Mineworkers Investment Company (MIC) has committed $10-million to venture capital firm Knife Capital’s new African Series B expansion fund, Knife Fund III.
The Fund’s aim is to invest behind the aggressive expansion of African innovation-driven companies and fill a critical follow-on funding gap.
The commitment positions MIC as anchor investor to the Fund alongside other local and international investors. Speaking on the announcement, Nchaupe Khaole, Chief Investment Officer at MIC explained: “The move to change the way local institutional investors approach venture capital investment has been in the pipeline at MIC for a number of years now. Our venturing into the earlier-stage alternative asset class space makes sense given the slow economic growth in the last three years.
“We believe that the impact of investment in small to medium scale enterprises on innovation, job creation and economic growth is crucial, and therefore urgent to unlock, especially right now.
“Our commitment brings to the table the investment, along with many of our strengths as an experienced player. One of which is our ability to influence the companies within our portfolio to partner with us and effect real, tangible change to the South African economy. We are delighted to be a key catalyst in the success of this funding round.”
On the back of initial startup successes and an increased focus on building a cohesive technology ecosystem, the funding gap is slowly closing for African startups at the early growth stages. However, a Series B funding crunch looms for the crop of startups that manage to get over the Series A funding hump and then require significant risk funding for aggressive growth and scaling. Successful entrepreneurs on the continent with world-beating innovations are simply under-funded to compete on the global stage. Therefore, while investments and investors are increasing globally, measured in terms of innovation potential, Africa remains under-capitalised.
Knife Capital, the pre-eminent South African venture capital and growth equity investment firm with offices in Cape Town, London and Jersey currently manages Section 12J Venture Capital Funds: KNF Ventures I and II as well as select family office investments. Knife Capital previously managed Mark Shuttleworth’s HBD Venture Capital Fund to successful exit and closure. In completing its value chain investment approach, Knife Capital curates a pipeline of high-growth technology enabled SMEs through its Grindstone Accelerator programme.
“We gained much respect for the MIC team during the due diligence and negotiation process and look forward to the mutual learning journey ahead,” said Keet van Zyl, Partner at Knife Capital. “MIC is already proving themselves to be a value-adding partner that have the funds and experience to responsibly deploy capital as well as the vison to influence positive change in this emerging market,” he added.
Knife Fund III’s target is to raise USD50 million in order to be well positioned to directly invest behind the aggressive expansion of South African breakout companies and co-invest with other credible funders in companies across the rest of Africa. The focus will be on scalable business-to-business technology companies that have attractive exit optionality.
The Fund is an attractive opportunity for MIC as it builds on the success and momentum created in Knife Capital’s previous funds and supports its value chain approach to investment. The team is now rolling out Knife Fund III to address the critical Series B funding gap that has characterised the venture capital asset class in South Africa, resulting in businesses not reaching full potential or exiting too early.
The Fund consists of two main funding vehicles: a USD-denominated limited partnership in Jersey and a ZAR-denominated limited partnership in South Africa, which will co-invest alongside one another in portfolio companies. MIC is investing in the ZAR-denominated partnership.