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Clifftop Ventures, the venture investment arm of financial firm Clifftop Colony, has increased its Equity Capital Drawdown Facility (ECDF) facility for online audio services company iono.fm to R4-million, after the tech firm was able to fully utilise an earlier R2.5-million facility.
The announcement was made in a press release yesterday by Clifftop Colony and comes after the utilisation by iono.fm of a R.2.5-million ECDF facility, announced in November 2016 by the financial firm.
The funding will help iono.fm, which was founded in 2009 by Ryan Dingley, to solidify the business next year and to expand into other African markets, such as Kenya, Nigeria and Tanzania.
The company’s customers are radio stations who use iono.fm to transcode, host and distribute their audio content via their own websites and various other distribution channels, such as iTunes.
The funding would help iono.fm to solidify the business next year and to expand into other African markets, such as Kenya, Nigeria and Tanzania
Dingley however did not want to disclose the equity stake that the investors — who are mainly from the US and Europe — would get in return for the R4-million that iono.fm can drawn down from.
He said the facility functions in a similar way to how an overdraft facility works, but that the company is “obliged” to spend the entire sum of money available in the facility. The equity stake would be effective from early next year, he said.
Dingley said iono.fm has about 15 million unique users in the last 12 months, 1500 active audio channels and 250 000 active episodes from more than 250 content providers, iono.fm is one of the largest audio media content platform providers in Africa.
Clifftop Colony CEO Oliver Drews said the company had experimented with an equity drawdown structure this year and found that in the case of iono.fm it worked well for both the team in the venture company and investors.
“It’s basically a framework agreement with a special purpose vehicle which provides certainty of funding for an agreed commitment amount and adjusts valuations over time,” he added.
He pointed out that as the investment arm’s investor base is predominantly from Europe and the US, a 12J venture capital tax incentive structure wouldn’t work for the company, meaning they had to come up with something different without having to go down the VC fund or corporate venture capital route.
“I think for early-stage companies with a proven annuity based business model like iono.fm the ECDF we developed is an interesting funding solution and we will continue to refine this structure further,” said Drews.