March 2017 Update

Since our last newsletter, GroTech has made good progress on a number of fronts.

As highlighted during our investor roadshows, our intention is to distribute a newsletter once a quarter to keep investors advised of developments in the fund

Annual General Meeting

GroTech held its Annual General Meeting (AGM) on the 24th January, 2017. The AGM was well attended and in addition to the normal regulatory and corporate governance matters, Malcolm Segal, Non-Executive Chairman, and I provided an update on the previous year’s financial statements at 29 February 2016 as well as other initiatives during the past year. These financial statements may be downloaded from this link.

Capital Raising Event

We wish to thank those who attended the capital raising event in February. More than 400 people attended and we received positive feedback from investors, entrepreneurs and other potential partners in the ecosystem. The event also increased GroTech’s brand awareness resulting in discussions with institutional investors as well as organizations / people with access to distribution channels to help raise additional capital.
Please watch a short video of the highlights of the event.

As at the 28th February 2017, GroTech has raised circa R90 million in shareholders’ equity funds. The additional capital raised was invested by more than 120 individual investors, bringing the total number of investors to over 200 with an average investment of over R400 000.

The additional capital raised will support the fund manager to grow our team as well as enabling GroTech to “write larger cheques” to invest in later stage companies, at the same time keeping within the Section 12J requirement of a maximum of 20%, of capital under management, invested in any one qualifying company.

The enlarged capital base also increases the rand value of companies that we can invest in which are “non-qualifying”. This definition includes companies that are not domiciled in South Africa or companies with a resultant net asset value of greater than R50 million post investment.

Current Investments

SMEasy: As communicated in our second quarterly review in 2016, GroTech made the first investment in SMEasy (www.smeasy.co.za), an online, easy to use business management and accounting solution for the small business market that has been specifically developed for entrepreneurs who don’t need to understand accounting.

SMEasy’s strategic alliance with MTN to “distribute” to their circa 250 million customers in Africa went live in a number of African countries including Nigeria in October 2016 and re-branded as MTNEasy. Due to some technical integration challenges, we have not yet seen the expected take up of the product. These technical challenges are currently being resolved. MTN plans to go live with MTNEasy in South Africa during the second quarter of 2017.

The company is also engaged in discussions with several other corporates looking to distribute the product through their channels including banks and other telecommunication companies in Africa and South Africa.

In addition to the above, the SMEasy board was of the opinion that it is in the company’s best interests to become majority black owned and the restructure has taken place with a new Black CEO, and majority shareholder, having been introduced. The restructuring has not impacted GroTech’s circa 11% equity holding in the company.

Current Term Sheets and Due Diligence

Our focus has been on concluding the due diligence in a company active in the retail technology domain. SnapnSave presented at our insights and capital raising event in February. GroTech intends to co-invest in this opportunity with a value adding partner. This partner is one of the largest corporates in South Africa operating in the retail technology arena, with offices in Africa and four other continents. The long term objective of SnapnSave is to become the number one shopping application in multiple countries. The due diligence is progressing well and we anticipate bringing the transaction to closure. We will advise further details once we have concluded the transaction.

I am pleased to report that the GroTech pipeline is full of promise and we continue to be excited as to the future investment prospects. One of the criteria that we have set is that the prospective investment should have a reasonable probability of achieving a 10 X return within 5 to 7 years. The Investment Committee continues to evaluate several opportunities which fall within the fund’s disruptive technology investment mandate. Thus far in 2017, we have received and evaluated a number of business plans. We have also met with several entrepreneurs and have identified two further companies which are disrupting their respective industries. We believe that both are positioned to grow locally and globally and we are currently conducting a high-level due diligence with a view to presenting them term sheets.

Strategic Alliances

We continue to expand our networks with both capital providers and capital seekers across South Africa and have concluded several strategic alliances with these parties.

One of these parties is Microsoft where GroTech will have access to the entrepreneurs being incubated through the Microsoft BizSpark Programme.

Another one of these parties is Startupbootcamp Cape Town, a leading accelerator focused on startups in blockchain, connected devices, payment solutions, capital markets and asset management, integrated supply chain, e-commerce, retailtech, insurtech, alternative financing, identity management, digital connectivity, data and behavioral analytics and enabling technologies. Click here to view website.

We have an agreement with Startupbootcamp that Grotech will be given access to vetted high quality deal flow for both the startups accepted into the bootcamp as well as the high quality startups that don’t fit within the current mandate of the accelerator.

We are also in discussions with several other strategic alliance partners which we hope to conclude agreements within the near future.

Public Relations

GroTech continues to receive ongoing exposure in the media building the brand to become recognized as “The disruptive technology fund of choice for South African entrepreneurs”.

GroTech’s awareness continues to build in the local technology scene. We continue to educate the market on the benefits of VC in the African landscape, and the need for smart capital as well as smart returns. Our directors are recognised as thought leaders in the innovation and technology arenas. Among other activities and accolades of the directors, Gil Sperling has recently launched CMO2020 to highlight to CMOs their rapidly evolving role and importance in organisations.
Click here to review this website

We continue with our representation at the major entrepreneurial events across the country and recently, Gil Oved, was a guest speaker at the Global Entrepreneur Summit held in Johannesburg in March 2017. I was also recently interviewed by one of the top start-up ecosystems in the world “Startupgrind”, about raising venture capital and scaling start-ups. To review the clip, click here.
Our team is in constant demand to share experience, skills and wisdom, which gives us advantage in attracting top entrepreneurs. I also continue to judge select entrepreneurial events across the ecosystem resulting in GroTech achieving visibility of the top start-ups early in their development stage.

We will shortly be launching our new website www.grotech.co.za, which will provide updated information on investee companies, GroTech news, blogs as well as many other areas of interest in the venture capital and Section 12J ecosystems.

I have included some GroTech articles which were in the press that may be of interest to you.
What criteria traits will make you and your business fundable?
Are you fundable, 10 ways to beat the odds?
Should you require any further information or clarification on this letter, please do not hesitate to contact me.

Kind regards,

Clive Butkow
CEO