What is smart capital? Four types of capital investors should contribute


“Investing is not just about giving money for a return,” says Clive Butkow, CEO of Kalon Venture Partners. “Smart capital is about being a high touch investor that combines money with smart interventions leading to smart returns.”

Clive is a South African technology and investment expert who has had a long career in global positions at Arthur Andersen and Accenture. Now he is the CEO and one of the driving forces behind Kalon, a company that invests in a portfolio of high-growth technology companies, with innovative business models, geared to existing and emerging institutions and their customers.

"We did our first round of capital raising in February and are sitting with R90 million," says Clive. "By February 2018 our target is to raise a quarter of a billion rand." The company aims to have at least five significant investments in its portfolio by that time. To date, Kalon has invested in cloud-based accounting software firm SMEasy and SnapnSave, South Africa's leading cashback coupon app that gives shoppers cashback on their favourite products. The current capital raising round closes on 30 September 2017.

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Kalon have also recently concluded a deal, which is still subject to SARB approval, for a Blockchain Crowdfunding solution, The Sun Exchange (TSE). The Sun Exchange is a solar energy online marketplace. Since March 2016 its members have been buying solar units for commercial solar power plants located in the sunniest places on earth and earning rental income streamed in Bitcoin. TSE has over 30,000 solar cells in production with active members in circa 60 countries and an initial pipeline of over 100MW of solar projects across the globe. Kalon will be co-investing with a Silicon Valley venture capital company, Network Society Ventures, who have made numerous investments into Blockchain technologies.

Apart from the deals above, Kalon are currently engaging with a number of other disruptive technology companies with the intention of issuing Term Sheets within the next few weeks. These companies are spread across numerous sectors including: FinTech, InsurTech and the TravelTech space. Kalon should be announcing these deals in the coming months.

According to Clive, there are four types of capital that investors should contribute:

  1. Mentorship capital: "As a smart investor, you need to be able to mentor teams of entrepreneurs and help them see the road ahead. A lot of founders don't realise that the skills needed to get you to R5 million ARR are not same skills needed to go to R50 million ARR. Instead of shooting from hip, you need to become systemised, focussed and reliant on the people you build around you."
  2. Social and relationship capital: "You need to be able to provide access to distribution through corporate partners. At Kalon, we have extensive relationships within South Africa, African and global companies. Those are the type of things entrepreneurs typically don't have."
  3. Human capital: "We can help you to find the best CFO, HR director, etcetera. Scaling a business is difficult. There are four key components to scaling a business, namely; Team; Strategy; Execution and Cash. The first one, scaling your team, is typically the most challenging and it is imperative that the founders and CEO hire people that are different and better than themselves. What follows is the strategy: become a delegator and vision setter. After that comes the execution and only then the cash."
  4. Financial capital: "This is important, but the least important relative to the other three types of capital required to scale a business."

Kalon Venture Partners has been set up under the Section 12J venture capital tax incentive, where investors receive a 100-percent deduction of their investment from their taxable income. Kalon's board and investment committee consists of tech and business leaders and entrepreneurs such as Gil Sperling, Gil Oved, Nic Liebmann, Romeo Khumalo, Arnold Basserabie, Fatima Habib and Malcolm Segal as chairman. Kalon's stated mission is to become the pre-eminent disruptive tech venture capital company on the African continent investing in entrepreneurs solving African problems.

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