The Start-Up Support Programme (SSP) aims to ensure that innovative and knowledge economy based small businesses (SMEs) and projects have access to finance.
The purpose of the SSP grant is to assist in the acceleration of a knowledge- based economy through the of provision of appropriate funding to SME’s during critical stages of their business development.
In order to achieve this purpose, the SSP has adopted a consultative investment process, which seeks to foster entrepreneurship and building of innovative knowledge-based companies; to create sustainable jobs through investee growth; and to build successful black entrepreneurs and management in successful businesses.
Each application is evaluated on its unique merits. We investigate potential recipients’ propensity for developmental impact and growth perspective.
Once a candidate has submitted an application form (with all relevant and detailed information, including a detailed business plan), the SSP aims and commits to a turnaround time of between 1 – 3 months (subject to complexity).
STAGE 1: APPLICATION AND SCREENING
Applicants must submit, together with the application form, a detailed business plan including financial projections. Once an application is received, initial evaluation is conducted to assess the opportunity’s potential across the SSP’s overriding criteria which includes, but not limited to:
a. Innovation and/ or knowledge- based business: ICT, Biotechnology, Green economy and Industrials
b. Job creation, demonstrable potential to result in the creation of good quality jobs
c. Proof of concept demonstrated or proof of concept will be demonstrated with funding provided
d. A duly registered entity or intent to register one in the near future
e. Economic growth and national benefit: the extent to which the business will contribute to economic growth and socio-economic development.with emphasis on Gauteng and South Africa, must be detailed
f. Commercial potential – Market appetite or sufficient evidence of market potential
g. Defendable and demonstrable competitive advantage and/or intellectual property position and potential
h. Project team profile: the team’s ability to successfully implement the project must be demonstrated; with clear indication of the BBBEE rating of the team, the level of community involvement as well as a plan to achieve level 3 BBBEE over the investment horizon
DETAILED EVALUATION – INVESTMENT CRITERIA
Once the application has graduated to stage 2, a detailed evaluation of the opportunity is conducted. Applications must meet the detailed criteria below to qualify to stage 3.
1.1.1. Sectors
a. ICT.
b. Biotechnology.
c. Green economy
d. Industrials (minerals beneficiation, advanced materials and manufacturing).
e. Including social based innovations and commercially motivated innovations.
f. All ensuing businesses / technologies must be sustainable.
1.1.2. Stage of business
a. Only businesses in incubation or entering incubation will be eligible.
b. There must be proof of concept demonstrated.
c. For the application to qualify for consideration, the following issues must be addressed: 1. Legal incorporation 2. IP protection strategy 3. Complete prototype design.
d. The business/ technology must be at a level where strategic fundamentals can be tested to a level of confidence, including 1. Market appetite or sufficient evidence of market potential 2. Defendable and demonstrable competitive advantage 3.Management team capability.
e. Only businesses that are innovation based and/or have knowledge focus are eligible. Technology transfer into the business must be evident if the technology is not owned by the business.
f. Only businesses that would either not qualify for funding or do so partially from traditional banks or funding agencies such as Industrial Development Corporation, National Empowerment Fund, Public Investment Corporation at the time of applying are eligible.
g. Strong preference must be given to businesses that have at least 25% (twenty-five percent) black ownership but the fund may invest in businesses with job creation potential that are not black owned as aforesaid.
(If the above requirements cannot be adequately tested but the Investment committee believes the opportunity warrants taking the risk, the Investment committee may approve on a case by case basis).
1.1.3. Fundable activities include but not be limited to:
a. product, process (comprehensive technology package) and prototype development;
b. sourcing of intellectual property opinions;
c. production of market samples and/or associated testing, analytical data and method development and specification sheet development;
d. refining and implementing designs;
e. conducting field studies;
f. support of certification activities;
g. piloting and scale-up and techno-economic evaluation;
h. detailed primary market research, or specialist consulting including use of TIHMC resources; and
i. business plan development; and
1.1.4. Minimum and Maximum investment
a. The fund will assist suitable candidates seeking minimum funding of R51 000 (Fifty-One Thousand Rands)
b. Support will be capped at a maximum of R650 000 (Six Hundred Fifty Thousand Rands) per opportunity, subject to availability of funds.
