MBA 043: Funding for growth with CLIVE BUTKOW

Part 1: What it Entails to be a Venture Capitalist
Elevator Pitch – Who is Clive Butkow?
As a venture capitalist, it’s Clive’s mission in life to make entrepreneurs more successful. Venture capitalists help grow small businesses in order to sell them at a later stage.

Starting Out
The very first business Clive started when he was just eight years old, was making and selling kites. Later Clive worked in a clothing store to put himself through university where he completed a BSC in Computer Science and Applied Mathematics. Right after starting a technology business, Clive was offered a position with another company in their consulting division. This opportunity allowed Clive to travel abroad and to apprentice under great mentors. He retired 28 years later. Although he was working in a corporate environment Clive worked directly with entrepreneurs and small companies.

Making Mistakes and Learning from Them
Ideas don’t equal good, investable business. Ideas don’t make you money, people make you money. Get the very best people for the job. Build a team around yourself of people whose skills supplement your own.

How Your Business Works
Grotech is on the second capital raise at the moment and they focus exclusively on disruptive digital technology. They do not invest in asset-intensive businesses or any business that needs a lot of working capital. The reason they focus on technology is because these types of businesses are capital light and capital efficient. Their fund in South Africa is a Section 12J fund, mimicked off the Venture Capital Trusts in the UK. It is about stimulating economic growth through investing in startup entrepreneurs. The investments are tax refundable and becoming quite prevalent.


Differentiate Yourself From Your Competitors
On the Grotech board there are various business builders. They have first-hand knowledge of the entrepreneurial world. Financial capital is, in Clive’s opinion, the easiest to supply. At Grotech they aim to provide mentorship capital – valuable advice and guidance to the entrepreneur to realise his potential quicker. Social or relationship capital is the other type of support offered by Grotech – access to a relevant market. Clive also mentions human capital where they can put you in contact with the very best person for a particular job.

Marketing
Inbound interest: every person on the Grotech board has an exceptional track record, so entrepreneurs tend to seek them out for their capital.
Outbound interest: the company actively seeks entrepreneurs to sell their capital to. They identify these people through their network and offer them the necessary capital input.

The Purpose of Many Board Members
Clive and his colleagues picked people with a diverse set of specialties to serve as members on the board – entrepreneurs, accountants and marketing and sales experts. With their collective knowledge on these different fields they can mentor their clients all the better.

The Skills of a Venture Capitalist
Many South African venture capital companies are run by accountants and people with a finance background as opposed to the ex-entrepreneurs in Silicon Valley. Clive feels that entrepreneurial and business-building skills are the most important factors that add to the success of a venture capital company.

Income Streams
There is a capital raising charge, in their case 3%, as well as a 2-3% management cost that is ongoing for the duration of the fund. Grotech only makes money if they make money for their investors.

Reset Button: If you had to start over in a different industry. What would it be and why?
Clive would use his Computer Science degree. He feels that entrepreneurship has become democratised.