South African venture capital powerhouse, Knife Capital, has achieved a significant milestone by successfully closing its eagerly anticipated $50 million fund, aptly named Knife Capital III. This strategic move holds paramount importance in addressing a pronounced funding void that has persistently hindered the growth prospects of local startups, particularly in the critical Series B stage.
The distinctive focus of Knife Capital III centers around catering to South African entrepreneurs who have successfully navigated their way to the Series B phase, a stage where sustained financial backing and strategic guidance are often imperative for substantial growth and potential high-value exits.
In an illuminating conversation with managing partner Andrea Bohmert back in February 2021, she astutely highlighted Africa’s evolving role as an incubator for international investors, who, despite their eagerness to invest in growth-stage startups, found themselves constrained by the lack of local support in the ecosystem. This funding gap, as Bohmert underscored, posed a genuine challenge, deterring not only potential local co-investors but also discouraging foreign investors seeking collaborative opportunities.
The arrival of Knife Capital III heralds a promising shift in this landscape. The fund seeks to extend its robust support to visionary South African entrepreneurs who are steering their startups through the complex terrain of the Series B phase. This strategic infusion of capital aims to empower these nascent businesses, enabling them to attain remarkable growth trajectories while fostering an environment conducive to potential high-yield exits.
Steeped in a rich legacy since its inception in 2010, Knife Capital has charted a steady course of growth and success. Its maiden fund, Knife Capital Fund I, also known as HBD Venture Capital, introduced a closed $10 million private equity fund under the adept guidance of Eben van Heerden and Keet van Zyl. The firm’s unwavering commitment to nurturing startups was further solidified with the launch of Knife Capital Fund II in 2016, a $25 million fund known as KNF Ventures, primarily dedicated to strategic investments at the Series A stage.
With a commendable track record featuring seven noteworthy exits across both funds, including transformative acquisitions like Visa’s $110 million purchase of fintech trailblazer Fundamo, Knife Capital is well-poised to replicate these successes with Knife Capital III. By meticulously crafting exit-driven strategies and meticulously evaluating startups from an exit-oriented perspective, the firm aims to pave the way for future listings, envisioning them as a prevalent exit pathway for the burgeoning African innovation ecosystem.
As a testament to its compelling vision and mission, Knife Capital III has attracted a diverse consortium of investors. Noteworthy names such as the International Finance Corporation (IFC), the SA SME Fund, Standard Bank, and the Draper-Gain family office, in partnership with Rand Merchant Bank, have rallied behind the fund, indicating a robust vote of confidence in its strategies and objectives.
Looking ahead, Knife Capital III envisions channeling its financial prowess and industry insights into propelling the growth trajectory of 10 to 12 carefully selected startups within its portfolio. With an average investment ticket of $3 million, the fund is well-equipped to provide pivotal financial backing to drive innovation, foster entrepreneurship, and catalyze transformative growth in the vibrant South African startup ecosystem.
The fund’s recent investments in visionary enterprises such as DataProphet, a pioneering South African AI-as-a-service venture, and Kasha, a trailblazing Rwandan health access platform, exemplify its commitment to identifying and empowering high-potential startups.
In an exclusive interview, Keet van Zyl, co-founder and partner of Knife Capital, delves deeper into the rationale behind these strategic investments and provides insights into the fund’s future trajectory. Van Zyl also shares his perspective on the local growth-stage venture capital scene and offers a glimpse into the fund’s ambitious goals for expanding its portfolio by the end of the year.
With Knife Capital III, the South African startup ecosystem is poised for a remarkable transformation, as this pioneering venture capital firm continues to champion innovation, nurture entrepreneurship, and carve a path toward enduring success for the visionary startups of tomorrow.
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