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New fund targets innovative ventures
South African venture capital firm Knife Capital has announced the launch of KNF Ventures, a SARS-approved section 12J venture capital company (VCC) dedicated to investing in innovation-driven ventures with proven traction.
“By leveraging knowledge, networks and funding, KNF Ventures will accelerate the growth of strategically relevant South African scale-up companies and generate enhanced returns for investors,” says Keet van Zyl, CEO of KNF Ventures and co-founder of Knife Capital. “We are taking our learnings in the local venture investment space over the last 10 years, partnering with value-adding investors and utilising the SARS section 12J VCC regime to create something unique.”
In selecting entrepreneurs with deep subject matter expertise and then adding a blend of the business building skills of Knife Capital and the diversified experience of a credible investor pool, KNF investees will have a solid knowledge foundation to scale from and the confidence that they are supported throughout the growth journey.
“Exploiting IP is one of the key strategies that businesses can rely upon to improve their competitiveness, but most South African innovation-driven companies we come across have not adequately taken advantage of their knowledge base,” says Van Zyl.
KNF will provide market access and accelerate investee traction by drawing on a dynamic partner network. Investors will be taken into the trenches of South African high-growth entrepreneurship through facilitated capacity building interactions and regular targeted investor/ investee networking events.
To facilitate this, KNF has partnered with former Springbok rugby captain, entrepreneur and corporate networker Bob Skinstad. “I’ve always treasured my personal and business relationships and believe in the power of like-minded individuals working together to achieve a common goal,” says Skinstad. “Through the KNF network we believe that the solution to virtually every challenge confronting a South African high-growth business is no more than three phone calls away.”
KNF will be based on the style and success of previous funds and investments managed by Knife Capital where investors achieved superior returns and investees enjoyed accelerated growth. Knife Capital has facilitated lucrative exits of local technology companies with the likes of General Electric, Visa and Garmin and also assisted portfolio entrepreneurs with management buyouts.
KNF will find, make, grow and realise scalable investments while aiming for a minimum of 40% annualised return on investments. The targeted investment capital is R100-million but initial closing will be smaller to start taking advantage of impending investment opportunities. The minimum participation per investor is R1-million.
To assist SMEs with access to equity finance, government has implemented a tax incentive for investors in privately owned entrepreneurial businesses in South Africa. Individuals, companies and trusts investing through approved section 12J venture capital companies like KNF can deduct the full amount of their investment from taxable income. Recent changes to section 12J of the Income Tax Act are beginning to have a positive impact on the South African venture capital industry with an uptake in VCC registrations.
“Through the 12J incentive, investors start the investment process in a favourable position by compensating for risk and enhancing future compound returns as a result of the immediate tax benefit,” says Van Zyl.