c. The SSP budget from GGDA will be used to support activities that are not funded under TIA, activities such as scaling-up and purchase of equipment and other activities which the investment committee might deem necessary for the project/funding.
d. The SSP budget will be used as a contingency for activities not fundable by TIA such as purchase of equipment and scaling-up. The approval will be limited to R650 000.00 (Six Hundred Fifty Thousand Rands) including activities funded under TIA and TIH budgets.
e. Activities such as equipment and scaling-up will be subjected to the availability of the SSP TIH budget which excludes any funds leveraged outside of TIH.
f. Where possible, the SSP may leverage its funding to enable investee companies to access larger investments from institutional and developmental funders
1.1.5. Investment Instrument
a. The financial instrument that the SSP uses is royalty attached grants, with royalties payable on successful commercialization
b. The investee will be obligated to pay a negotiated percentage of total incremental revenue in royalties for a specified period or until a determined (by the investment committee) multiple of the investment is realized
c. All royalties paid back into the SSP are used to support other opportunities
d. Equity and debt financing are not provided through the SSP but through partnerships with other funding institutions.
e. Accordingly, where the investment comprises leveraged funding from other funders, the financial instruments may include convertible grants, loans and equity.
1.1.6. Purpose of the finance
The purpose of the financial support through the SSP is fairly broad and includes but not limited to:
a. Start up support to achieve agreed set of milestones as an incubatee
b. Bridging finance
c. New development
d. Final market development
e. Market testing prototyping or piloting
1.1.7. Growth potential
The supported company should demonstrate potential to be sustainable in the short term and high growth potential in the long term with sustainable job creation and sustained profitability as major indices.
1.1.8. Mandatory documents
a. Three (3) year projections for companies that are scaling up, and 12 months projections for companies that are at pre-pilot, proto type, conducting techno economics, market test, proto-type refinement and ect (Projections should cover income statement, cash flow and balance sheet).
b. List of detailed assumptions
c. Name key staff with their brief biography and/or curriculum vitae.
d. Detailed Business Plan (no more than 20 pages).
e. Partnership agreements. (If any)
f. Other funding agreement etc. (If any) Companies that have received funding/sponsorship prior to applying for SSP, they need to provide a detailed report regarding what the funds were used for.
g. Certificate of Incorporation/ Registration Certificate / proof of registration of the company.
h. Valid Original Tax Clearance Certificate.
i. Legal documents for the business: including copies of any license agreements patent applications / patents; design registrations) etc.
j. Itemized budget
k. Proof BBBEE status i.e. BBBEE certificate, Letter from auditors etc. If the entities BEE level is above level 3, the entity must submit a BEE plan detailing how they will reach BEE level during the contractual period with the innovation hub. The BEE plan should at least outline how they will achieve the compliance level in the following; Management, Preferential procurement, Socio Economic Empowerment and Employment Equity.
l. Financial statements (If available) or company 3 months bank statement.
1.2. STAGE3: DUE DILIGENCE
Once the entity meets the mandatory requirements, the SSP in conjunction with the potential investee, will proceed through the detailed due diligence required to make the final investment recommendation to the Investment committee. At this stage, the SSP will, either internally or by third party (ies), complete financial, technical, legal and IP due diligence and/ or any negotiations with co-investors. All due diligence costs are carried by the programme.
1.3. STAGE 4: ADJUDICATION
On successful completion of the due diligence process, recommendations to provide financial support to the opportunity are made to TIHMC Investment committee for approval. Recommendations are prepared in the form of a detailed formal report that will include background on the opportunity, documentation of all due diligence activities and outcomes (where are applicable), and a recommended funding level and structure. The Investment Committee’s reviews, for approval, all investment proposals as recommended by TIHMC Investment officials. The Committee will also assist with deal structuring and consideration of appeals from applicants where TIHMC Investment official has reviewed the appeal but found no reason to alter the previous decision to reject the investment proposal
1.4. STAGE 5 & 6: APPROVAL AND FUNDING AGREEMENT
On approval of the investment proposal together with the investment structure, TIHMC CEO will give final approval on whether to invest in the opportunity as recommended by the Investment committee. Final funding agreement is executed and funds distributed as per agreement.
The Innovation Hub SSP Office received 21 SSP applications during the 2018/19 financial year, and of these, 13 applications received funding to the total value of R5 051 621.82.
