South African startups now have access to more VC funds as the country’s SME Fund and the government’s Technology Innovation Agency (TIA) has announced a public-private partnership to co-invest R350 million across three venture capital funds.
Here Is All You Need To Know
- A Memorandum of Understanding (MOU) was signed between TIA and SME Fund at the Innovation Summit in Cape Town on Friday 13 September, 2019.
- The partnership sees over R350 (over $23 million) invested in three venture capital funds.
- These fund managers will invest in a portfolio of early stage businesses and provide capital, as well as other support, to the entrepreneurs, to help them commercialise technologies and grow their businesses.
- The South Africa’s SME Fund’s mandate to the three fund managers includes a requirement that they invest at least 50 percent of the fund into businesses owned by black entrepreneurs.
- The SA SME Fund and TIA also signed the legal agreements for the OneBio Seed Investment Fund, officially launching the only biotech dedicated investment fund in South Africa.
Which Fund Managers Get The Funds
The fund will go to:
- OneBio Seed Investment Fund, a biotechnology dedicated fund. R83.5 million has already been given to the OneBio Seed Investment Fund.
- Savant Venture Fund, a hardware technology incubator and Fund Manager (in which two deals have already been pre-funded by TIA’s Seed Fund. Savant Venture Fund has received R111.5 million so far. Savant Venture Fund recently ZAR9.5 million (US$635,000) in E-health startup, SmartBlade’s.
- The fund will also be made to South Africa’s newly established University Technology Fund (UTF). An anticipated commitment of R152.5m million will be made into the University Technology Fund (UTF) (for which the SA SME Fund anticipates receiving formal approval by the end of September).
Why Investment Was Made Into The Funds And What Startups Will Expect
According to Ketso Gordhan, Chief Executive of the SA SME Fund:
“We are hugely excited and energised by this partnership to support and invest in innovation, especially in black-owned start-ups and scale-ups in this space. This forms part of our commitment to support government, together with TIA, in stimulating and intensifying technological innovation to improve economic growth, create jobs and impact on the quality of life of all South Africans”.
Fuzlin Levy-Hassen, Interim Chief Executive of the TIA, said:
“This new investment partnership is the result of the synergies and commitment that exist between Government and the private sector. We are aligned in our vision of turning bright young minds into viable and sustainable business founders whose successes will create jobs and drive economic growth. The sophistication and creativity already evident in these businesses should make us proud as a country, and encourage us to further support innovation”.
Read also: New Funding Round Opens For Small Businesses In South Africa
What Startups The New VC Funds May Be Targeting
The SA SME has invested in these three VC funds because they are trying to support innovation and the creation of entrepreneurs in South Africa. They also seem to be supporting underdeveloped sectors. For instance:
- OneBio is a fund that focuses on biotechnology, which historically has been the purview of Big Pharma, but technology and declining costs in the research and development mean that our engineers can develop great solutions using local resources for global needs.
- Savant a first time Fund Manager focused on hardware technology Fund. This Fund is plugging the shortage of investment into hardware technology within the South African VC environment. The team has over a decade of experience in commercialising hardware tech.
- The UTF is a University Technology Fund that aims to leverage and commercialise the IP originating from SA universities, where the focus has typically been at very early stage research with no follow-on capital.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world