SA gets R400m VC fund for startups and SMEs

This is big news anyone involved in the running of a startup. Business Partners, a specialist risk finance company, has launched a R400-million fund for small and medium-sized businesses in South Africa.

A portion of that will be aimed tech startups, with the fund concentrating on providing first-round finance deals up to R10-million.

The main criteria for investment, the company says, will be the potential for growth and its viability as a business.

“Small businesses, particularly those in the concept or start-up phase, struggle to find funding as financiers are reluctant to enter this high-risk arena,” Business Partners said in a statement.

“This is due to the high failure rate of start-ups and the lack of security available for financiers to compensate risk and the high gearing required for seed capital,” it said.

According to Business Partners CEO Gerrie Biljoen, the impact that small to medium-sized businesses can have on the economy is one reason why the company decided to launch the fund.

“We recognise the potential benefit that innovative and high growth enterprises can bring to the country. It is for this reason that the company is launching the fund — to finance exactly this type of high impact entrepreneur.”

While the company is clearly excited by the tech sector, Biljoen says the company is casting its net across a variety of industries:

“We currently see great potential and opportunity within clean energy, agri-processing, bio-tech and ICT sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level.”

The fund is a massive potential boon for the country’s startup scene. There are after all, a relatively small number of VCs, especially in the tech sector.

There were however some dissenting voices in the wake of the announcement:

@invenfin @businesstechsa @siliconcape have you ever tried working with business partners? Impossible

— mleeman (@mleeman) October 16, 2012