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While Cape Town venture capital (VC) company HAVAÍC has yet to exit any of its five portfolio investments, it has had two opportunities to do so since launching about two and a half years ago, says the VC’s CEO Ian Lessem.
Lessem told Ventureburn earlier this month that the VC company held off exiting because he believed there was still “too much upside potential in these businesses to warrant an exit”.
The VC company was founded by in 2015 by Lessem together with Grant Rock, Rob Health and Jonty Levin.
HAVAÍC held off exiting because there was still “too much upside potential in these businesses to warrant an exit”
Rather than utilise a VC fund, HAVAÍC General Partners, acts as the manager of each investment while raising capital through a limited partnership structure on a deal-by-deal basis. This argues Lessem allows the company us to approach investments in a “bespoke manner” and “marry these investments with investors who have the appropriate appetite”.
HAVAÍC’s portfolio of five investments include digital marketing startup delvv.io (2016) cloud solutions company Digital Cabinet (2017), cloud-enabled financial management system Drive Revenue (2017), healthtech startups Recomed (2017) and Vula Mobile (April 2018).
Read more: Healthtech startup Vula Mobile raises R1m after partnering with HAVAÍC
Read more: HAVAÍC announces R4.5m investment in Cape healthtech startup Recomed
Read more: Cape Town company Digital Cabinet lands R5m funding from HAVAÍC, Growth Grid
Read more: Drive Revenue gets multi-million rand funding injection from HAVAÍC
Read more: delvv.io receives R6.5m in funding round [update]
Ventureburn emailed Lessem a number of questions, as part of a series of interviews with venture capitalists and angel investors in South Africa tech startup sector (see the footer of the story for links to other interviews). Here’s what he had to say.
Ventureburn: What return on equity do you generally look at? And after how long do you typically look to exit? What percentage of equity do you usually look to take?
Ian Lessem: HAVAÍC’s minimum target is 30% internal return on revenue (IRR) per year, and our typical time horizon is three to five years. We generally take minority stakes (of) 10% to 20%, where the founders are still major shareholders in the business.
VB: How many investments have you exited from and how many are making really good growth?
IL: We have not exited a business yet, however have had two opportunities to do so, but believed there was still too much upside potential in these businesses to warrant an exit. In terms of performance, on a portfolio basis our investments are tracking in line with our target benchmark.
VB: Why would some investments be doing better than others?
IL: As each of our investments address a market need, by in large the differentiating factor is the engagement that the founders or entrepreneurs have with their advisors and investors — ie do they welcome strategic advise from vested parties, or do they prefer to go it alone?
It’s like the old African proverb says, if you want to go fast go alone, if you want to go far, go together. We believe in going far, and that’s why the pre-investment and post investment advisory support that HAVAÍC offers is so valuable and important.
VB: How many of your current investments have had second or third-round investments?
IL: As we are early-stage investors, most of our investments have had seed or angel rounds. In terms of where VC’s play, we do tend to come in rather early though.
We are very happy to team up or to lead rounds, it’s all about what structure makes the most sense to the business and the investors. Re foreign investors, to the extent the business is looking to enter a foreign market, having a strategic offshore investors often does make sense.
Read more: Jozi Angels wants R8m return from R400k invested per startup [Q&A]
Read more: Market readiness key when investing in startups – 4Di Capital founder [Q&A]
Read more: Startups need at least 10x in 5 years to be good investment – VC, angel investors
Featured image: HAVAÍC CEO Ian Lessem (Supplied)