Aurik to kick off fund raising for new Section 12J VCC for SMEs

Aurik Investment Holdings will this Friday launch a bid to raise capital for a new fund that will invest in established small firms that it currently assists with business support.

The Johannesburg based business support organisations will to launch fund raising at the 12J Marketplace Conference which takes place in Melrose Arch in the city this Friday.

The fund — called Aurik Capital — will be in the form of a Section 12J venture capital (VC) company.

The VC tax incentive, set up under Section 12J of the Income Tax Act, allows investors who make investments in approved VCCs — that then invest in qualifying small companies — a tax deduction.

Aurik’s Section 12J fund will invest in established small businesses that it is presently mentoring

Aurik CEO Pavlo Phitidis (pictured above) told Ventureburn in a phone call today that Aurik is looking to raise between R60-million and R100-million from investors for the fund and estimated that the fund would benefit at least 12 businesses.

He said he has already had interest from two “retired businessmen from well-established firms” keen to make commitments to the fund.

Phitidis said the fund will invest in established small and medium-sized firm that its accelerator works with.

He said the accelerator currently works with 302 established businesses that last year grew their average annual turnover by 29.8%. The firms have an annual revenue of between R15-million to R150-million.

Aurik Capital, through the Section 12J incentive, will allow investors to claim 100% of their investment as a tax deduction, thus reducing the investors’ exposures by up to 45% on the total investment amount.

Phitidis said Aurik’s first Section 12J fund dubbed “Linkmakers” is expected to be fully deployed by next year. The fund, which was launched two years ago, targets small firms that are 51% or more black-owned.

Phitidis said the fund had so far deployed over R60-million drawn from corporates looking to score BEE points through funding black suppliers under the supplier development element of the BEE scorecard.

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Featured image: Aurik Investment Holdings partner Pavlo Phitidis (Facebook)