Here Be Dragons (HBD) has outsourced the management of investments to a new company owned by its portfolio managers, but the jury is out on whether or not Mark Shuttleworth is pulling out of SA.
HBD was started in 2000, shortly after Shuttleworth made his millions as an Internet entrepreneur, with the aim of helping to develop the early stage-funding model in the country. Two investment funds were built up.
The first was an early stage, or seed capital fund, of R75 million, and the second was for more mature companies, with an emphasis on funding those that could get foreign revenue earnings. This second fund was supposed to invest R150 million, but only spent R126 million on seven investments. Among those companies were Fundamo, Clicks to Customers, and Ordertalk.
HBD CEO Julia Fourie says: “Until now, HBD has been a captive fund, meaning that there is only one funder, namely Mark Shuttleworth. While this has been the best strategy for a market like SA, where venture capital has been so new, such a closed approach has both benefits and limitations for underlying investments.”
Fourie says the benefit is that it is like a formal angel investor, with one entity able to take full responsibility to nurture and control direction of underlying investments. The downside is that the collaboration benefits such as networking, experience and so forth are limited to a single source.”
Powering VC
HDB has thus outsourced the management of investments to Powered by VC, which will be led by HBD portfolio managers Eben van Heerden and Keet van Zyl.
However, other companies involved in the VC industry say they wonder if this means that Mark Shuttleworth is divesting from his South African portfolio.
“It seems as though their hearts were not really in investing over the past two years, and I wonder if that means that Mark (Shuttleworth) is realigning his portfolio,” one VC funder says.
Fourie denies that HBD is pulling out of SA, as it would continue to manage the investments in the companies it already has.
“If we were pulling out, we would have sold out all investments,” she says.
Fourie says HBD would continue to be Shuttleworth's investment arm and that it had adopted a strategy of investing through other funds on an international level. This includes funds that invest into other emerging economies, such as China and even back into SA.
Well-known local entrepreneur and CEO of Yola.com Vinny Lingham says the realignment is natural in the market, and that HBD pioneered the mid-staged VC investments.
“It does appear that they are exiting the VC market as they are treating their existing investments as a private equity portfolio and not making any new investments,” he says.
David Murry, a partner in Cape Venture Partners, says the HBD announcement will have minimal impact on the VC market.
“They haven't made a new investment for almost two years,” he says.
Brett Commaille, Invenfin CEO, says: “HBD is the classic case of a successful entrepreneur making it and then investing back into the market. The form of that investment, however, is always up for debate.”
He says he hopes to see HBD continue its participation in the local VC market.
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