Tue, 27 Oct 2020

The SAVCA survey report showed that fewer and fewer venture capital deals are being funded with money raised from the public sector. Only 26% was funded through public sector money compared to 74% in 2014. Big corporates have become the main source of venture capital funding, followed by the Section 12J investments, while local pension funds and insurance companies are choosing not to venture into this space.

SAVCA CEO Tanya van Lill said SA's venture capital industry looks set to continue with its winning 2019 streak. Last year, the industry enjoyed one of its best years, as investors were able to exit 38 deals, more than triple the exits recorded in 2018.

In venture capital, when investors exit deals they funded some years ago, it usually means that the businesses they funded are now self-sustaining and making a profit, which allows the investors to take their money and invest in the next person who needs financial backing.

But exits could also happen when investors decide to cut their losses on a non-performing investment or to close unprofitable businesses. But in the case of deals that SAVCA members exited, 50% were profitable, giving investors R830.5 million returns to potentially plough into the next big idea.

"There is no doubt that the current health and subsequent economic crisis will reflect in next year's results; however, we can find some solace in [the 2019] results, which suggest a strong foundation and an overall positive outlook of the venture capital industry," she said.

Lamprecht said the current state of South Africa's economy has increased appetite for early-stage investments among some managers, who might want to back industries that have emerged as gainers under the current crisis.

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