IDC Venture Capital Fund
RC&I met with Dr Paul Johl (Senior Account Manager: Venture Capital SBU) of the IDC to discuss their new Venture Capital Fund. Some points noted from the meeting are as follows (please ensure to check with the latest information on the IDC website):
- The fund is unusual as it invests in fairly early-stage projects (ideal for UCT) and does not have to exit within a specific period like VC - i.e. they may remain invested for >10 years possibly, which is beneficial to implementation projects that have a long time, e.g. biotechnology / projects requiring regulatory approval.
- Minimum funding is R1 million and maximum R30 million (drawn in two tranches of < R15million).
- There is 'seed' funding and 'start-up' funding - application process is the same (i.e. no separate fund)
- The IDC will appoint a board member (although it will not be somebody from the Venture Capital unit).
- Their fund is R250 million over 5 years, although this is expected to continue beyond this date.
- Although there is no specific requirement for BEE upfront in the shareholders agreement IDC will make provision for the option of BEE investment at the point that they disinvest.
- They are looking for novel technology. Sector is not that specific and they are interested in medical devices (although not specifically listed in their publicity material).
- Approval timeline is typically 3 months from receipt of business plan to approval.
- IDC require equity investment dependent on assessment of future cashflow (assessed during their due diligence). The range is 26% to 49%, but is generally >40%. The IRR target is 35% (minimum).
- IDC want to see "meaningful financial contribution" by participants. This is assessed based on an individual's assets. For a university it may be capital investment / the sponsorship of research over a specific period. The team should not be drawing corporate-level salaries if they have equity too, i.e. shareholders' salaries should be below market rates.
- There is potential for co-investment by other government funders - SPII, or Innovation Fund, etc.
- Approach IDC with Business Plan
- Allocated to IDC team member for assessment / determine market potential / evaluate numbers (amount required, ownership of technology). Period = 10 days.
- Revert with request for more information and/or meeting scheduled.
- If acceptable, then due diligence scheduled - conducted by a team over 3 days.
- Submission by IDC Team to Approving Body (internal) - Special Credit Committee meets every 2 weeks.
- Outcome announced.
- Funding provided.