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 Shuttleworth Calls for More VC Funding in South Africa 
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Joined: Tue Apr 25, 2006 2:48 pm
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Post Shuttleworth Calls for More VC Funding in South Africa
Mark Shuttleworth, the well know technology entrepreneur turned Venture Capitalist, who heads up the venture firm HBD recently called for more VC firms to become active, especially in the early stages of start-ups in South Africa. With so many VC firms being prepared to only get involved in the growth stages of new firms, many small firms are of the opinion that VC firms are to keen to feed of the spoils once most of the risk and hard work has been taken on.

What has been your experience?

Full article here by Stephen Gunnion

MORE investment was needed in seed capital and start-up businesses in order to develop entrepreneurs and make a meaningful contribution to economic growth, venture capital experts said yesterday.

Speaking at a workshop organised by HBD, the venture capital group started by Mark Shuttleworth, CEO Julia Long (pictured) said few investors were prepared to make small investments in "early-stage" businesses, preferring to invest in companies that were in later stages of development.

There were also very few venture capital investors in early stage companies in SA because there was little publicity surrounding their success.

Locally, companies that have successfully used venture capital funding include Shuttleworth's Thawte, technology groups EDH, Lodox and Tracker and food group Peppadew, among others.

Dimension Data had also raised venture capital funding in its early stages, HBD investment analyst Sol Bezuidenhout said.

Long said some of the challenges facing venture capital funds included holding periods of seven to 10 years, where investors were unable to receive a return on their investment, limited areas of investment opportunity and the relative size of the SA market compared to other markets. Compliance issues were often a deterrent to entrepreneurs, she said.

HBD portfolio manager Eben van Heerden said there had been 28% growth in available funds for venture capital and private equity investments in SA over the past four years, with funds growing 10% to R43,9bn last year.

Many investments in private equity and venture capital were being fuelled by empowerment initiatives, he said. "Angel" investors were helping to fill the funding gap left by venture capital funds unwilling to take a risk on start-up companies, Van Heerden said.

Long said there was a need for more "angels" -- wealthy individuals who provide seed capital to entrepreneurs -- as well as incentives from government such as tax breaks and less restrictive foreign exchange rules.

David Murray, partner at Cape Venture Partners, who started the Cape Town chapter of the Southern African Venture Capital & Private Equity Association, said half the organisation's 48 members said they were prepared to invest in start-ups.

However, Murray said only 12% of the funds invested by the association's members over the past six years fell into the venture capital category and only 1% in seed capital was invested.

Following last year's growth in funds to R43,9bn, growth this year would lift available funds to about R50bn. About R15bn of this was uninvested, he said.


Copyright © 2006 Business Day.

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Sat Oct 28, 2006 2:42 pm
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