Days before local entrepreneur Mark Shuttleworth rockets into space, his venture capital fund, Here Be Dragons (HBD), has announced it is investing R20 million in four young local companies.
Founded in early 2001, Shuttleworth gave the HBD venture capital team the mandate to find local companies in seed or early stages that they deemed worthy of a capital injection.
HBD today announced the first four companies that have made the grade.
The first investment is Nucleus EcoPower, which HBD says has developed the world`s only digital, low-voltage lighting transformers that make use of planar transformers.
The second is Kinetic Market Delivery Systems, developing systems using mobile technology to assist companies with sales and marketing strategies.
The third investment is Sterizone, which has developed a patented ozone generator. The company says ozone is an antioxidant which neutralises bacteria, viruses, odours and bad tastes, and is used in the hospitality and chemical industries.
The final local company is MyBeat Interactive Technologies, which uses technology to enable radio listeners to get more information on what music is currently playing.
HBD spokesman Andrew High says Shuttleworth participated in the selection process despite his hectic schedule.
"Mark`s involvement has decreased steadily as time goes on due to his hectic schedule. Right now, the HBD team fields all the business proposals when they first come in, so Mark does not see them at all.
"We then decide which ones we like, and investigate them further. Should we find one that we think fits our mandate, we then do a thorough due diligence. It is only after this process that Mark comes into it. He is one of three members of our investment committee who has the final say over whether to make an investment.
"But having said this, Mark is in almost daily contact with us, so he usually knows what we`re doing and what we`re looking at. By the time a business proposal reaches the investment committee, he already knows quite a bit about it."
High says while HBD has entered the companies in their very early stages, the fund still expects to see healthy returns on its input.
"We`re in this over a medium-term. We expect to exit between years three and five. As far as exit strategy is concerned, we would most likely be looking at trade buy-outs. The returns that we expect differ from company to company, but when we do our financial analysis, we look at a minimum of 40% return on investment," explains High.
One of the criteria for the investments is that the companies have a strong management team, but High says at least one HBD member will sit on the companies` boards.
He adds that, in line with HBD`s strategy, there will be at least another three to four more investments this year.
"There are very few companies that will invest in such early stage companies that do not yet have track records, or any income for that matter.
"This was not an accidental strategy. The team and Mark felt that there was a definite gap in the market and that entrepreneurs looking for funding for their ideas needed help. Generally, it is almost impossible for an entrepreneur to get funding for an early stage company if he needs less than R10 million. Most VC companies have minimum amounts of around R30 million."
As Shuttleworth reaches the final stages of preparation before blasting into space, High says the new investments can expect Shuttleworth`s full support, as he may even sport some branded clothing on his celestial voyage.
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