VENTURE CAPITALISM AND ENTERPRISE REVOLUTION IN ...

Venture Capitalism and Enterprise Revolution in NigeriaPart 2
On March 19, 2012 ? In Finance, Viewpoint

By Peter Osalor

Its large population and market size bestow tremendous potential on the Nigeria economy -Africa?s second largest and among the most rapidly growing. The country?s ambitious Vision 2020 programme and the UN Millennial Development Goals together represent considerable challenges in terms of economic revival.

Past experience favours strongly against big businesses, which have had a dismal track record and a high-failure rate under both private and public operation.

Undeniably, the fate of Nigeria?s long term goals rests on rapid proliferation of SMEs and their ability to drive an enterprise revolution that will sufficiently diversify the economy away from oil and reverse decades of stagnation. The objective is to use SMEs to deliver sustainable development, employment creation and most importantly, poverty alleviation.

This is where venture capitalism derives its significance in the context of Nigeria?s long-term ambitions. Private equity investment has been responsible for some of the most notable economic success stories across the globe. Entrepreneurs starting out with angel loans turned India around into the largest software exporter in the world.

In South Korea, booming small high-tech businesses bypassed larger firms to lead the country?s recovery from the Asian economic crisis. Equity funded enterprises have likewise recorded high growth figures in developing countries from Asia, across Europe and in South America.

The global experience with venture capitalism throws up a number of important considerations in terms of providing the right environment for rapid growth. The following are some of the most important challenges and considerations facing Nigerian policy makers in this regard:

?Establishing a venture capital technical assistance programme to enhance SME performance in diverse economic sectors.

?Institutionalising tax benefits for equity investment to attract foreign investors.
?Providing risk guarantees to create strategic venture capital industries that improve self reliance and curb import quotas.

?Enhancing venture capital capacity to stimulate and promote the industrial expansion.
?Focusing equity investment on SMEs that optimise resource utilisation and assist local raw material development.
?Promoting innovative business ideas, processes and techniques that boost both productivity and profitability.

However, the benefits of venture capital go beyond the provision of long-term finance.? Since they have a vested interest in the success of a business, venture capitalists, unlike banks, actively work with the company?s management by contributing their experience and business knowledge gained from helping other companies with similar growth challenges.? They are involved in the management, strategic marketing and planning of their investee companies.? Unlike banks, they are not just passive financiers, but are also entrepreneurs.

?In some of the world?s foremost universities, venture capital is helping to turn research that would never have gone outside the laboratory into multi-billion dollar businesses.? In the US and the UK, young innovative individuals, who because of their age and lack of track record would never have attracted bank finance, but who have the necessary intangible assets and good business plans, are now behind some of the world?s most successful internet companies ? like Amazon.com and lastminute.com ? backed with venture money.

?However, the benefits of venture capital go beyond the provision of long-term finance.? Since they have a vested interest in the success of a business, venture capitalists, unlike banks, actively work with the company?s management by contributing their experience and business knowledge gained from helping other companies with similar growth challenges.

Source: http://www.nigerianbestforum.com/blog/?p=110203

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