A START-UP is one step closer to getting its innovative software solution that tackles online piracy to market, following R500,000 in seed funding it received from the Technology Innovation Agency (TIA).
Custos Tech is one of almost 300 projects the agency, an initiative of the Department of Science and Technology, has assisted with seed funding in the past two years.
Its director, Fred Lutz, says the funding, which was disbursed via Stellenbosch University, will enable the company to develop a media-distribution platform for its product Custos, which uses Bitcoin to protect media products against piracy.
The system, which was developed by Mr Lutz with Prof Gert-Jan van Rooyen and Herman Engelbrecht, embeds a unique code in media products. If someone illegally shares the files, another internet user can find the code and anonymously claim their deposit as a kind of reward. Using the unique code, the media company can trace the transaction to discover who initially shared the file.
Mr Lutz says the seed funding helped cover the costs for the first prototype and travel to the US to test the market. The product is in a closed beta version at Screenercopy.com.
"We started the application process in October 2013, and we had the funds by April 2014. It was not linked to milestones, but it did come with governance and reporting conditions, as well as targets," says Mr Lutz.
The idea for Custos was born while Mr Lutz was a student at the university’s MIH Media Lab, where he met the two co-founders who are also the directors of the laboratory. The company’s two developers are also Media Lab alumni. They have just hired its second full-time developer, bringing the team to five members.
"The TIA funding helped us procure a second round of funding, which we used to hire our first developer," says Mr Lutz.
He believes there is a "sore" lack of early-stage investors in SA and that helping fund new companies, particularly innovative ones, can help create jobs.
"Something like the TIA seed fund helps aspiring entrepreneurs cross the chasm from idea to investable company — especially someone like myself, who is coming fresh from university and who does not have the capital to fund a project like the one we are doing now," Mr Lutz says.
Since 2013 the agency has provided grants of up to R500,000 to people looking to fund the development of proof-of-concepts and prototypes. Grants are disbursed through universities and seven regional centres in specific funding rounds. The agency hopes the grants will help commercialise university research and encourage the development of more innovative start-ups.
The agency’s seed fund head, Saberi Marais, says the agency wants to double the amount available each year through its higher education institution seed fund to university-based projects to R50m and increase the amount available through its regional seed fund to R40m a year.
The third round of the higher education institution fund closed in October and Mr Marais says the agency expects to run at least one round this year, as well as a second round of its regional seed fund. From a pool of 84 applicants, 54 have been awarded a total of R24.7m.
Some of the ideas for funding included a point-of-use heating system at Tshwane University of Technology, probiotics for abalone at the University of Cape Town, an enhancement of HIV/AIDS lateral flow diagnostics at the University of the Western Cape and re-absorbable wound dressing at Wits University. "There has generally been an improvement on the focus of the applications," says Mr Marais.
While the funding comes from the agency, university technology-transfer offices and regional centres are responsible for putting out calls for applications. They screen these and send the best to the agency for approval, before funding is disbursed.
In the first two rounds of the higher education institution seed fund, 215 projects received funding of R73m, through 21 tertiary institutions. The agency’s regional seed fund has disbursed a further R37.5m via seven organisations to 82 projects since 2013/14. The organisations also contributed almost R32m to the programme in nonfinancial support such as incubation services.
The organisations are the Cape Craft Design Institute, The Innovation Hub, Smart Exchange, Invotech, the Free State Development Corporation, the Eastern Cape Development Corporation and the Limpopo Economic Development Agency.
While some failed projects were discontinued, others have moved closer to being commercialised. Several are being considered for further funding from the agency’s other programmes, says Mr Marais.
Ismail Hassen, MD of CSR Africa, says the R500,000 he received in seed funding through the Eastern Cape Development Corporation last year, helped him to fine-tune his Bitu-Box containers that road-construction companies use to store bulk bitumen.
Hassen, winner of DStv’s Dragons Den last year, exports his containers to several African countries. He says he is negotiating a joint venture with a local manufacturer that will allow him to increase his monthly production.
Agency seed funding also helped Cape Town-based Nervedata to select two important clients to test its internet-of-things platform, which allows users to collect and monitor data gathered from devices such as GPS sensors and radio-frequency identification tags.
Hein Koen, a partner at Nervedata, admits he was quite sceptical when he applied for the funding from the Cape Craft and Design Institute in response to a call the organisation put out, but says the process was managed "very well". The company received R300,000 in seed funding three months after Mr Koen applied.
He says one client is a leading domestic insurance company that is testing the technology’s ability to monitor risk in commercial clients and the other is a crane company keen to improve the performance of operators and the machinery itself.