Corporate SA urged to create venture capital programmes

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Llew Claasen, managing partner, Newtown Partners.
Llew Claasen, managing partner, Newtown Partners.

SA’s big firms are being implored to create corporate venture capital (CVC) programmes, in an effort to position the country as a centre for innovation.

Llew Claasen, managing partner at venture capital firm Newtown Partners, says to stand a long-term chance of success, corporates in SA need to get better at cooperating with the disruptive start-ups.

This, he notes, includes creating investment programmes targeting these new innovative companies, hence the need to increase CVCs in the country.

CVC refers to a practice of a large organisations setting aside capital to be deployed as equity investments in start-ups.

Claasen, who moderated a panel discussing corporate venture capital at the SA Innovation Summit 2021 last week, said, locally, there is a perception that a CVC programme is expensive to run, but to the contrary, such an initiative is a good way for corporates to remain innovative and agile.

According to Claasen, corporates must get better at investing in and working with start-ups, adding: “The option of not doing something doesn’t exist.”

Speaking to ITWeb, Claasen said, at a global level, CVC programmes are growing, as start-ups are getting more comfortable working with corporates and equally, corporates are warming to the idea.

He said the amount of money being deployed in CVC is large and growing, with over $73 billion invested globally by corporates into start-ups in 2020, across 3 359 individual transactions.

Claasen noted that locally, CVC programmes will drive innovation and growth, which will in turn prompt economic growth in SA.

“I think there is a shortage of early-stage venture capital in SA. I would like to see a handful of corporates in South Africa, more than any other African markets, that are in a position where they could launch CVC programmes. I think it could be a real good driver for innovation for them but they have to go through their own internal processes of figuring out why this is a right decision for them.

“Raising awareness of CVC is a real thing; it solves real problems globally. I think we need to keep having these conversations and we will find more local corporates starting these programmes and it will be beneficial to the creation or development of a start-up ecosystem, which will lead to more job creation and ultimately SA will be in a better place to be innovative.”

Additionally, Claasen said, investing in start-ups enables large organisations to get “first-hand market intelligence, develop internal human capital, and act as a conduit to bring people together in the pursuit of collaborative innovation and the sharing of knowledge”.

Calls for large corporates to support new ventures on the continent have been growing in recent weeks.

Cathy Smith, MD of SAP Africa, last week in her opening address at the SA Innovation Summit urged corporates to support start-ups. “To be successful, start-ups need the building blocks for success.

“A great idea is only an idea until someone believes in it, until it has a business plan, until it has a proof of concept, until it has funding, until there is demand, and until it is sustainable. Those building blocks move an idea from a concept to a thriving business. Those building blocks are what we refer to as ‘the ecosystem’.”

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