31 August 2006
HBD, the venture capital firm created by internet billionaire Mark Shuttleworth, has launched its second fund, worth R150-million, to finance young South African businesses that develop products with global potential.
HBD Venture Capital launched its first fund, targeting seed companies, in 2000.
HBD CEO Julia Long told Engineering News that the company aimed to invest “between R10-million and R20-million in each of our HBD Fund2 investments over a three- to five-year period and then profitably exit from them.”
Long said Fund2 had already made its first investment, in EDH, a developer of products and services for the sport, defence and industrial inspection markets.
HBD will not make any new new investments through its Fund1, but will continue to support its Fund1 start-ups, which include smart phone technology developers Red Five Labs and mobile phone product and service providers MyBeat.
“We are confident of successful on-sell from a number of these [Fund1 start-ups] within the next few years,” Long told Engineering News.
HBD’s Fund2 will focus on companies “that have made some revenue but are not yet profitable,” Long said.
HBD had decided to shift to early-stage funding, she explained, because South Africa’s entrepreneurial culture was young and there was a lack of confidence among potential business owners as well as other funders.
“As a result many brilliant ideas will never get off the ground,” Long told Engineering News. “Early stage funding is very difficult to access in South Africa and, by offering it, we hope to not only make our investments a success but also to affect the mindset in the country by showing positive results.
“I believe this could ultimately lead to more positive results at seed funding level too.”