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SA has a new-ish tech fund on the block, the R500-million LionPride Agility Fund — linked to Silicon Valley based SA entrepreneur Vinny Lingham.
The fund’s CEO Deven Govender today revealed to Ventureburn that the fund (which launched earlier this year) concluded three deals this year (see this story). So, how do you qualify for funding?
Lingham (pictured above) is the founder of startup Civic and a former judge on TV show Dragon’s Den and Shark Tank SA.
One of the deals is with Mara Phones — the first smartphone to be manufactured (not assembled) in Africa, with its origins in Rwanda and have now opened a factory in Durban.
Vinny Lingham linked LionPride Agility Fund has concluded three deals this year – so, how do you qualify for funding?
The fund — which operates as a Section 12J fund under the SA Revenue Service’s (Sars) VC tax incentive — invested about R5-million to 20% of the SA master franchise to distribute the phones. It’s also invested about R10-million in two other deals.
Govender says this year his his team sifted through more than 100 pitch decks. So, as a startup, how does one stand out?
Questions fund asks when looking to invest
In a letter to be sent out this Friday (13 December) to investors, Govender says when selecting investments the fund’s team usually asks the following questions:
- Does the investment fit the requirement of a Section 12J company?
- The team we are backing — are there team dynamics, a complimentary skills set and are they coachable?
- The problem we are solving — is this scalable, does it focus on the bottom of the pyramid, does it improve the quality of people’s lives on a day to day basis
- The business model — everyone believes that they have the next Facebook, but a business-to-consumer (B2C) model is not easy to crack. How do you make it sticky that customers come back every day or many times during the day?
- Business life cycle — most South African VCs first invest in post revenue businesses. This is where the founders have been able to sell their idea to a client. Govender says The Agility Fund takes a different view. “We look at each business on its individual merits. What we have found is that most black founders do not have enough startup capital nor do they have the family or business network to get the business to a minimum viable product (MVP). To engage a potential customer you need a MVP. We have taken the view that we will in certain instances invest in pre-revenue where we are reasonably convinced we can get to MVP in the following three to six months. This is a higher level of risk, but allows Agility to get in early ahead of other investors in future rounds when there is a MVP and customers.”
- Quality of the plan — the fund would like to see the thinking behind the plan, that the founders have identified risks and have look at ways to mitigate them. Says Govender: “We’ve all been around long enough to know that a plan is just that (it is not reality), so understanding how founders react to the ‘curved-ball’ is critical.”
The verticals the fund is looking at
Govender also detailed the verticals that the fund is looking to invest and some of the types of investments that the fund has so far looked at investing in. These are:
- Healthcare: Including disruption of the independent pharmacists and supply chain and medical devices.
- Education: University tuition and mentorship as well as bursary management programme, secondary school maths and science tuition.
- Access to financial services: A digital platform for lay-byes — appeals to those who cannot access credit, payments made by facial recognition, a platform where spaza shop owners can access the market and credit
- Food: An edible plate and utensil with the focus to reduce waste and vertical farming.
- Social Media: A platform where people living in the townships have skills (which can be socially verifiable) are able to access opportunities, esports platform for gamers, rental of high-end merchandise for social media images and a team that helps you think twice before you press post.
Read more: Vinny Lingham linked VC fund has secured 20% of Mara Phone’s SA master franchise
Read more: Four Sars Section 12J venture capital funds that invest in SA tech startups
Read more: New Vinny Lingham linked R500m VC fund currently mulling 15 investments [Updated]
Featured image: Silicon Valley based SA entrepreneur Vinny Lingham (Facebook)