GroTech, a Section 12J Venture Capital Company which will invest exclusively in disruptive technology opportunities, has attracted R62-million in its first round of capital raising. Of this amount, Caleo Capital, a wealth and asset management business, has invested significant capital into GroTech to help build and grow their venture capital interests.
The subscription for shares by private placement has boosted Grotech. In association with Caleo, GroTech plans to build a R200-million portfolio of disruptive high growth technology companies.
GroTech is a Section 12J Venture Capital Company where investors benefit from a 100% deduction from their taxable income of the amount invested. GroTech investors (individuals and trusts) are eligible for a 41% tax break at the time of investment (28% for companies) which mitigates the investment risk and significantly enhances the potential return. Provided the investment is held for at least five years, there is no recoupment of the tax benefit when the investment is realised.
Clive Butkow, former chief operating officer of Accenture South Africa and GroTech’s CEO, says: “We have funding and are ready for business, so we want to engage quality tech entrepreneurs who aim to disrupt industries and grow rapidly. Once this capital has been deployed, we will open for second round funding to investors who want to take advantage of great returns and the tax relief offered by our Section 12J status.”
Nicholas Liebmann, co-founder and joint CEO of Caleo Capital, says that the company was seeking a replacement for its Jemstep investment, having recently exited that position when the US-based tech disruptor was acquired in January. “We made a decision that a partnership with the strong GroTech team would be a good way to build on the success of our venture capital interests. Our exposure to Jemstep means that we have a good understanding of the ecosystem and the sector.”
Venture capital in tech is a sector where disruptors are found, and this is also appealing, according to Caleo Capital’s co-founder and joint CEO Garth Wellman. “In addition to strong investment possibilities and great returns, we want to support how these disruptors will change the way we interact with businesses, people and our environment. My partner and I broke away from a traditional banking environment to form our business as we strongly identify with entrepreneurs.”
GroTech’s strong management team was another attraction. “The directors have extensive experience in the technology ecosystem, have committed their own funds and will be actively involved post investment to reduce the risk,” explains Wellman. Caleo Capital will be represented on GroTech’s Board as well as on its Investment Committee.
GroTech in association with Caleo aims to achieve an investment return of five times the risk capital invested with a targeted IRR of in excess of 30% per annum. There is a R100 000 minimum investment.
It intends to invest in entrepreneurs who are looking for growth capital to scale their businesses which are disrupting traditional industries such as banking, insurance, health and wellness, telecommuications, retail, media and entertainment. The GroTech team is extensively networked in the tech ecosystem and has a pipeline of investment opportunities under evaluation.