Venture capital (VC) spending in South Africa is set to hit ZAR146 million (US$11 million) this year, according to new figures from the Southern African Venture Capital and Private Equity Association (SAVCA), up from ZAR109 million (US$8.3 million) two years ago.
The SAVCA report says these investments are mostly in high-tech companies, with 43 transactions averaging ZAR3.4 million (US$260,000) each happening this year, up from 18 deals in 2013, which signalled a low in VC investing.
The venture-capital industry had ZAR1.87 billion (US$142 million) invested across 168 active deals as of July 31.
“The value of transactions concluded reflected global trends for deals involving digitisation, online enablement and e-commerce, which typically require smaller amounts of funding,” said SAVCA chief executive officer (CEO) Erika van der Merwe in the report.
“Startups achieve rapid market uptake by using available technologies and adopting lean operations with shorter development cycles.”
SAVCA highlighted the growth of startup incubators and accelerators as assisting the growth of the VC industry in South Africa, while banks and mobile network operators (MNOs) are also embracing innovation.
“The survey results confirm that the South African VC industry continues to expand in line with the increase in entrepreneurial high-tech activity in the market, a deepening pool of skills and experience, a growing exits track record, and lower barriers to entry for VC-type deals, especially for those that target businesses that involve the use of digital technology (e.g. online, e-commerce and new media) to expand service offerings,” van der Merwe said.
Average deal size, however, has fallen in recent years, though SAVCA said this is a trend seen across the world as leaner approaches to starting businesses become more prominent.