Endeavor South Africa marks a milestone with the first close of its R500-million Harvest Fund III, securing R190-million and exceeding its initial R150-million target. The fund aims to catalyse growth in high-potential tech-related companies across the African continent.
Major investors include Standard Bank, Allan Gray, and the SA SME Fund. The first close coincides with the final investment of the successful R190-million Harvest Fund II, which made 19 investments in 17 companies.
“In Harvest Fund III, we are doubling down on a strategy that is working, investing in Endeavor’s existing portfolio of high-growth entrepreneurs who run market-leading founder-led companies with exceptionally strong local and global growth, scalable IP, robust returns, and a pay-it-forward mindset,” says Antonia Bothner, Endeavor SA capital markets lead.
The fund plans to invest exclusively in a vetted pipeline of 135 selected Endeavor companies in Africa. This will comprise 20 to 25 companies in southern Africa, accounting for 85% of the value, and five companies in other African regions. The fund targets a 25% return or a 3 to 4 multiple on invested capital (MOIC), with deal sizes of R15-million for Endeavor companies and R7,5-million for early-stage Endeavor companies.
Alison Collier, MD of Endeavor South Africa, notes: “We have a deep understanding of the 135 businesses in our pipeline and are confident in their growth potential, as they have been selected through Endeavor’s rigorous two-stage international selection process, which spans one to two years. We engage with them continuously and will assess their capital needs to guide the fund’s investments.”
Harvest Fund III is a commercial-first VC fund with a mission-driven approach, reinvesting 100% of the carry back into each African ecosystem that it invests in. “When we were designing Fund III, we wanted to stay aligned with Endeavor’s overall mission, but also carve out a business model that would create a sustainable revenue stream to support the work Endeavor South Africa does,” explains Bothner.
The potential for strong growth is evident in the Harvest Fund II portfolio. Its 17 companies in enterprise tech, fintech, retailtech, and edtech, delivered 58% annual revenue growth, reaching a total revenue of R7,7-billion as of December 2023. They created over 9 200 jobs in 2023, growing employment by 35% annually.
Notable investments include unicorns like Go1 and TymeBank, and high-growth companies such as Clickatell, Sendmarc, and digital payment innovators Onafriq (formerly MFS Africa), iiDENTIFii, and Ozow, amongst others.
Investors have been drawn to Harvest Fund III due to Endeavor South Africa’s established track record.
Anwar Harris, head of investments at Standard Bank Corporate and Investment Banking, says: “Our decision to invest is strongly influenced by the extent and quality of Endeavor’s network and strong selection process of its portfolio companies, which minimises risks and provides substantial reassurance to investors.”
Ketso Gordhan, CEO of the SA SME Fund, which invested in both Harvest Fund II and III, says Endeavor’s support of potential target investments is a significant factor in providing investors with a sense of security in their investment, as well as meaningful impact. “Additionally, we see a complete alignment with our ethos and strategy in promoting entrepreneurship and growth,” he says.
The fund received catalytic support from Prosper Africa, under its Catalytic Investment Facility, to enable the team to scale their raise. “The announcement of the first close of the fund is a fantastic milestone in a challenging fundraising environment, and reaffirms our belief that investors are recognising the high-growth potential of African startups,” says British A Robinson, coordinator for Prosper Africa.
Collaborations with 10 fund partners under this investment facility are set to mobilise over $600-million in private capital.