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Prowling for investment just got a whole lot easier for South African startups.
Last night at StartupGrind Cape Town, serial entrepreneur and South African Dragon Vinny Lingham announced the launch of Series Seed — a series of free, standardised term sheets that can help SA startups get investment more easily by helping them cut back on legal fees.
Speaking about the real behind-the-scenes of the reality show Dragons’ Den, Lingham noted that the experience of fact-checking and due diligence with the pitching startups was “painful”. He and fellow venture capitalist Llew Clasen were then prompted to sit down and find a way of streamlining the process in order to help boost local investments.
“If you’re raising a couple of hundred grand to let your business float, the last thing you need to do is be paying for your lawyers. You should be focusing on your product experience and everything else,” Lingham told the sold-out event.
Backed by Newtown Partners, Esselaar Attorneys, Simodisa and Silicon Cape, the site contains free, downloadable documents you must have when setting up a company, including the Memorandum of Incorporation and the Shareholders Agreement.
The Series Seed documents are locally adapted versions of those used by US investors and companies. The site notes that the general principles are based on business concepts that have been tried and tested in many successful startup companies over many years. Lingham explained why this is important:
Silicon Valley benefited massively from the dot com’s rise, fall and collapse. Because what it did was train a whole generation of entrepreneurs. It burned through billions of dollars and they’ve learned lots of lessons. The value got stronger as a result of that.
The documents have been vetted and all the legal fees have been covered. “We put terms in which are attentive for investors but are also help startups give them the freedom for what they need to do,” he said. “You really shouldn’t take terms that are different to these.”
“What we need to start doing is stop focusing on minimising failure,” the Gyft founder said. “We need to start focusing on maximising success. Too many investors in South Africa are too worried about losing money versus optimising positive outcomes. If you don’t want risks, go to the bank and get 8% a year.”