By Daniel Mpala
Very young entrepreneurs who get offered grant funding should consult with a lawyer before signing anything, advises Chanzo Capital managing partner and Angel Fair Africa founder Eric Osiakwan.
Osiakwan was speaking during a panel discussion at last month’s Very Young Entrepreneur Education & Acceleration Summit in Johannesburg.
While
grant capital, he says, plays a very important role for young startupsstart-ups,
especially during their research and development stage — a time when few
investors will back them — the receipt of grant funding is often tied to the
entrepreneur agreeing to certain conditions around the intellectual property
(IP) that they develop.
“So, the critical thing is you need to get real lawyers to read that agreement. I don’t believe there’s anything like free money in this world,” says Osiakwan.
He urges entrepreneurs to think about what the entity or person proving the grant is aiming to get out of the deal, in exchange for their capital.
“And most of the time it plays on intellectual property, and the agreement can be so subtle you don’t realise it until you build a big business, and suddenly that person owns the intellectual property. And if you don’t hold the intellectual property of your business, then that’s your business gone,” warns Osiakwan.
‘Back your kids’
Responding to a question on advice for parents who have their children approach them for investment, Osiakwan urged parents of very young entrepreneurs to consider investing in their own children’s businesses.
He drew attention to how there’s a common saying that the first people to invest in a venture are the entrepreneur’s “family, friends and then fools”.
“The reason why it starts with family is that your family always knows you. The first people to invest in you will be your family. And that’s why you must always back your kids when you want to do something,” he explained.
“You are probably the best person to know whether he or she can execute. If you can come to that conclusion by yourself, putting everything aside, then you should give up all the savings,” added Osiakwan.
Featured image: Chanzo Capital managing partner and Angel Fair founder Eric Osiakwan (Photo credit: Mfundo Mbanze)
