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Investor interest in placing money in venture capital funds has picked up since the resignation last month of Jacob Zuma as president and the swearing in of Cyril Ramaphosa, say cautious local venture capitalists.
Speaking to Ventureburn yesterday, Kalon Venture Partners CEO Clive Butkow (pictured above) said he’d experienced renewed interest from investors since the election in December of Cyril Ramaphosa as ANC president.
He noted that a breakfast meeting he held in Johannesburg on 2 February saw about 1000 investors and representatives from family offices attend.
“I think had it not been for the Zuma change we wouldn’t have received that interest,” he said.
He added that Kalon is also looking to set up a fund to invest in tech startups in the rest of the continent.
Knife Capital co-founder Keet van Zyl added that startups are now finding it easier to “sell positive future ‘blue sky’ business plans now that the Zuma cloud has lifted”.
I think had it not been for the Zuma change we wouldn’t have received that interest says venture capitalist
“We have experienced more investors — mainly local and international family offices as well as private individuals — backing Knife Capital at the moment,” he said.
He said Knife Capital has signed term sheets for two deals and is busy drafting legal documents for these. The deals would be announced in the next few weeks, he added.
“But we must qualify that one of our funding vehicles is the KNF s12J Fund (Section 12J under the VC tax incentive) and the fact that Zuma resigned before 28 February was good timing for us and made for a very busy fund raising week at the end of February,” he said.
Grant Rock, the executive director of Cape Town VC company, Havaic said deal flow had been good in the last few months. “We have started the year very positively,” he said.
Havaic yesterday began raising capital internally for a new investment, in what Rock was prepared only to describe at present as “a nice size deal” for a “disruptor in the private security”.
The VC company is set to announce the conclusion of a new health tech deal in the coming days, Rock added. The deal was signed earlier this year.
‘Sitting on the fence’
However, a more cautious Clifftop Colony’s Oliver Drews said it would take “some time and more than just words” to undo the negative investor perception generated during the Zuma administration.
“Most investors are sitting on the fence right now, waiting for key developments to unfold,” he said.
He said these include addressing corruption, more details on funding certainty of the state and state-owned enterprises and the reaction of the rating agencies particularly on property rights and details on the announced growth measures.
“Obviously, last week’s parliamentary decision on expropriation without compensation was not received well by the international investor community,” he added.
He said Clifftop continues to concentrate on educating the international investment community about South Africa.
“We have had huge demand – even from tech investors – for more information on the land debate given that property rights are a precondition of any positive investment decision, in any sector or on any theme,” he said.
Clifftop Colony currently has a portfolio of three companies, namely: Wyzetalk (since 2012), Loot (since 2014) and iono.fm (since 2016).
“We have earmarked a fourth investment, like Wyzetalk a seed investment, and we have spent the last six months or so to get to know the founders team and refine the business model together with them,” he said.
‘Little effect to existing growth’
Some like 4Di Capital’s Justin Stanford believe that the political change has had little effect on the growing VC sector in South Africa.
The reported value of VC investments made during 2016 was R872-million in 114 deals — an increase of 134% over the R372-million invested in 93 deal in 2015, according to the Southern African Venture Capital and Private Equity Association’s (Savca) 2017 VC survey.
“There was already a growing enthusiasm from foreigners to invest here prior (regardless of the politics) and things are just continuing to proceed as before. We haven’t seen any specific reaction to the land expropriation story,” he said.
He said 4Di Capital is still making new investments from its second fund (Exponential Technology Fund), and it is still open to new investors or fundraising, as before.
The VC company, he said, has a few new deals in the pipeline which are ready for closing. He didn’t reveal any more details about the deals.
Savca CEO Tanya van Lill said her organisation is looking at hosting investor immersions this year alongside the government’s planned investment conference targeted at both domestic and international investors.
“The discussions around land reform are reflective of government now focused on policy, constitutional dialogue and public and stakeholder consultation. All key characteristics of a working and sustainable democracy.
“This should inspire, rather than deter, confidence in SA’s long term economic outlook and investment prospects going forward,” said Van Lill.