IDC commits R150 million to SA startups

The Industrial Development Corporation (IDC) says it aims to invest at least R150 million into new technology startups, “but quite possibly more”, as the organisation’s VC funding has exceeded its expectations.

The IDC says it intends to request a further capital allocation from the IDC Board, as it has already committed as much as R600 million out of a total budget of R750 million since 2007. The self-financing group says it aims to double its current VC allocation.

“The IDC venture capital strategic business unit (SBU) intends to request a further capital allocation of at least R750 million from the IDC Board within the current financial year as we expect that the remaining R150 million of the current capital allocation will be committed before the end of the year,” the group told BusinessTech.

The IDC Venture Capital SBU invests in new globally unique technologies of South African origin for application in any industry.

The group told Engineering News earlier this week that, of 32 tech related startups supported by the IDC VC unit, 27 investments remain active, while four have closed. The IDC exited the remaining investment.

“Of the 27 remaining investments, three are in distress and the remaining companies are making satisfactory progress,” it said.

IDC VC SBU said all of its investments to date are in South African businesses that are developing or have developed globally unique technologies. “We are further supporting these businesses to commercialise their technologies locally and internationally.”

“We invest a maximum of R40 million per project/company for an equity stake of between 25.1% and 49.9%, which is determined by our valuation of the company,” the group said, adding that it restricts its first round of investment to R15 million to allow sufficient scope for follow-on investments.

The IDC said it has invested in new technologies in a variety of industries. “We have quite a number of investments in medical devices. Other industries in which we have interests include biotechnology, agriculture (product beneficiation), forestry/silviculture (automation), mining/industrial, ICT (software, electronics, telecoms), green energy, security, etc.”

“We are witnessing commercialisation breakthroughs / successes in many of our portfolio companies,” it said.

The group said it helps companies to become self-sustainable from a cash-flow perspective and to build up a track record of sustainable profits and the prospect of further growth opportunity.

“When this level of maturity is achieved we will be able to exit from these investments and reinvest our returns into new tech start-ups.”

The IDC said its investee company, Lodox, recently received lots of media exposure due to its full-body low-dose x-ray machine’s flighting on the TV series Grey’s Anatomy. “We are very bullish about Lodox’s prospects to become a South African success story from an international perspective. Similarly, many of our other companies have the potential to succeed globally.”

“The IDC VC SBU will invest at least R150 million into new technology startups during 2013, but quite possibly more, hence the intention to request a further capital allocation from the IDC Board,” it said.

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IDC commits R150 million to SA startups