The South African venture capital sector has seen an explosion of new funding and offerings in the last year, primarily as a result of the arrival of Section12J funds.
Our internal position is that the Section12J funds are likely to come under increased scrutiny in 2019 as funds fail to find investments and move out of mandate, but we do believe that it is worth highlighting new developments in the sector.
To that end, please find below an announcement from Kingson Capital:
Kingson introduces a new high-growth tech and black owned SME fund
Founded in 2015, Kingson Capital is a Section 12J Venture Capital Company committed to providing venture capital for companies, enabling them to accelerate their growth potential.
The hope for success of both Enterprise Development and Supplier Development hinges strongly on the idea that capital and supply contracts are enough to bring about meaningful transformation, but studies have shown that capital alone is not a sufficient driver to propel SME’s and black-owned businesses into their next growth phase.
“Although we see a substantial rise in South African start-ups,” says Gavin Reardon, founder of Kingson, “it is unfortunate that when it comes to them sustaining that start-up momentum, many fall by the wayside due to lack of support.”
Ongoing business support is critical to ensuring long-term business sustainability, which is why Kingson has launched a brand-new High-Growth Tech and Black-Owned SME Fund.
The Fund pairs investment with business support through its investment structure. This allows investors to score B-BBEE points under both Enterprise and Supplier Development scorecards, whilst acting as a minority shareholder in the black-owned business in which it has invested. Pairing investment with business support facilitates meaningful economic transformation, driving stable and sustainable black-owned business. Where SME’s look to enter a corporate Enterprise and Supplier Development program, they should not only seek funding, but this holistic approach.
By investing in the SME or black-owned business as an equity shareholder, the fund aligns to its long-term success, growth and profitability. The Fund Manager acts as a shareholder representative and plays an active role in strategy and business development, as well as providing financial management and a key governance oversight role. These are all essential factors in the transfer of skills to executives and senior management that ensure long-term success and sustainability.
The socio-economic and financial benefits of the Fund are exponential, giving the SME growth potential towards sustainable profitability that can cement job creation and youth employment. On-the-job upskilling of executive management and industry-specific transformation become integral parts of the process allowing the investor sustainable supply chain opportunities, as well as a solid return on their capital. All of this positively contributes towards the emergence of black industrialists aligning with the Industrial Policy Action Plan and National Development Plan.
Kingson Capital’s investment approach is to invest in businesses that are unique and scalable, and entrepreneurs that are building a better tomorrow today. . By pairing SME’s whose product offering has the potential to change the current landscape and existing business models with investors intent on cultivating measurable socio-economic growth, key players from both sides will see progressively larger returns that have long-term impact.