A conversation with Andile Ngcaba, founder of Convergence Partners Investments, and CEO Pramod Venkatesh about the company’s rebranding to Solcon Capital.
Earlier this month, technology investment firm Convergence Partners Investments announced its rebrand to Solcon Capital.
Founded by South African businessman Andile Ngcaba in 2003, the firm was the first vehicle structured as a permanent capital vehicle in the Convergence Partners stable, which focuses on private equity through its current and future digital infrastructure funds.
Under the new brand, Solcon Capital will focus on international deep tech investments in generative AI and large language models (LLM), synthetic data and big data, cybersecurity, and quantum computing in South Africa, India, and Southeast Asia.
TechCabal spoke to Andile Ngcaba as well as Pramod Venkatesh, the CEO of Solcon Capital, to find out more about the rebranding, the rationale behind investing in deep tech, the potential impact of deep tech technologies in Africa and much more.
What was the rationale behind the rebrand from Convergence Partners Investments to Solcon Capital?
Pramod Venkatesh: Convergence Partners Investment has been operational in and investing in tech assets, both in Africa and globally, for the last 20 years. As part of that commemoration of 20 years in the market, one of the things we wanted to do was to establish the next rule of how we are going to take this forward. The current strategy for Convergence Partners Investments focuses on bringing technological breakthroughs in terms of infrastructure development, software and everything else into Africa and the rest of the world.
As part of the rebrand to Solcon Capital, we have unveiled our 2035 strategy with a core focus on making permanent capital investments in deep tech in markets like India, Southeast Asia and the US. So effectively, we are now moving ahead from being an Africa-focused tech company to more of a global focused company.
Andile Ngcaba: In the last 20 years, we have been investing in a number of companies building satellites, submarine cables, and being involved in deep software companies, and many other investments. Convergence Partners Investments, the entity rebranding to Solcon Capital, is a permanent capital vehicle investing on a very long-term basis in the companies we take equity in. We don’t have a timeline for exit and can invest for 15 years and beyond.
To explain the name, Solcon is short for solar constant which refers to the measurement of the intensity of sun rays as they go through the atmosphere into Earth. We chose the name because of our involvement in space technologies, and our continued interest in space science. If you look at the logo, it shows 1011, which is a binary code. 10 means two and 11 means three, so the logo is a representation of the fact that the rebranding happened in 2023.
Please share more information about Solcon Capital’s 2035 strategy.
PV: In coming up with the strategy, we were looking at various different technologies which are going to be prominent in the next 10 to 15 years. And what we did was, we looked at how the market was reacting to those technologies, and also at the company’s growth, and we figured out the four most important areas we are going to be focusing on in terms of the strategy. Those are Artificial Intelligence, Web3, Space Tech, and Cybersecurity.
With AI and generative AI, as you can see, that has taken the world by storm. Of course, artificial intelligence is not new but what has happened in the last one year or so is the advanced advent of generative AI, and the accessibility of AI to all right now. It’s already having a huge impact on companies but it is our belief that it’s going to be much more advanced as we move forward. So as part of our strategy, AI will be a focus of ours.
The next area of focus in the 2035 strategy is Web 3.0. Now, that focus area does not mean that we’re going to be investing in cryptocurrencies or any of those. Our focus is mainly on the underlying technology, which is blockchain, and we are very bullish on that. What you see now is decentralisation having a huge impact in terms of how we look at certain industries like finance, infrastructure, etc and we will be looking at companies building products around that concept.
And then we also have space tech in our strategy. When space tech is mentioned, it is mostly seen as something which is mainly for governments because it is such a massive and capital-heavy industry. But as Convergence, we have actually launched satellites before so for us, space tech is not necessarily about launching satellites, but the data which is being generated. If you look at companies like SpaceX, you see that there is definitely a huge amount of what you call “democratisation of space”, which means now you see private industry players are able to actually launch satellites. In terms of our focus, it’s going to be more on low elliptical orbit satellites. We believe that as time progresses, launching satellites is going to get cheaper so we will leverage that to launch satellites whose data we are going to use to build products and solutions. We understand that there are companies which might be still in the early stage of space tech right now but we do see some mature companies as well which are, for example, building analytics for farmers using the data from space on satellites. Those are the types of companies we will be looking to invest in.
Lastly, in terms of areas of focus of our 2035 strategy, will be cybersecurity. As things become smarter, bad actors are also becoming smarter. For example, with the advent of AI came things like deep fakes . As the world gets smarter, the cybersecurity landscape is also going to see a major shift. We are extremely bullish on backing companies building products addressing the need for a safer internet.
