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Johannesburg - For all the negative perceptions surrounding the South African venture capital (VC) sector there is plenty to be positive about, including the impact from the government and angel investors.
That's according to research by Stephan Lamprecht from Venture Solutions on behalf of the South African Venture Capital Association (Savca).
The local VC sector has taken its fair share of criticism over the past few years, with arguments that not enough was being done to support potentially high growth start-up sectors and monetise intellectual property coming out of South African universities.
"We have a VC sector and it is working," said Lamprecht. He pointed out that while transaction numbers were still well off 2007/2008 levels, there had been a noticeable uptick in activity and the number of transactions concluded in the first six months of 2010.
Two sectors which came in for praise from Lamprecht and Savca CEO JP Fourie were the much-maligned government agencies and the emerging "angel" funders in the country.
Government has come in for much criticism around its slow amalgamation of the various innovation agencies into a single body, the Technology Innovation Agency (TIA), over the last three years.
There have also been lingering questions about the success of these investments, particularly with the focus on biotechnology and life science sectors which were regarded as highly specialised and primarily the domain of international players.
Biotechnology has been the biggest recipient of VC money in South Africa over the last decade, capturing 25% of the funds invested, according to Lamprecht's research.
"Twenty years ago nobody would have given this government any hope of supporting science and technology as it is today," said Lamprecht, praising the work done by the department of science and technology (DST) and the department of trade and industry (DTI).
These sentiments were echoed by Fourie, who noted that the focus would now turn to delivery and the ability of the government to successfully exit from these investments.
Angel funders and image issues
One area which had surprised Lamprecht and Savca was the surprisingly vibrant angel funding community emerging in South Africa.
Traditionally there has been a view that angel funding, which sees private individuals putting money into businesses, was underdeveloped in the country. However, feedback indicated otherwise.
"Angel investors are now competing head on with VCs," said Lamprecht, indicating that private individuals were putting up to R30m into businesses.
This is in contrast to the average deal size in the VC sector, which comes in at about R10.5m.
One area it was acknowledged South African VCs need to work harder at was celebrating their successes and raising the profile of their activities.
Fourie pointed out that a highly-regarded international firm had backed two SA-domiciled companies - and this had not been picked up by the media.
Similarly, Western Cape-backed technology companies have been receiving a great deal of airtime in the mainstream media, while Gauteng initiatives were going unacknowledged and beneath the radar.
However, this had changed in the last few years, said Lamprecht. He pointed to efforts made by Mark Shuttleworth's HBD and up-and-coming venture capital players like Vinny Lingham.
"Entrepreneurs are not the bottlenecks (to further growth) but more experienced candidates - especially those with VC experience - will help a lot," concluded Lamprecht.
- Fin24
