This document discusses financing instruments for technology incubators, specifically Section 12J of the South African Income Tax Act. Section 12J allows for a 100% tax deduction on investments in qualifying companies, and exempts gains from capital gains tax if held for 5 years. It presents the Seed Engine Entrepreneur Development Fund, a proposed R100 million impact investment fund registered under Section 12J. The fund would provide funding for early-stage businesses from incubators and provide support through a professional management team. Investors would receive tax benefits between 28-41% and target returns of 30% IRR annually by investing in a portfolio of companies.

1. Financing Instruments for
Technology Incubators
Presented by: Jeff Miller jeffm@grovest.co.za
Chairman – Seed Engine Group @jeffmiller180
CEO - Grovest

2. Chairman of Seed Engine Group which is an entrepreneur training and
incubation company.
CEO of Grovest.
Has been actively involved in the early stage venture capital eco system
for the last number of years.
Jeff Miller

3. Access to
MarketsAccess to
Funding
Lack of
Mentorship
Capital
Challenges that
incubators face

4. SEC 12J – South African Income Tax Act
Promulgated in January 2009 and ends in June 2021.
All amounts invested in a Sec 12J company qualify for a 100% deduction from
taxable income in the year in which the investment was made.
Investments into a Sec 12J company are not subject to recoupment if held for
5 Years.
No one Investor can own more than 20% of the Sec 12J company.
No one Investment can represent more than 20% of the issued share capital of
the Sec 12J company.
Currently 32 registered VCC’s.

5. Current Funds Under
Management
Venture Capital Company
Energy

6. Services provided by
Sec 12J management
company
Valuation of
Investment Portfolio
Capital Raising
Assisting with
strategy & budgeting
of investee
companies
Due Diligence of
potential
investments
Compliance and
Administration of
Section 12J
company
Corporate
Finance
• Structuring
• Valuations
• Negotiations

7. S.E.E.D Fund will be a public unlisted section 12J Impact Investment Fund with its sole
focus being investments in businesses:
• that can make a difference and who can generate social, environmental and economic
value.
• that can become a sustainable business and positively impact the South African
economy through job creation.
• preferential emphasis for black women and youth owned businesses that have the
ability to create sustainable businesses with opportunities or job creation.
S.E.E.D aims to provide capital, technical business support to its investee companies,
whilst promoting inclusive growth.
“Impact Investments are investments made into companies, organisations and funds with
the intention to generate social, environmental and economic impact, alongside a
financial return.”
- Global Impact Investing Network (GIIN)
S.E.E.D Fund Mandate

8. Seed Engine Entrepreneur Development
Fund
Impact investment Fund to Raise R100 million to be launched in June 2016
Targeted investors are corporates, foundations and philanthropists who:
- Identify with impact investments
- Support the entrepreneurial eco system in South Africa
Two types of Equity :
- Ordinary Shares
- Empowerment Shares
-Minimum investment is R5 million
Targeted returns of 30% IRR p.a.

9. WHY INVEST IN THE SEC 12J S.E.E.D
FUND
Structured Investment vehicle registered with the FSB , SARS with strong corporate governance and
mandatory reporting.
Board of directors, Investment Committee, Audit committee
Solution to the “MISSING MIDDLE “ – Funding of early stage businesses, that are in Incubator or coming
out of incubation.
Incubators are the main source of deal flow.
Strong professional, experienced , hands on , management team that works with the investee
companies – ALL THE TIME
Corporate venturing with the ability to invest in further investment rounds of portfolio companies.
Subscription for Empowerment Shares qualifies for ED and SD points
Corporates making an Investment in a portfolio of Investments
Investors receive a tax benefit of between 28% - 41%
MANAGE REAL ROI

10. IT ALL BEGINS WITH
… ONE LITTLE
SEED
… ONE
GREAT IDEA
jeffm@grovest.co.za
@jeffmiller180
Thank You