2020 in Review – Anza Capital

Audrey Verhaeghe // Board Member, Anza Capital

In line with Space in Africa’s review of 2020, we had a chat with Ms Audrey Verhaeghe, a Board Member at Anza Capital, and the Chairperson at SA Innovation Summit. Anza Capital is one of the organizers and investors in the Space-tech challenge, which is aiming to scale startups utilizing space technologies. She summarized Anza’s activities and plans for the coming year.

Does Anza Capital have a fund?

Not at the moment, no. Anza Capital receives its operational funding from SA innovation Summit, and from the Research Institute for Innovation & Sustainability, both of which are supported by Anza. Through internal funding, we have made a single angel funding investment in the health-tech industry, medical devices segment. But in the meantime, Anza is in the process of creating a fund. We are currently pitching to Funds of Funds across the world to raise EUR 30 Million for our first Startup fund, with a 10-year investment horizon.

What industry sectors will the fund target?

It is a very inclusive startup fund. We do not have industry selections, but we will have a 50% female founder focus.  

Will you have any requirements for Black-founders?

We do not have a mandate towards black-founders, but because we are Africa focused, the Summit attracts more than 80% of black founders.

What Funds of Funds are you speaking to?

They are basically wealth offices, but not the typical equity that turns into VC. It is more of developmental funding. 

What strategy will be used in your due diligence for the Space-tech challenge?

Because of the types of startups we invest in, what we are mainly interested in is scalability. Scalability is not possible without technology, so as the core product, we prefer technology and the company’s reach to customers. 

How much do you invest in seed capital and how much equity share does the firm seek?

In pre-seed capital, we invest between USD 100K -500K, for seed capital, between USD 450K – 650K,  and series A upwards, up to USD 2 Million.

At what equity share do you claim a board seat?

There is a lot of technical & entrepreneurial support needed to grow early-stage startups. So, when we acquire 15 – 25% of a company, we do claim a board seat. However, if we are co-investing and there is a lead investor, we do not.

Do you prefer a B2B or a B2C Investment Strategy?

A lot of investors prefer B2B investments, but in our case, all of our companies, we are a lot more focused on B2C models, so we understand the model. It is quite a controllable model if you understand it. B2B might be easier, but B2C is not excluded, it all depends on the opportunity that presents itself.

For the Space-tech Challenge, will you be considering revenue-generating startups?

Not ideally. We would want to see some market traction, proof that someone wants the product/service. We look at the growth model, the experience of the team, the size of the market that plays in, the core technology, and whether it is predictable. All these things come together to inform where the capital will be used, and where the value will be added to that market.  

The Space-tech challenge features startups in the downstream segment, those operating in Agriculture, Insurance, retail, and sustainability & conservation.  Which segments do you think have the most predictability of technology use?

From an Angel Capital perspective, this is not true about the entire market. We are not big in retail, but some of the areas we are sure of their predictability are insurance, agritech, and sustainability & conservation. This does not mean there isn’t an opportunity in retail for another funder, it is just that our backgrounds are not retail, so we may not support retail as much. It is about where we can add value, not about the ideas.

Space Tech Challenge

The Space-tech challenge features startups in the downstream segment, those operating in Agriculture, Insurance, retail, and sustainability & conservation.  Which segments do you think have the most predictability of technology use?

From an Angel Capital perspective, this is not true about the entire market. We are not big in retail, but some of the areas we are sure of their predictability are insurance, agritech, and sustainability & conservation. This does not mean there isn’t an opportunity in retail for another funder, it is just that our backgrounds are not retail, so we may not support retail as much. It is about where we can add value, not about the ideas.

Do you think the ecosystem is supportive of businesses whose services and products are based on sustainable sciences?

A lot of strides have been made, especially in South Africa. But our progress has been seen more in accelerators and incubators focusing on traditional economies and fewer accelerators and incubators having the expertise to talk about tech startups. There are a few incubators focusing on technology, but there is still a huge gap in the tech component of entrepreneurship, and digitalization.  This space is more supported by the growth stage investors, more than any infrastructure in South Africa. There are more incubators that are going to be created with huge tech components, supporting tech specifically, and at least we need a critical mass to have more impact. If you think about the funding that we have, before we hit the market for technology development that is market-oriented, the only funder in this space in South Africa is the Technology and Innovation Agency. The money provided plays a very little part in the space. Out of the 400 Million Rand, a good proportion of it goes to just managing operations. If you consider that Africa’s tech startup ecosystem is USD 42 Trillion underfunded, according to a recent Partech report, the USD 4 Million contributes up to nothing in impact. We must understand that we need critical mass, one or two agencies cannot do the job. Funding agencies should at least raise 5 – 6 times the money raised. Then that funding must attract more and more capital until we have billions of dollars in the ecosystem, through angel networks, and others. That way, we will achieve a systemic change. From this perspective, we are currently far from the target. 

So can we say that much isn’t being done? And when it comes to critical mass, who specifically should be included?

A lot is being done. Various groups of people are lobbying, a lot of people are trying to come up with new legislation, and more angel investors are entering the market. Remember that change often occurs slowly then all at once, and that is how the exponential curve also works. By constantly doing what we are doing, we will probably get to that exponential growth that comes all at once. There are sovereign funds being launched, and with that, they will attract other instruments. So, I think that people are very aware, and we need the policymakers, funders, the private sector, and universities to be more entrepreneurial in what they do. Further, we need all these players to understand each other and what they do. We are getting there but we need to understand each player’s priorities; the government’s priority is impacting service delivery, and the entrepreneur’s priority is profit. After we understand this, then we have to respect profit and respect service delivery in equal measure. Currently, this mutual respect is lacking. What we need is the alignment of these interests between governments, investors, the private sector and academia. Again, there is a lot of lobbying and we see there are national programs in place. It is not a lot of money, but definitely, rising support. The missing component is the private sector and their involvement with tech startups.

What should we expect from Anza Group Holdings in the coming months?

Other than support to the ongoing space-tech challenge, the SA Innovation Summit will be launching a big Tech Community to support tech startups across Africa. This will be 365 days- a year kind of engagement. Additionally, we will be having an event in Cape Town to talk about expanding into Africa.

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