Vinny Lingham, LionPride in R500m investment deal
Silicon Valley-based tech entrepreneur Vinny Lingham's Newtown Partners has joined hands with LionPride Investment Holdings to raise R500 million for a co-managed section 12J technology investment fund.
According to Deven Govender, LionPride CEO, this fund uses the section 12J tax incentive to give investors the ability to use their investment as a taxable deduction against other income.
He explains the fund has a single structure with two classes of shares. Class B will focus on impact investing, where mature technology is used as leverage to economically empower people at the bottom of the pyramid, he notes.
The class C shares will focus on new and emerging technology which will disrupt current business models, adds Govender.
"The LionPride Agility VCC Fund is a single technology fund with a choice of two share classes providing the opportunity for a compelling risk-weighted return," says Govender.
"This structure enables investors to invest capital into one of two capital pools co-managed by LionPride and Newtown Partners. It also allows investors to gain balanced exposure to early-stage South African technology businesses, or concentrated exposure into a selected theme according to their desired risk allocation."
He points out that a major benefit of a section 12J investment fund is that investors can deduct 100% of their investment from their taxable income in the tax year in which the investments are made. This benefit effectively translates into an investment discount of up to 45% on the total investment amount.
"We believe that we're taking a bold approach that will catapult economic transformation in South Africa. The tax deductible 'discount' that a section 12J fund provides is a great incentive for investors to invest in projects of a developmental nature that can positively impact employment in South Africa," adds Govender.
SMEs that fall within fintech, agritech, on-demand services, business process outsourcing, renewables, healthcare, fourth industrial revolution and edtech will be the focus of the LionPride Agility VCC Fund.
Lingham, general partner of Newtown Partners, believes the fund has enormous potential to build globally successful technology businesses from SA.
Local investors have not had sufficient exposure to the classic Silicon Valley VC model of asymmetric returns versus capital deployed; this fund will create that opportunity, says Lingham.
"I'm looking forward to giving many more South Africans the opportunity to really make a dent in the global technology markets through this fund. We're also excited about the opportunity to positively impact economic empowerment in South Africa, and the LionPride Agility fund is an important tool to achieve that," says Lingham.
"Our board and the fund management team are incomparable among technology investors in South Africa. The wealth of experience of the team gives us confidence that the LionPride Agility Fund will perform exceptionally well for both its investors and for South African technology entrepreneurs," concludes Govender.