The SA SME Fund announced on Monday that not only has it successfully achieved First Close for its Venture Capital Fund of Funds (VCFoF), but also that it has significantly exceeded its target figure. The SA SME Fund is a collaborative effort between the South African business sector and government and was set up by members of the CEO Initiative. It is intended to help stimulate the country’s economic growth.

The VCFoF is intended to be a R1-billion fund. Its First Close was aimed at raising R500-million. In fact, it raised R600-million. The first commitments to venture capital funds should take place next month. The VCFoF also has a well-defined transformation mandate.

“The SA SME Fund has been instrumental in scaling the entrepreneurial and startup ecosystem in our country by providing catalytic capital,” reports SA SME Fund chairperson Adrian Gore. “The launch of the [VCFoF] advances this vision, and further cements venture capital as a credible asset class in South Africa. I am excited to see the impact we have had in realising our country’s potential.”

To date, the SA SME has invested in 16 funds spread across the venture capital, debt and private equity markets. In the process, it has catalysed more than R3-billion in further funding for its partner funds.

“The SA SME Fund has become the largest institutional investor into [venture capital] funds in South Africa and has effectively doubled the size of the [venture capital] industry in South Africa through its investment programme,” highlighted SA SME Fund partner fund Knife Capital founder Keet van Zyl. “We are grateful for their support of Knife Capital and look forward to a prosperous partnership together.”

The VCFoF will focus on late-stage venture capital funds in the country. It will seek superior risk-adjusted returns.

“Attracting institutional and pension fund capital to the [venture capital] industry is a significant achievement,” affirmed SA SME Fund CEO Ketso Gordhan. “Critical to both the VCFoF, and the Debt Fund, is the inclusion of a first loss capital layer, which is an important feature in the SA SME Fund’s two recent funds. The first loss advantage helps to de-risk investments and attracts other private sector players.”