An honest conversation with a VC about working with SA startups
Clive Butkow, CEO and chief investment officer of
Clive Butkow is a well-known figure in South Africa’s entrepreneurship ecosystem.
Butkow is a venture capitalist, director of Grovest and CEO and chief investment officer of Grotech.
Butkow’s Grotech, which was launched last year is an investment fund that is targeted at investors with an appetite for higher risk and invests in high-growth, disruptive tech companies and is the fundraising initiative for venture capital company, Grovest which has been around since 2013.
Butkow’s almost evangelical passion for entrepreneurship has made him something of an authority in SA startups and has seen him support and mentor many technology businesses, assisting them in driving growth.
He has over 28 years management consulting experience and significant technology skills from working across multiple industries including financial services, resources, retail, automotive and communications.
See also: 7 unpopular truths about raising VC
SME South Africa sits down for a one-on-one interview with Butkow to talk to him about what it takes to get him to invest in your startup and how he separates the entrepreneurs from the wantrepreneurs.
Q: What do you love most about what you do?
I love working with people that are coachable that want to learn, that know what they know that know what they don’t know.
It makes me proud to be able to give back, to really help these young entrepreneurs who haven’t necessarily had the experience, to help them see the road ahead. I can help them see the potholes, I can help them see the curves in the road. I can really help them jump the learning curve and not have to build their businesses by trial and error.
“It makes me proud to be able to give back, to really help these young entrepreneurs who haven’t necessarily had the experience”
And I think what gives me the most satisfaction is when an entrepreneur comes back and says ‘Wow, your input, your mentoring and counseling have changed my business and have changed my life’. And that makes me sleep very well at night.
Q: What excites you most about seeing a startup you have coached succeed?
Success excites me – you’ve put in a lot of effort, their incredible passion and commitment and actually seeing results.
There’s a very small percentage of entrepreneurs that actually succeed. [The stats say it’s about] 5%. And I like to see the guys that I work with being part of that 5%.
It gives me incredible confidence in the country and the entrepreneurs to see that they can learn and they can turn an idea into a product, into a business. It’s extremely rewarding.
Q: What do you think is the difference between a good entrepreneur and a great entrepreneur?
It takes a lot of years’ experience to go with your gut. I have what I call the ‘BS Meter’, and my BS meter can tell me a really good entrepreneur who’s really committed and really passionate and puts everything into what they are doing, from the people that are doing it on the side – if it works it works and if it gets too hard they’re going to stop.
“If they’ve got that ‘why’, then the ‘how’ and the ‘what’ normally come from that”
I think they need to get that ‘why’, I need to understand why they’re doing it. If they’ve got that ‘why’, then the ‘how’ and the ‘what’ normally come from that – but they need to have that ‘why’. ‘Why am I going to work 24 hours a day – Why am I going to get a roller coaster of euphoria and then absolute horrible times and keep on going’.
And that for me is what separates the good from the great. And that is what separates the winners from the losers, in all honesty. The winners will keep on going and the losers will find excuses to why they should stop.
Q: What are the 3 most important criteria when deciding whether to invest or not?
I’ve got many criteria but in all honesty, I invest in people and I invest in teams. And my first top 5 criteria are people, people, people, people, people. I want to see that they’ve got the best team on the planet. I want to see that they’ve done this before, or at least that they’ve got someone on the team that has done this before – it’s what I call the execution intelligence. And that they’ve taken on a challenge like this and have been successful before.
[They’ve got to have] someone on the team or an advisor or a mentor, someone that can help them through the rough times.
Number 2 is that they are making something that the market wants. It’s what I call product-market fit. Just to make the next new shiny toy and then find people or the market that wants it – the ‘build it and they will come’ method – is not what excites me. I want to know that they are solving a significant customer problem and we all know that in Africa we’ve got our challenges, so there are many opportunities to solve big problems and turn that into a big business.
Number 3 is that they are able to sell whatever they are making. Nothing happens until the cash register rings. Sales is the number 1 skill that every founding team needs. We need to get clients and then we need to keep those clients happy, they’ll come back and buy over and over again.
Those three are the main criteria of the many criteria that I look at when making an investment decision.
Q: What have been your toughest experiences so far?
Whenever you have to close a business down, that’s tough. You get used to the people and they become part of the family and one day you look and the business is not working. And you have to actually close it down. And that’s very very tough because it impacts people it impacts families, it impacts your investors, it impacts everyone. So as much as we don’t like to do that we also don’t want to throw good money after bad.
“I’ve got many criteria but in all honesty, I invest in people and I invest in teams”
As a venture capitalist, you have to know from when you’re being stubborn to when you’re being realistic. And I think the realism says we’ve tried, we’ve given the business everything, it’s now time to stop throwing good money after bad and you have to close the business down and it’s really really tough to do that to your ‘family’.
Q: What has being an investor taught you about entrepreneurship?
There’s a lot that being an investor has taught me and I think the number one thing is that not all entrepreneurs are made equally. The biggest challenge of a venture capitalist is to be able to sieve out the winners from the losers.
Everyone comes with their great stories and great business plans and tells you they are going to be millionaires in three years’ time. But the real challenge is to [separate] the real people that can really make it happen and can execute from the guys that just tell you whatever you want to hear.
My best lesson again is to not look at all the nonsense, to be able to sieve out the real stuff and the real people from all the nonsense that you hear all the time.
There are so many ‘wantrepreneurs‘ who just want to try and get capital from you for the sake of building something that no one actually wants.