The expectations of ICT players seeking funding are more now realistic than during the Nasdaq boom, says Vantage Venture Partners principal Mutle Mogase, announcing the first closing at R200 million, of a R300 million venture capital fund.
Vantage Venture Partners (VVP), formed last year by Mogase, Chris Lister-James, Colin Rezek and Amrit Bhatta, established the venture capital and private equity fund to target the information and communication technology (ICT) sector in SA.
At the announcement in Sandton of the first closing at R200 million, VVP said the fund`s initial investors included a R75 million investment from the Industrial Development Corporation (IDC) matched by a maiden R75 million investment from the Financiering-Maatschappij voor Ontwikkelingslanden (FMO), the Dutch development bank targeting the expansion of private enterprise in emerging markets.
Transnet Pension Fund has invested R30 million, and R20 million is being invested by the Eskom Pension Fund.
Further commitments are awaited from others for a final closing at R300 million.
Mogase said although the current ICT environment had hurt venture capital funds that invested during the height of the initial public offering (IPO) boom, the time is ripe for funds looking to make initial investments.
"We have found the expectations of local ICT players seeking funding are far more realistic than they were during the Nasdaq and IPO boom. Instead of paying multiples of projected turnover, valuations are based on defined and achievable business models.
"Furthermore, the ICT sector in SA that has survived the downturn is strong, innovative and in many instances poised for internationalisation."
The fund has identified a number of potential investments and has earmarked a portion of the funds for start-up ICT companies, the majority of funds for second- and third-level investing, with a portion for late stage and management buyouts.
Hang Wah Man, senior investment officer at the FMO, says this is the first significant investment the Dutch development bank has made in SA.
"We are very excited about the prospects for the South African ICT sector which we view as being globally competitive, technologically on a par with Israel and India, and with an existing technology base that is extremely high relative to other emerging economies," says Hang Wah Man.
The FMO, which finances a portfolio spread across 71 countries with assets in excess of 1.3 billion euros, has a country limit for SA of 115 million euros, of which about eight million euros have now been committed.
The IDC says it identified the technology industry as one with high growth potential, and a sector where SA needs to stimulate development.
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