A R300m seed fund has been established to provide early-stage capital for start-ups in the technology sector.
The fund has been established by the SA SME Fund, the department of science and innovation, its entity the Technology Innovation Agency (TIA) and E Squared Investments.
The aim of the initiative is to fund at least 50 technology-driven start-ups through fund managers. The capital of the fund will be allocated to at least five fund managers.
The founders of the fund believe it will address a gap in SA’s venture capital market where later-stage investments have historically attracted more funding.
SA SME Fund CEO Ketso Gordhan believes seed funding to be the cornerstone of entrepreneurial success.
“Seed capital is the lifeblood of innovation and entrepreneurial growth. Without it, many great ideas would never see the light of day. By injecting capital at this critical early stage, we are not just funding start-ups — we are cultivating the next generation of industry leaders,” he said in a statement.
“SA has no shortage of brilliant minds, and this fund will ensure that more of them have the resources they need to succeed. Our goal is to make sure these companies have a fair chance at success and scale in the local and global markets.”
Acting TIA CEO Patrick Krappie noted that governments across the globe played a crucial role in fostering innovation ecosystems. The seed fund of funds would, he said, catalyse a wave of new start-ups by enabling them to transition from ideas to viable enterprises.
E Squared Investments CEO Gladwyn Leeuw said the initiative aligned with the company’s vision to be a leading early-stage investor.
The SA SME Fund is a collaboration between the government and business and was capitalised by 52 corporates and the Public Investment Corporation (PIC) with R1.4bn. It invests in funds that support and develop mainly black entrepreneurs. It also has a R300m SME debt fund with the Gauteng government and the Industrial Development Corporation (IDC) as well as a fund of venture capital funds of R795m.
Parliament’s trade, industry and competition committee was recently told by experts in the field that SA needed a dedicated and comprehensive law to facilitate the development of start-up companies along the lines proposed by the AU.
The current regulatory environment was not conducive to start-ups, they said.
A start-up act movement has been created consisting of start-ups, industry associations, academics, black entrepreneurs, investors and local venture capital companies.
Chairperson of the movement Matsi Modise told MPs that SA had fewer successful start-ups than it could have and the aim was to get the endorsement of the department of trade, industry & competition to progress policy for high-growth, high-impact start-ups in SA.
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