The South African venture capital (VC) industry continued to experience “robust growth” in 2018 with 181 new VC deals reported, up 13.8 per cent on the 159 deals reported in 2017.
This is according to the SAVCA 2019 Venture Capital Industry Survey, released by the Southern African Venture Capital and Private Equity Association (SAVCA),which was carried out in collaboration with research partner Venture Solutions, and features data gathered from 56 fund managers as well as other industry investors.
It also shows a substantial increase in the overall value of all deals, up from the ZAR1 billion (US$68.3 million) invested in 2017 to just over ZAR1.5 billion (US$102.4 million) in 2018.
SAVCA chief executive officer (CEO) Tanya van Lill said it was especially encouraging to see this continued industry growth in the face of a tough economic climate.
“The continued expansion in VC activity over the past decade is evident when comparing the average of 129 deals per year from 2014 to 2018, to the average number of deals per year from 2009 to 2013, a meagre 26,” she said.
Of all the new deals reported in 2018, by value, 41 per cent were categorised as startup capital.
“If taken by number of deals, this proportion jumps to almost half of all deals reported (47%),” van Lill said. “Likewise, the total number of active deals invested through seed or startup capital amounts to almost 60 per cent of all deals to date. This highlights the increasingly important role that venture capital continues to play in South Africa as an essential source of funding for scalable startups.”
As in previous years, independent VC fund managers comprise the largest share of active portfolios (35.1 per cent), with captive government funds and angel investors increasing investment activity fuelling the growth of early stage investments.
“As the industry starts to mature, we may see more fund managers opting to specialise in specific industries, or new funds being established as new sources of capital become available from institutional investors looking to capitalise on early stage investments,” van Lill said.
“This year, for example, we’ve seen a significant surge of deals in the energy and financial services sectors, which could indicate that VC investors are already starting to specialise in certain sectors.”
