StartUp News

South African VC firm Knife Capital gets first commitment for its $50M fund, to invest in 10-12 Series B rounds

February 12, 2021

3 minute read

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Knife Capital, a South African enterprise capital agency, is elevating a $50 million fund for startups trying to increase Sequence B financing. With Knife Fund III referred to as the African Sequence B Growth Fund, the agency seeks to instantly spend money on the aggressive growth of South African breakout firms. It additionally plans to co-invest in firms throughout the remainder of Africa.

The primary fund, generally known as Knife Capital Fund I or HBD Enterprise Capital, was a closed non-public fairness fund managed by Eben van Heerden and Keet van Zyl. The agency provided seed capital to startups. It additionally generated vital exits from its portfolio — Visa acquisition of fintech startup Fundamo, and orderTalk’s acquisition by UberEats come to thoughts.

In 2016, the VC agency launched its present 12J providing with Knife Capital Fund II. The fund (KNF Ventures), which invests primarily in Sequence A stage, has eight startups in its portfolio. Final yr the agency instructed TechCrunch of its intention to increase the Fund II and open to new traders. The plan was to present startups access to networks, cash and growth alternatives.

“We wish to assist South African and African firms internationalize,” mentioned co-managing accomplice Andrea Bohmert on the time. A testomony to its trigger, one in all its portfolio firms, DataProphet, raised $6 million Sequence A to develop into the U.S. and Europe.

Bohmert tells TechCrunch that the third fund goals to deal with the crucial Sequence B funding hole that has characterised the enterprise capital asset class in South Africa, leading to companies not reaching full potential or exiting too early.

“Recently, we see a rise in firms capable of increase $2 million to $5 million funding rounds. And whereas the businesses are working inside their residence nation, in our case South Africa, such quantities take you far because of the native price construction,” Bohmert says. “Nevertheless, as soon as these firms begin gaining worldwide traction and have to construct an infrastructure outdoors of their residence nation, they should increase vital quantities to afford so. There are presently hardly any South African VC funds, maybe apart from Naspers Foundry, that may write checks of $5 million or extra and are keen to deploy them to finance the externalization of South African firms into bigger markets.”

In consequence, Bohmert argues that Africa has grow to be an incubator for worldwide VCs who can write these checks however can’t present the native assist most of those firms nonetheless want. Likewise, there are cases the place worldwide traders actively seek for native co-investors in South Africa to spend money on a spherical, and never discovering one would possibly blow the possibilities of them going additional with the funding. That is the hole Knife Capital intends to fill by launching this fund, Bohmert says.

“We wish to be the native lead investor of selection for South African know-how firms trying to internationalise, co-investing with worldwide traders who can lead the Sequence B dialogue and additional.”

This week, Knife Capital secured $10 million from Mineworkers Investment Company (MIC), a South Africa-based funding agency. The dedication positions MIC as an anchor investor to the fund alongside different native and worldwide traders.

Nchaupe Khaole, the CIO at MIC, defined that the transfer to vary the way in which native institutional traders method enterprise capital funding has been in MIC’s pipeline for some time. And by partnering with Knife Capital, this concept can start to materialize.

“Our dedication brings to the desk the funding, together with lots of our strengths as an skilled participant. Considered one of which is our potential to affect the businesses inside our portfolio to accomplice with us and impact actual, tangible change to the South African economic system. We’re delighted to be a key catalyst within the success of this funding spherical,” he mentioned.

As per different particulars, Knife Capital goals for a primary shut by Could and a closing shut by the top of the yr. Most of its participation will probably be co-investing, and the thought is to try this in 10 to 12 firms.