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SIMON BROWN: I’m chatting now with Wayne Stocks from Stocks & Strauss. Wayne, appreciate the early morning time. Your University Technology Fund II has had final close – R400 million in there. What’s the idea with the fund? From the name you’re investing into IP, into business ideas coming out of universities around South Africa.
WAYNE STOCKS: Yes. Good morning. Thanks for having me. It’s a privilege to be able to highlight this asset class, which has been well understood for too long. Yes. Our first fund was specifically mandated to invest in the commercialisation of IP and research that has been generated in South African universities.
What we’ve now done with Fund II and another fund, which is our Seed Fund thereafter, is we’ve added a portion of alumni-founded technology companies. So what that means is a third of our mandate.
If you’ve gone to a South African university and have an innovative business or technology business, we can invest in you, and that is what the thinking there was.
The evolution from the first to the second fund was it’s an ecosystem, and you build on that ecosystem. So alumni are part of that ecosystem. It also adds a little more sector exposure, which helps us balance our fund risk a little better.
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SIMON BROWN: Gotcha. In a sense universities are by their very nature, by their design, hotbeds of innovation and ideas.
WAYNE STOCKS: One-hundred percent. South Africa has incredible universities and some of the minds that we have and the research that’s coming out of it are fantastic. But nothing’s happening to them. They’re sitting on the shelf. And research really, in its true form, optimises for publication.
So the incentives that universities have had, and that professors and researchers and the university have had, have been kind of misaligned to commercialise those ideas where they can really have an impact in the world.
There are stories from many years ago where international companies have bought IP at a massively discounted amount and made billions from that. What we want to do is retain some of that value here in South Africa.
And of course, from a brain-drain perspective, if we are investing in bright researchers hopefully they’ll stay in this country and make a difference.
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SIMON BROWN: Also true. Are there particular areas, sectors, fields that you that look at to invest into, or are you broadly agnostic as to what’s coming through?
WAYNE STOCKS: One-hundred percent. Yes, we are a sector-agnostic fund. But what you tend to find is different universities have different faculties which produce better research than others, and that’s just from the sector or the area that they’re in and the hubs they’re in.
So if you look at what universities are really geared to do, it’s very complex problems to solve challenges or opportunities that better the social position within the economy.
The best opportunities which we found are when there’s cross-collaboration between faculties – and that’s when you really get something unique.
If you have a corporate, you’re very aligned to one sector and you can come to a university and find three different faculties working together to solve a unique problem in a different way – and that that creates a lot of IP and opportunity.
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SIMON BROWN: Yes, I hadn’t thought of that. Of course across the sectors – which is the sort of thing you wouldn’t get in the sort of more mature corporate space.
Where are you investing, at what stage? I imagine this is sort of seed, early round that you’re getting involved in. Some of it might be a little later, but this is probably more early-stage investing.
WAYNE STOCKS: Yes. That’s quite correct. And that’s why we’ve coined a platform because our Seed Fund – and our Fund II now that we’re investing in and actively deploying out – the idea of the seed fund is really to get it at early seed stage. So the definition of pre-seed and seed in South Africa is slightly looser and more informal than that in America, but it is certainly pre-revenue.
What we want to do – the technology being de-risked to a point where it’s been proved at a pilot stage or out of the lab, and we’ll get involved at that early stage.
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And then our Fund II is when the companies have reached a product market fit, they’ve generated some revenue, and we can then see that there’s a demand from a customer source and we’ll then put bigger checks in at a Fund II level. And that’s looking at Seed Series A, Series B stage there.
SIMON BROWN: We’ll leave it there. That’s Wayne Stocks, with Stocks & Strauss investing into IP coming out of universities. New and novel. I’ve seen it in some of the offshore universities, but it’s new for South Africa.
Wayne, appreciate the early morning time.
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