US$100m fund for new companies

The Venture Capital Trust Fund (VCTF) will launch a US$100million fund called the "Angel Fund" in July this year to create opportunities for start-up companies in the country.

"Start-up companies with a good track record, skills and profitable venture can access the fund," said Mr. Daniel Duku, Chief Executive Officer of VCTF, in an interview with Business and Financial Times.

Mr. Duku explained that the Fund recognises the need to complement government's efforts toward supporting Small and Medium Enterprises (SMEs) and will continue to secure additional funding through the Public Private Partnership (PPP) model.

"A model which is the first of its kind wherein a government institution has leveraged its resources with the private sector to create more funds than it was endowed with.

“We intend to embark on an investor drive to attract local and foreign strategic investors to put more money into the Fund," said Mr. Duku.

He said the VCTF will intensify its monitoring efforts, as well as collaborate with top educational institutions, to build capacity for its portfolio managers through entrepreneurial development and capacity building programmes to ensure efficiency.

He said the VCTF will encourage and support fund managers to list on the Ghana Stock Exchange and establish Venture Capital SME roundtables in all the regions to enable portfolio companies and potential entrepreneurs to network.

He said the VCTF will also intensify its public awareness campaign to educate SMEs on the benefits of equity investment and attract more funds from financial institutions.

In 2006, the VCTF was set up by government through an Act of Parliament with two mandates - to provide capital to SMEs and to promote the development of the venture capital industry in the country with a seed capital of GHc22.4million provided by government.

The Fund now operates with capital of GH¢83million raised through its partnership with local and foreign investors.

Since its establishment, VCTF has invested over US$17million to 39 portfolio companies and created over 1,000 direct jobs in the participating communities and farmer-based organisations.

The Venture Capital Trust Fund monies are made available to SMEs through inter mediation by Venture Capital Financing Companies.

A Venture Capital Financing Company is a company incorporated under the Companies code 1963 (179) and has as its sole authorised business providing assisting in the development of Small and Medium Enterprises by making equity and quasi-equity investments, and providing technical and managerial expertise to these small businesses in which it has made or proposes to make an eligible investment.

In practice, the Trust Fund is a source of funds and operates through institutional partnerships by means of joint venture arrangements that establish Venture Capital Finance Companies (VCFCs).

Each VCFC is comparable to a small fund. VCFCs are managed by Fund Managers who act as GPs to the partnership and are licenced by the Securities and Exchange Commission (SEC).

Fund Managers are responsible for deal sourcing, selection, monitoring and exit of Fund investments. However, final investment decisions rest with the Investment Committee (IC) of all Funds. ICs are made up of representatives of Investors and mostly include independent Professionals who are appointed by the Fund’s Board of Directors to protect Investors’ interests.

VCFCs are encouraged to invest in all sectors of the economy, but are precluded from investing in businesses that engage in imports to sell. The maximum funding limit is 15 percent of total capitalisation of a VCFC and a minimum of US$25,000.

For purposes of VCFC investments, an SME is defined under the VCTF ACT 680 as a business whose total asset base, excluding land and building, does not exceed the cedi equivalent of US$1.0million.