Black-owned investment company the 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 in the aggressive expansion of African innovation-driven companies and fill a critical follow-on funding gap, says MIC.
It notes that this commitment positions it as an anchor investor of the fund, alongside other local and international investors.
“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 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,” MIC CIO Nchaupe Khaole says.
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, says MIC.
However, it notes that 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,” the company explains.
Knife Capital manages Section 12J venture capital funds − KNF Ventures I and II, as well as select family office investments.
Knife Fund III’s target is to raise $50-million to be well positioned to directly invest in 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 MIC says the fund presents an attractive opportunity for the company, 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 their full potential or exiting too early.
The fund consists of two main funding vehicles: a dollar-denominated limited partnership in Jersey and a rand-denominated limited partnership in South Africa, which will co-invest alongside one another in portfolio companies.
The MIC is investing in the rand-denominated partnership.