Michael Jordaan, First National Bank's former CEO and current Mxit chairman, has made good on his love of disruptive technologies by investing in AngelHub Ventures, which provides capital for start-ups.
AngelHub Ventures, which was previously just AngelHub, provides backing for companies that are starting out, but have disruptive business models enabled by technology, and target existing profitable industries and markets.
The businesses it looks for also need to have the potential to return 10 times the investment within five years.
Jordaan, who has joined the AngelHub team, points out there is a shortage of angel investors and the venture hopes to play a small role in filling this gap. "It is really important for the economy that we have a vibrant start-up sector. After all, entrepreneurs are the only ones who can create real jobs."
It is generally underestimated how, in the next decade, existing large organisations will be disrupted by small, focused entrepreneurial teams who use technology to create new business models, says Jordaan. "We hope to invest in such teams once they have proven the concept and help with their rapid growth.
"I hope we can, over time, create a number of home-grown success stories where lean start-ups took on big competitors and succeeded by giving more value to customers, probably disrupting the old ways of doing things."
Changing arena
The formation of AngelHub Ventures comes on the back of the buyout of former company AngelHub by two of its angel investors, Jordaan and Kevin Harris. AngelHub founder and CEO Brett Commaille says the new fund is being established in order to keep up with the demands of fast-changing technology and investor landscapes.
"When we started AngelHub at the end of 2011, we had a simple objective: to bring the promise and potential of SA's start-up business environment to the attention of experienced investors and facilitate this interest into real investment to grow these businesses. We've since seen the establishment of a number of new incubators and investment companies, and we believe it's only the beginning."
Jordaan explains AngelHub, which is not dealing with external investors, provides funding for deals as they arise. He says the amounts are quite humble, ranging from R500 000 to R2 million for significant minority stakes.
"Our investments are closer to angel or seed funding than traditional venture capital, although we do like businesses that have launched a minimum viable product and has customers already."
The previous AngelHub, in its two years as a business group, facilitated five different investments, with the last two having just been completed. These last two deals featured 13 different investors, including Jordaan. The new fund allows AngelHub to focus more on the companies rather than raising the funding, which is sure to be a boost for the start-ups.
AngelHub Ventures will retain its links with angel investors as it sees the opportunity for future co-investment or eventually investment in its fund. Commaille says the new business is no longer an open angel group.
Commaille adds the growth and maturation of the local venture capital market over the past few years has created a space for a next tier of angel seed funds. "We always believed AngelHub would work best with its own investment fund."
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