and Nairobi.
- Where capital is only one aspect, a mentor-driven capital approach uses mentorship to guide entrepreneurs to success. Understanding how to add value to a starting business is core to becoming a successful Business Angel.
- How can you help entrepreneurs become strong leaders?
- How can you support the founder team in achieving their business objectives?
- How can you unlock your network and expertise for the growth of the company?
- How can you use your experience to help the company navigate the market?
- How can you do this in your own interest to maximize value and improve chances of a successful investment outcome?
These seem like easy questions but there are tried and tested practices for how to do this. VC4A is working with leaders in the industry to provide you with the best tools and lessons learned available anywhere. Most importantly, we engage with experts from across the African startup industry to make the content and design of our programs contextually relevant.
Mentor Driven Capital
VC4A believes Mentor Driven Capital is core to unlocking the continent’s potential. Not only is the pool of entrepreneurial talent coming up across Africa expanding, the number and the quality of ventures are improving over time. These companies represent a powerful collection of innovations, products, and services that have the potential to transform every industry. At the same time, as these businesses grow, they offer new sources of income and produce high-quality job opportunities. As the turnover of these businesses grow, they provide African governments with new sources of tax revenue needed to invest in infrastructure and social services. And for ventures that achieve great levels of success, there is a healthy financial return for the investors that took the risks early and supported the effort with their Hard (money) and Soft Capital (Time, Network, and Expertise) when they needed it most.
Where any startup requires cash to operate, it is the application of capital in smart ways that secures a greater impact and return on investment. Mentor Driven Capital has a critical role to play in supporting the continent’s entrepreneurs. It is also where a good Business Angel can make the difference between venture failure, survival and success.
What makes Mentor Driven Capital unique?
The focus and emphasis are too often on the money part of early-stage investing, when we know that the soft contribution Business Angels can make for startups adds the most value. Where any startup requires cash to operate, it is the application of capital in smart ways that secures a greater impact and return on investment. More importantly, Business Angels are in a unique position to add value. They often bring deep industry experience, an extensive network of contacts and many lessons learned from years of being in the industry. The Business Angel can provide a level of support an entrepreneur will not get from a traditional Bank, VC investor or most Startup programs. Business Angels can provide hands on support when companies need it most!
What defines Mentor Driven Capital and the Business Angel?
• Two individuals believe in the potential of an idea, share an enthusiasm and dedication for its potential, and are willing to put in the hard work needed to implement the idea successfully;
• Where one individual is the entrepreneur responsible for building the business structure that will carry the idea, the Business Angel offers hard (money) and soft (time, expertise, and network) capital support;
• Investing hard capital (money) without offering the entrepreneur soft capital (time, expertise, and network) means the individual is an investor. Investing soft capital (time, expertise, and network) without investing hard capital (money) means the individual is a mentor. Mentor Driven Capital is the combination of both and is what defines the Business Angel.
Alignment of Incentives
The business angel investing money into the business means they most likely stand to benefit financially from any successful outcome. This ‘skin in the game’ helps to create alignment between entrepreneur and Business Angel, and where both parties are working towards the same objectives. At the same time, there are many reasons why startups fail at an early stage. The risks are only compounded when operating in nascent markets where infrastructure can be lacking. Investing capital into a business and expecting success is often short-sighted. This is where supporting the entrepreneur in the decision-making process and actively unlocking opportunities for the entrepreneur to tap into can only improve the chances for a positive outcome, and can often mean the difference between failure, survival, and success.
Skin in the game helps to create alignment between entrepreneur and Business Angel, and where both parties are working towards the same objectives. It is not always possible for the investor to engage as a mentor. Sometimes the investor is too busy or should focus on other business priorities. This is not necessarily an issue if both parties are upfront about this at the start of the relationship and to manage expectations. This is to prevent a situation in which the entrepreneur is expecting support they are not going to get, or the investor being inundated with requests they are unable to follow up on.
Investing money into the business is also not a requirement. It is not always possible. It can be that the Mentor does not have the financial resources to invest in the business or that the entrepreneur is pursuing a fundraising strategy that doesn’t allow for the mentor to participate as an investor. Again, this is not necessarily an issue, but where both parties need to understand the incentives that motivate their partnership from the beginning. Sometimes a mentor is looking for new career opportunities, wants to better understand a market or industry, or simply wants to give back. Any of these reasons are valid for wanting to engage with startups in a formative stage, but where it’s important for both parties to understand what motivates their engagement and to set realistic expectations.
Through mentoring, business angels offer more than just money. ‘Mentor-driven capital’ is the approach to creating value for startups by sharing the knowledge, experience and network you’ve built during your career, while also maximizing the return on your investments.
Take advantage of the first dedicated training program designed for African business professionals keen to guide Africa’s up and coming entrepreneurs to success. Angel investing is of course about providing early-stage companies with investment capital, but the expertise and network that you, as a business angel, can share with entrepreneurs is also vital to their growth and success. The goal of this program is to therefore boost your ability as a high-powered mentor to support entrepreneurs while learning to think and act like a savvy business angel.
In this unique mentor program for 30 corporate executives and aspiring business angels (15 in Lagos and 15 in Nairobi), you will guide promising entrepreneurs to success while you achieve your own level of success. You will receive expert guidance, training and hands-on support. The only thing you need to invest during the program is your valuable time, knowledge and network!
What we offer
- Participate in 2 full-day Mentor-Driven Capital Bootcamps in April and July, covering topics including:
– Introduction to Business Angel Mentorship
– What makes a good businessangel?
– Partnering with Corporates
– Structuring the Corporate Deal
– Starting as an Angel Investor
– Valuations and Term Sheets
- Mentor a promising startup
- Access to peer group mentor sessions
- Access to mentorship guide and online training materials
- Access to resident experts on corporate matchmaking & investment readiness
- Access to promising startup companies looking for angel investment
- Profile on VC4A website + Make IT website
- VC4A Pro Account (3 months) + access to VC4A Mentorship Marketplace
- Become part of the Make-IT program with many industry-leading events
CLICK HERE to Learn more about the program and participant requirements. The program is – at this time – only working with mentors in Lagos and Nairobi.
(This post is an adaptation of an article written by Ben White with the title ‘ Mentor driven capital, a business angel movement to realize African startup potential’ published on VC4A in July 2018.)