An introduction to IDC Venture Capital

1
An introduction to IDC Venture Capital

Day Month Year
Presented by Peter van der Zee IDC Venture
Capital Strategic Business Unit 25 April 2008
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WHAT IS OUR MANDATE?

• The IDC Venture Capital SBU has a MANDATE to
• acquire significant minority equity stakes (25 -
  50)
• in South African businesses
• in their seed or start-up stage of development
• that operate in technology-focused industries
• that meet our investment criteria
• by providing funding of between R1m and R30m per
  project
• maximum initial investment of R15m to allow for
  follow-on funding
• for the funding of development costs and
  commercialisation of the business

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WHAT IS A SEED OR START-UP BUSINESS?

• RD
• Proof of concept
• Product development
• Market research
• Business plan refinement

• Initial marketing
• Assembly of management
• Finalisation and testing of prototypes
• Initial scale-up from prototype to production
  models

Risk
Seed
Start-up
Development
Expansion
Stable
IDC Venture Capital SBU
Other IDC SBUs, other VCs, private equity firms
and commercial banks
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WHICH TECHNOLOGY FOCUSED INDUSTRIES DO WE
TARGET?

• Cleantech
• includes the wind power, solar power, biomass,
  hydropower, biofuels, information technology,
  electric motors, lighting, and many other
  appliances that are now more energy efficient
  Wikipedia.
• Information and Communication Technologies (ICT)
• an umbrella term that includes all technologies
  for the communication of information
  Wikipedia.
• Biotechnology
• Any technological application that uses
  biological systems, living organisms, or
  derivatives thereof, to make or modify products
  or processes for specific use. - The United
  Nations Convention on Biological Diversity
• Nanotechnology
• the control of matter on the atomic and
  molecular scale, generally 100 nanometers or
  smaller, and the fabrication of devices with
  critical dimensions that lie within that size
  range - Wikipedia.
• Other
• Consumer electronics and devices, engineering
  technologies, mining technologies, etc.

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WHAT ARE OUR INVESTMENT CRITERIA?

• Intellectual Property (IP)
• Must be novel / unique in the South African
  context
• Should preferably be patentable, but if not
  should provide at least a first mover advantage
• Ownership of IP must vest ( remain vested) in
  the business being funded by IDC
• Preference for locally-developed IP
• Will consider acquisition of and further
  development of foreign IP
• Product ( related service) should be
• able to maintain sustainable technological
  competitive advantage
• aimed at a clearly identifiable high growth
  market
• scalable

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WHAT ARE OUR INVESTMENT CRITERIA?

• Business should be economically viable, i.e.
• should reflect high value added and profit
  margins
• IDC investment to show a real after tax IRR of at
  least 30 pa
• Management team must include people with all the
  required key competencies
• Promoters should clearly indicate their full
  commitment to the business
• Sweat equity
• Meaningful cash equity contributions
• Prospect of good exit opportunities for IDC
  within a reasonable time-frame
• Successful commercialisation should lead to the
  realisation of significant developmental returns

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HOW DOES THIS SUPPORT THE IDCS MANDATE AND
OBJECTIVES?

• Identifying and supporting opportunities not
  addressed by the market
• Providing risk capital
• building of competitive industries through
• support development of entrepreneurs SMEs
• globalisation of competitive SA technologies
• generation of balanced, sustainable economic
  growth to the economic empowerment of the SA
  population through
• job creation
• support dev of entrepreneurs SMEs
• high returns on investments
• add value to entrepreneurs and businesses
  through
• post investment strategic support and ongoing
  operational guidance
• Serving as catalyst for balanced, sustainable
  development

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THANK YOU
QUESTIONS
Peter van der Zee peterz_at_idc.co.za IDC Venture
Capital