• Editor

SAVCA VC Conference 2021 in Review

The 2021 SAVCA Venture Capital (VC) Conference kicked off on 15 November 2021. A hybrid event, the physical component took place at Eureka Wine Estate, Durbanville while also being streamed to a virtual audience attending from across the country.

In a continuation from the March conference, the overarching theme was “re:imagine” as we work towards re:imagining the part VC can play in rebuilding our economy.

Sisters Matsi Modise and Mosidi Modise, who praised the enabling role SAVCA plays in the VC industry, provided a warm welcome to the event and introduced the first session. This was an interview between Ketso Gordhan, SA SME Fund CEO and Mmboneni Muofhe, Deputy Director-General: Technology Innovation (Department of Science and Innovation) on the role of government in enabling an innovative and vibrant VC ecosystem.

Fireside Chat: The role of government in enabling an Innovative and Vibrant VC ecosystem

Gordhan began by emphasising the importance of government support in the rise of the VC ecosystem. He pointed to Silicon Valley and Israel as examples of government policies that have underpinned successful and innovative VC industries.

Muofhe highlighted the strong foundation that the SA government has laid for doing something similar here by investing in research and development (R&D). He cited research that shows the South African government funds more than 50% of the country’s R&D. This contrasts to other countries where governments’ contributions are typically closer to 33%.

“We need to continue to strengthen R&D as a foundation for a thriving VC ecosystem,” he said.

He went on to illustrate the urgent need for innovation in SA. “There is no better time than now to strengthen the VC ecosystem, support start-ups and those coming up with good ideas and new solutions. Ultimately, we need innovation to get us out of our economic rut,” he said.

Debate: To invest or not to invest in VC? Is it feasible/pragmatic for a South(ern) African institutional investor?

Next, we heard a debate on the practicality of investing in the South African VC industry for institutional investors.

The opposing front consisted of David Moore, Head of Alternative Investments: Alexander Forbes; Andile Keta, Group Executive, Investments and Corporate Finance: Rand Mutual Assurance and Mathabo Zandile Makhaya, Chairperson - Investment Subcommittee: Mineworkers Provident Fund.

They argued that high VC fees, illiquidity, volatility, difficulties with valuation and regulatory requirements were the main impediments to VC investing.

“Our clients don’t like high fees,” Moore said. “VC managers are expensive by virtue of what they do and that is a challenge for us”.

Makhaya’s view was that there’s a need for capital allocators to improve their understanding of the VC industry. “There’s a gap in education in that capital decision-makers don’t always understand VC structures. The negatives of VC investing are well-known but we need to learn more about how to work around these issues”, said Makhaya.

Keta (one of the opponents) agreed there’s an education element missing. “We have to start inviting asset managers to present their strategies, get our investment committee comfortable understanding with the assets. We need to work together to be creative in coming up with solutions that enable us to match our long-term liability profiles,” he said.

Nchaupe Khaole, Chief Investment Officer: Mineworkers Investment Company (MIC), who sat on the proponents’ side of the debate responded that collaboration is a way to mitigate some of these perceived risks. He said: “Because the industry is at such a nascent stage of development, industry players are very open to idea sharing so as to drive the industry forward.”

The other proponent, Henri Zietsman, Startup Business Development: Amazon Web Services (AWS), was also supportive of the idea of collaboration. “The way I diversify is by collaborating with venture firms, especially with accelerators like Grindstone”, he said.

Showcasing Competition

The next session was a new addition to this year’s conference – a showcasing of six early-stage investors and their portfolio companies to demonstrate how their deals make a positive impact on society and the environment.