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Newly formed WDB Seed Fund seeks to develop an urgent response to the scarcity of funding for startups in their early growth stages.
The fund is made up of for-profit social enterprise, Seed Engine, WDB Investment Holdings, an organisation driven to impact the lives of other women in rural communities in SA, as well as Grovest, an SA VC company.
The WDB Seed Fund also offers investors tax advantages, as well as Broad-Based Economic Empowerment (B-BBEE) points, for those who wish to invest. This is because the investment would be utilised for enterprise and supplier development initiatives. The fund has also been established as a section 12J VCC.
“The fund allows organisations to achieve an above average targeted internal rate of return of 20% on their investment in enterprise and supplier development programmes with a focus on black women and youth-owned businesses,” said CEO of Seed Engine, Donna Rachelson, in a press release.
Investments can also be deducted from their taxable income in the same year which they invested. This means that there is a 28% tax benefit for business and 41% tax benefits for individuals and trusts.
Corporates will be able to select the startups they wish to invest in from a variety of sectors, such as ICT, education, health, and logistics. The fund has three types of shares available: enterprise development, supplier development, and impact shares.
“We believe that the impact of WDB Seed Fund will be significant as the partners bring specialised experience. The WDBIH has funded and supported female entrepreneurs and is experienced in impact investments. Grovest has pioneered Section 12J companies and Seed Engine and Seed Academy has a track record in training and supporting entrepreneurs,” said Rachelson.
“The intention of Section 12J funds is to incentivise investment in the development of SMEs, and the WDB Seed Fund will generate not only financial returns for our investors but social, environmental and economic impacts as well,” said CEO of Grovest, Jeff Miller.
Once set up, businesses will get to tick off one possible source of funding of their list, while investors can find yet another way to develop small enterprises as well as their surrounding communities.
Featured image: Jake Stimpson via Flickr