The executive directors of South African venture capital firm Empowerment Capital Investment Partners say they are optimistic about the opportunities that exist in offering digital solutions that address societal challenges. This after the firm announced this week that it approved and placed a total of R162 million into 13 South African start-ups between July 2019 and February 2021, with several tech start-ups receiving sizeable investments.
Empowerment Capital plans to invest a further R32.5 million, which has already been approved, in three new ventures this month.
According to the company, the deals closed span a range of sectors, including agriculture, food and beverage, but with a bias towards a variety of technology platforms and marketplaces.
“Except for two investments, every other transaction we have concluded has had some sort of a tech angle to it,” Anton Baumann and Mark Fitzjohn, Empowerment Capital executive directors, told ITWeb. “Most are straight-out tech businesses.”
Asked which start-ups received the lion’s share of theclose to R200 million investment, the executive directors would not divulge this information, only stating: “We can’t disclose specific breakdowns of the figures due to confidentiality restraints, but the deals ranged between R3 million to R30 million per start-up.”
They add: “As a minority investor, our investments are not below 26% and generally not more than 40%. All of our investments are approved and vetted by our board of directors and corporate partners.
“The investments have to be sizeable enough so that the start-up can scale their business, and the opportunities we participate in align to our purpose and speak to our social mandate of driving transformation in an all-inclusive manner.”
Founded in 2015 by Baumann and Fitzjohn, Empowerment Capital counts Andzani Ventures, Imvelo Ventures and Thuthuka Nathi Ventures as its investment funds.
Each fund has a specific investment focus, with Andzani focusing on innovation-driven ventures in the forestry, agricultural and renewable energy sectors of SA. In terms of Imvelo, the focus is on fintech, propertytech and fidtech (fiduciary technology), while Thuthuka Nathi focuses on innovation in retail.
Despite subdued investment activity across the economy in 2020, the company points to last year as its most active year yet. As a result, it is seeking aggressive growth as it enters the next phase of its business, to raise funding with institutional investors for further support of the SMME sector.
“We were actively looking for investment opportunities from 2019 that are aligned to our mandate of inclusion, transformation and empowerment. What we found was not doom and gloom. In fact, we found an overwhelming number of opportunities in the market in the form of amazing ideas, promising talent and innovative solutions that all deserve the support that we offer.
“With our corporate partners − Sappi, Capitec Bank and Shoprite Checkers – we were able to secure funding and investments for over a dozen start-ups for equity investments based on opportunity, merit and historical performance.”
Turning to the businesses that received equity investments, Empowerment Capital reveals Thuthuka Nathi approved and invested in start-ups in the sectors of food manufacturing, distribution and agriculture, namely LBB Foods, Red Baron Agri and Zulzi On Demand.
Imvelo Ventures partnered with Capitec Bank to fund 10 promising South African small to medium and micro enterprises in the broad spectrum of financial technology.
Andzani Ventures, formed in 2018 with corporate partner Sappi, approved an investment in Acumen Software for the soon-to-be-launched My Smart City platform. The mobile platform allows citizens to engage critical service providers in their cities to access relevant information, log issues and request services.
“We looked for investees with strong leadership teams that offered our corporate partners attractive investment opportunities, which we believe are able to drive inclusive growth in the South African economy through solutions that address the current challenges faced by consumers and society,” says Baumann.
Fitzjohn adds: “2020 was a pivotal year for us to show how promising tech start-ups can showcase the value offered by corporate venture capital.”
Empowerment Capital says successful entrepreneurs don’t only receive capital, they also receive hands-on support and mentorship from the venture capital firm’s team in the form of management and stakeholder support, strategic marketing, mentoring, access to extensive business networks, and most importantly, access to market.
According to the firm, the transactions of the three new ventures in line to receive the R32.5 million in funding have been approved, two of which will be concluded this week.
These include a “highly innovative and advanced” digital core banking system (banking software as a service/bank SaaS). The second is a fintech solution that aims to focus on payment solutions in the township economy.
The third transaction is expected to conclude by mid-February and includes a proptech offering that already has access to market.
Baumann and Fitzjohn conclude: “The pipeline of opportunities we are currently working on confirms our view that there is an abundance of commercial investment opportunities available in South Africa’s SME sector that can offer attractive long-term commercial returns.
“We want to keep the momentum that we have at this time and we are open to new opportunities that we can help develop with fellow founders. We are currently inundated with good opportunities that require capital and market access, and through our network of clients and partners, we believe we can offer both.”
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