R400 million in venture capital for SMEs
Specialist risk finance company, Business Partners is launching a R400 million venture fund targetting small and medium businesses (SMEs) in South Africa including start-ups in the ICT sector.
The fund will consider first round finance deals up to R10 million, with the focus on the venture’s viability and high potential for growth.
Consideration will be given to early stage investments after the research and development phase, the company said.
“Small businesses, particularly those in the concept or start-up phase, struggle to find funding as financiers are reluctant to enter this high-risk arena,” Business Partners said in a statement.
“This is due to the high failure rate of start-ups and the lack of security available for financiers to compensate risk and the high gearing required for seed capital,” it said.
According to Gerrie Biljon, the executive director at Business Partners, SMEs are key drivers of wealth in South Africa and it is reported that SMEs contribute 40% of GDP and employ 60% of the workplace in formal employment.
“We recognise the potential benefit that innovative and high growth enterprises can bring to the country. It is for this reason that the company is launching the fund – to finance exactly this type of high impact entrepreneur.”
Who will benefit?
Biljon said that, often, the majority of financing deals are made available to SMEs in typical lifestyle businesses, such as coffee shops or small manufacturing outlets, which are considered the “safer” option.
“We feel that all businesses with the potential to reach ‘blue sky’ should be considered for funding, as SMEs within all sectors have the potential to flourish,” he said.
“We currently see great potential and opportunity within clean energy, agri-processing, bio-tech and ICT sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level.”
According to Biljon, in order to achieve the goal of five million jobs created by 2020 (set by government in the New Growth Path), businesses and in particular, SMEs, need to expand and provide more job opportunities for South Africans.
Related article
SMEs the engine room of job creation: Absa
Loading ...