HBD Venture Capital has established its second investment fund with R150 million in the kitty to help young companies penetrate global markets.
Called HBD Fund2, the fund is designed to fill a need in SA for finance to accelerate the growth of early-stage businesses.
Julia Long, CEO of HBD Venture Capital, an independent commercial division of the Shuttleworth Group, says often, even though companies have found a market for their products, lack of capital prevents them from becoming commercially successful.
"Our aim is to address this by investing between R10 million and R20 million in each of our HBD Fund2 investments over a three- to five-year period and then profitably exiting from them," she says.
Long says one of HBD`s key challenges was to identify the ideal companies in which to invest.
"Our preference is for companies with an existing client. In other words, companies that have made some revenue, but are not yet profitable. We have already made one HBD Fund2 investment in EDH, a company which develops products and services for the sport, defence and industrial inspection markets," she says.
Long says the investment criteria will be stringent, with careful review of business plans. Those that meet requirements, such as having an existing customer-base and offer products which can be marketed locally and abroad, will undergo a due diligence investigation.
"If this is successful, we will make the investment and become involved in the business from a strategic perspective and also offer business and marketing support," she says.
HBD began its first fund in 2000, which targeted seed companies.
No more investments will be made from the first fund, Long says, but those companies that have received assistance would continue to receive it. These companies include Red Five Labs, a smartphone technology developer, and MyBeat, a provider of products and services for mobile phones.
Long says the decision to shift focus to early stage funding was necessary.
"SA`s entrepreneurial culture is young and there is a lack of confidence and risk-taking among both potential business owners and other funders. As a result, many brilliant ideas will never get off the ground or get the support needed to go from strength to strength," she says.
According to Long, early stage funding is difficult to access in SA and she hopes to not only make their investments a success, but also to affect the mindset in the country by showing positive results.
Share