The Remgro group’s two-year-old venture capital arm, Invenfin, has committed 60% of its first allocation of R50-million to five separate companies in various sectors and expects to allocate the balance during the course of 2010.

CEO Brett Commaille tells Engineering News that the uptake has been slower than initially anticipated owing particularly to a lack of qua- lity proposals received during the 2009 recession. But he stresses that the company’s appetite for high-potential start-ups remains strong, while the market appears to be returning.

The company is also keen to develop a blended portfolio, embracing both technology and more traditional industrial companies, having acknowledged that the relatively small venture capital market in South Africa has, hitherto, been heavily biased towards information technology companies.

In fact, two of Invenfin’s most recent investments have been into companies that provide engineered products and solutions. One is a designer and developer of a patented tyre-maintenance system, while the other has devel- oped a solution for the mining industry’s serious acid mine-drainage, or AMD, problem. Commaille could not provide details as to the identity of the two companies, owing to confidentiality constraints.

The company, which generally seeks to acquire between 30% and 49% of the equity in a start-up, is also considering opportunities in the so-called green-industry milieu, from alternative fuels through to renewable-energy solutions.

However, Commaille cautions engineers that, although Invenfin is willing to accept a level of risk higher than that accepted by traditional investors, it is not sufficient merely to request support for an idea. “We would also like to see this backed by a coherent business plan and a strong business model,” he says.

Invenfin is particularly keen on opportunities that have international market potential and believes it can add value by taking a “protectable” and “differentiated” concept through the product development, industrialisation and commercialisation stages.

“It must be patentable, or otherwise capable of being legally protected. Even though we look at early-stage development, we do require proof-of-concept or beta stage development,” Commaille explains, adding that the company is, thus, not a suitable investor for all types of businesses.

The company will usually invest between R2-million and R15-million in an enterprise that is typically at the “prerevenue stage”. Its focus, therefore, is an investment into poten- tial, rather than value, which has meant that the R50-million initial funding has been spread relatively widely. However, Remgro’s backing also means that Invenfin is not restricted to pursuing small, or low-capital, prospects.

The exit strategy is also slightly nuanced from that of other venture capital houses, owing to the fact that the company has a mandate to pursue prospects that could potentially meet the strategic needs of Remgro – the JSE-listed group has investments spanning banking and financial services through to medical services, resources, as well as food, wine and spirits.

However, Commaille expects that its first withdrawals could well take the form of trade sales to international companies.

Its two most mature investments include two companies, called Ad Dynamo and ChessCube. Ad Dynamo currently delivers more than 300-million pay-per-click online advertisements monthly, while ChessCube, which is a gaming offering, has attracted more than one-million users in over 200 countries and has become a leading online tournament platform.

Invenfin recently completed a national road show at which the company spelt out its investment philosophy. But Commaille says that he is continually on the look-out for new prospects and continues to be open to receiving applications online, so long as these meet the company’s mandate.