Specialist risk finance company Business Partners has launched a R400 million venture fund, which extends to entities in the ICT sector.
The fund - the Business Partners Limited Venture Fund - is said to be one of the largest for small and medium enterprises (SMEs) in SA. Business Partners supports entrepreneurial growth by providing financing, specialist sectoral knowledge, and added-value services for viable small and medium businesses.
Executive director Gerrie van Biljon explains that the fund is not restricted to a specific industry, but caters for those businesses or concepts with exceptional growth potential, which includes the ICT industry.
The company's aim is to guide entrepreneurs through the process and add value before, during and after the funding takes place, says Van Biljon. "The focus is not on getting involved on a day-to-day basis, but rather to offer support to make it an even better business."
Many opportunities
Van Biljon explains that software developers, over many years, were financed by outside investors, which include venture capitalists. "SA has many creative and talented inventors as writers of software that deserve an opportunity to take their product to market or increase the market share."
There are still many ICT entrepreneurs out there who have the potential to make it big, says Van Biljon. "We feel that all businesses with the potential to reach 'blue sky' should be considered for funding, as SMEs within all sectors have the potential to flourish.
"We currently see great potential and opportunity within the clean energy, agri-processing, bio-tech and ICT sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level."
Risk adverse
Van Biljon explains that, while SA ranks 37 out of 144 countries for venture capital funding by the Global Competitiveness Report 2012/2013, small businesses, especially those in the concept or start-up phase, struggle to find funding as financiers are reluctant to enter this high-risk arena.
This is because of the high failure rate of start-ups and the lack of security available for financiers to compensate risk and the high gearing required for seed capital, says Van Biljon. However, he points out that SMEs are key drivers of wealth in SA and it is reported that SMEs contribute 40% of GDP and employ 60% of the workplace in formal employment.
The lack of funding and support for SMEs often results in innovative business ideas, many of which are developed at tertiary institutions, incubator programmes, innovation hubs and industry groups, never getting off the ground, says Van Biljon. The company's fund aims to plug this hole, he adds.
The fund will consider first round finance deals up to R10 million, with the focus on the venture's viability and high potential for growth. Consideration will be given to early stage investments after the research and development phase.
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