Quarterly Update – Q3 2018

Kalon Venture Partners Q3 Investor Update 

As we progress towards the end of 2018 and our imminent new capital raise in February 2019, Kalon continues to make progress on a number of fronts including; deal flow; new and current investments, strategic alliances, capital raising and more.

Section 12J

National Treasury recently announced that tax incentives received by venture capital companies (VCCs) investing in small and medium enterprises in South Africa are under review.  They raised concerns about possible abuse of the Section 12J tax incentive, to which Treasury proposed far-reaching changes to the Income Tax Act under the Draft Taxation Laws Amendment Bill (DTLA).

We are pleased to announce that numerous parties representing the Section 12J community met with National Treasury and agreed to changes to the DTLA acceptable to all parties. We are comfortable that the proposed changes are intended solely to end abusive structures within Section 12J and do not affect Kalon.

Deal Flow

We continue to receive and analyse a multitude of exciting ventures resulting in positive growth in our pipeline with an impressive array of disruptive tech companies across industries.

Since our last communication, we are close to finalizing a number of deals including a company disrupting the rental property market as well as an Artificial Intelligence company disrupting the Financial Services industry. The investment in the AI company is a co-investment with a Mauritian based family office. Both these deals should be closed before year end.

We have also issued term sheets to numerous companies where discussions are on-going and we are confident that we will close a number of these deals.

Follow-On Investments

A key strategy of Kalon is to further invest in our current portfolio with additional growth capital.

i-Pay is raising a Series A round of capital and currently evaluating a number of international and local Term Sheets to find an appropriate “smart” capital provider. In the event the transaction is consummated, Kalon will invest further capital to take advantage of the significant growth being experienced by the company.
We are also currently negotiating a follow-on investment into cashback rewards platform, SnapnSave. SnapnSave continue to show impressive growth and require further growth capital in order to expand both locally and internationally. This re-investment will be a continued joint investment with the Smollan Group.

Current Investments 

Our current portfolio continues to show tremendous growth as reflected below:

The last 12 months have seen good progress on a number of fronts.

Revenue is 27% up on quarter 2 and 111% up on same quarter prior year. SnapnSave have closed a number of new clients including; Kellogg, Vermont Sales, 3M, Johnson & Johnson and TFG. The company generated a positive EBITDA for the first time in July 2018.

The number of coupons redeemed were 10% up on quarter 2 and 28% up on the same prior year quarter. A major milestone was achieved with the 1 millionth till slip being processed.

SnapnSave also launched their wholesale solution which is one of South Africa’s only rewards programs for independent vendors in South Africa.

SnapnSave partnered with one of the leading loyalty providers, providing the company exposure to the 1.75 million members. They also signed a deal with a wholesaler association in SA which provides access to over 25 000 independent vendors in South Africa. SnapnSave is also working with Zapper providing access to their 1 million users plus additional cash out feature for SnapnSave users. SnapnSave also partnered with Discovery Vitality powering Discovery’s recently launched restaurant rewards programme.

The past three months have been exceptionally exciting for i-Pay. Not only did they see significant growth from a Revenue perspective, they also received numerous term sheets from a number of global and local investors for their Series A capital raise. Below are some of i-Pay’s key highlights:

Since inception i-Pay has grown its revenue at a 19% compound monthly growth rate. It’s cumulative monthly processing revenue, it’s Gross Merchant Value, equals 24% compound monthly growth rate since inception. i-Pay achieved revenue growth of 115% for the 7 months ended September 2018, in comparison to the previous year.

Over the past 3 months, i-Pay has added over 116 merchants to its client base. These include exciting brands such as SPCA, The Lighting Warehouse, TV Mall, Liquid Sky Technologies, Himalaya Products, Peermont Global, PowerBets, Mercedes Benz Financial Services.

Partnerships and Strategic Alliances 

We continue to make progress with the forming of Strategic Alliances with many constituents in the local, African and global venture capital and entrepreneurial ecosystem. We are seeing some strong deal flow emanating from these networks and Kalon is being sought by many of these ecosystem players for co-investment opportunities. The Kalon team continues to be invited to numerous ecosystem events including the judging of various tech entrepreneurial competitions where we are being exposed to strong deal flow and extensive networks.

Capital Raising 

Kalon will be issuing a Prospectus for a new disruptive digital technology fund during November and will be open for capital raising from November 2018 until the February 2019 tax year end. Once our prospectus has been approved we will distribute to our investors.

In Conclusion 

As we progress into the final stretch of the calendar year, we thank you for your ongoing support of Kalon Venture Partners and please don’t hesitate to contact the Kalon team if you have any questions on the contents of the letter. If you have any suggestions for future communications, please contact us on the above email addresses.