Section 12J Digital Technologies Fund
Kalon Venture Partners invests in- and builds a portfolio of high growth technology companies, with innovative business models, geared to existing and emerging institutions and their customers.
Kalon Venture Partners invests growth capital in the form of equity to be utilised to assist established, but still high-risk ventures in expanding activity such as creating additional traction in South Africa, launching into Africa and then foreign markets, as well as creating new product/technology lines.
Kalon invests in start-ups that have a proven customer base, technology development offerings, are post-revenue and have a large target addressable market. Our Section 12J disruptive technology fund invests in entrepreneurs solving African problems with the potential to scale into global markets. We focus on providing smart capital, as well as on delivering smart returns.
Kalon Venture Partners’ overall investment strategy is to provide growth capital and acquire a minority stake in high growth innovative digital technology companies that provide technology-based solutions with innovative business models.
Through our “high-touch” methodology and approach, our fund assists these companies through hands-on involvement to help build the businesses into assets of value that can be exited to trade buyers, private equity firms or through an Initial Public Offering (IPO).
Our fundamental strategy is to invest the majority of our capital in support of entrepreneurs who are disrupting traditional industries. We look to invest in companies with high margins and unique intellectual property (IP), a clearly defined and agreed-upon exit strategy and repeat customers through annuity and another revenue stream.
The fund invests in growth capital and companies that have already achieved a product-market fit and are seeking growth capital to scale in the form of revamped and re-assessed execution strategies; hiring additional human capital, marketing, sales, operations, etc.
The company must be South African;
The company must not be a controlled group company in relation to a group of companies;
The company’s tax affairs must be in order (a tax clearance certificate must be requested from SARS to support this requirement);
The company must be an unlisted company (section 41 of the Act) or a junior mining company; A junior mining company may be listed on the Alternative Exchange Division (AltX) of the JSE Limited;
During any year of assessment, the sum of the “investment income” derived by the company must not exceed 20% of its gross income for that year of assessment;
The company must not carry on any of the following impermissible trades:
Any trade carried on in respect of immovable property, except trade as a hotel keeper (includes bed and breakfast establishments);
Financial service activities such as banking, insurance, money-lending and hire purchase financing;
Provision of financial or advisory services, including legal, tax advisory, stock broking, management consulting, auditing, or accounting;
Operating casinos or other gambling-related activities including any other games of chance;
Manufacturing, buying or selling liquor, tobacco products, arms or ammunition; or
Any trade carried on mainly outside the Republic.
There are no special tax rules for investee companies. The standard tax rules will apply.
To ensure that your business fits the Kalon Venture Partners mandate and to maximise your chances of getting selected for investment, the following criteria must be met and provided in order to proceed to the subsequent rounds of discussions:
1) Is your business revenue-producing?
2) Do you have an impressive and plausible business model?
3) Are your offerings attractively priced and have the potential for rapid growth?
4) Do you have a defensible market position?
5) Do you have a dynamic and motivated management team that has a meaningful equity stake in the business?
6) Do you require growth capital?
7) Your application must include an executive summary, complete business plan and financial projections.
Kalon Venture Partners follows a detailed investment process with the executive team and investment committee (IC) involvement at all stages. The high-level investment process is as described and depicted below.
The Kalon Venture Partners high-level investment process begins with the initial meetings with the entrepreneurs and a top-level screening is undertaken to determine whether an investment is possible. After a decision to proceed has been agreed upon, a preparation of the high-level overview of the pitch deck to present to the IC begins. Following the presentation to the IC, an assessment by the IC is conducted to determine the suitability of the investment and the required terms of the investment.
Once past this stage, a term sheet is issued to the investee and the investment memorandum is presented to the IC. From this point, Kalon begins a rigorously detailed due diligence and review process, and final terms are laid out. Once a final decision from the IC has been made, and the legal documents have been prepared, a recommendation by the IC is presented to the Board of KVP to conclude the transaction based on final terms. Kalon Venture Partners and the investee sign the legal documents and the investment is concluded.