So in summary, those are the areas which make up our 2035 investment strategy going forward as Solcon Capital.
In terms of your investment strategy, why permanent capital investments instead of venture capital?
PV: The way the entire company is structured is as a permanent capital vehicle, and it has always been like that from 2003 at inception. We invest in companies which have seen long-term growth and have a long-term vision. Effectively, the permanent capital strategy ensures that we are not burdened by the need for an exit. Sometimes what happens in a VC environment is you might have to let go of an asset because the time is up in terms of trying to recoup it. With a permanent capital vehicle, you don’t have that time limit. Also, sometimes in VC, when you start looking at companies which are just coming up, you see some with very nice presentations and marketing but the companies fundamentally don’t have an IP or proven business model to back that up. So for us, the focus is going to be selecting a few companies which we believe are going to be relevant in 2035.
So once we invest in those companies, we are not going to be in a cycle of getting rid of these assets for the sake of exiting. Of course we will look at an exit strategy but it will not be a forced exit. And that’s the reason why we are focusing on deploying permanent capital in these companies, because the number of companies we are going to invest in will be quite small. Additionally, we are going to be investing in companies which already have a positive EBITDA and a positive cash flow because that gives us confidence in the tenacity of their business model.
In the announcement of the rebrand, there is a lot of emphasis on the concept of “platform economics”. Please explain what that is and why it’s important to your investment strategy.
PV: When you talk about platform economics, we are looking at a product’s ability to scale extensively. When you want to scale a company from, let’s say, Africa, to the world, you have a lot of regulations, requirements, and everything else, which might inhibit that company’s ability to do that. Our thought process is that a company with good platform economics should be able to achieve scale at zero marginal cost, meaning that you can have clients on your platform from all across the globe, being supported by the same structure. This ensures that your growth is not limited by any chance.
Apart from South Africa, Solcon Capital will not be making investments in any other African country, instead choosing to explore the Indian and Southeast Asian markets. What is the rationale behind this decision?
PV: Some of our biggest investments today are in Africa. Now, when we look at investing in Southeast Asia and India, it does not mean that we are not putting it back into Africa. The way we are looking at it is, remember, we now have a set of companies in Africa, and now are going to be looking at companies in Southeast Asia and India to foster cross-cultural fusion between those portfolio companies. We believe that is going to yield the maximum value because if you look at the value proposition, if I go to a company in India and say we want to invest in you, obviously, they might have many investors who want to invest in them.
But for them to choose us, we will have to show them that we can provide them access to the Africa market through our existing portfolio companies. So by bringing companies which we are investing in newly with the existing companies which are already in Africa, what we are trying to bring about is cross regional innovation. This can allow, for example, our Indian portfolio companies to expand into Africa and vice-versa.
AN: India produces over a million software engineers per year and every big tech company on this planet has a presence in the country as a result of the software development talent. Because we want to be part of the global technology ecosystem, we have to be present in the country because it has taken a leadership position in the world of technology.
Our CEO was born in and lives in Bangalore. He also has lived in Silicon Valley, so he understands the art of identifying synergies between different ecosystems. Southeast Asia is the fastest growing tech region in the world partly as a result of its proximity to India so we want to have a presence there so we can foster cross-cultural innovation between that region and our pre-existing African portfolio.
What would you say is the future of deep tech in Africa?
PV: Africa is a growing economy so deep tech is going to play a huge role. As you can see, it is already playing a huge role in the global economy. If you look at the population of Africa, it’s roughly around more than a billion people, and if you put all the countries together, it has one of the youngest populations in the world. So that shows that there is a huge base of potential in Africa and that’s where deep tech has a lot of opportunity to make a difference.
Solcon Capital’s role will be bringing deep tech innovation to Africa through our portfolio companies.
AN: We are very bullish about the future of deep tech on the continent. Africa is going to be one of the largest markets because it will have the biggest population of young people on the planet. That is why we want to partner with technology hubs such as India and Southeast Asia in order to build the future platforms for the African continent, be it for the arts community, the creative community, business, government, academia, or society.
Editor’s Note: In the interest of transparency and accuracy, we would like to clarify that the interviews with Andile Ngcaba and Pramod Venkatesh were conducted on two separate occasions. This approach was taken to ensure a comprehensive and well-rounded understanding of the subjects’ perspectives, experiences, and insights.