Development finance institution the International Finance Corporation (IFC) has invested $10-million in venture capital firm Knife Capital's Knife Fund III to support growth in South Africa’s digital economy and increase access to financing for the country’s technology entrepreneurs.
The investment in Knife Fund III will provide financial support to tech startups in high-growth sectors in South Africa, with strong potential for expansion across Africa and internationally, including enterprise technology, software, health technology and financial technology, the IFC says.
Knife Capital aims to raise $50-million for Fund III, which will primarily target investments in the series B, or second round of funding, stage. Knife Fund II was launched in 2016, and Fund I in 2010.
“Increasing access to venture capital promotes digital entrepreneurship and innovative tech solutions that enable better delivery of vital services such as healthcare, fintech and logistics. By supporting funds such as Knife III, the IFC can help more startups and digital entrepreneurs innovate and expand in South Africa and beyond,” says IFC South Africa country manager Adamou Labara.
According to the IFC-Google report 'eConomy Africa 2020', South Africa’s Internet economy has the potential to grow in size from $21-billion to $31-billion between 2020 to 2025, and up to $125-billion by 2050. To support this growth, it will be critical to provide local tech startups with the capital they need to launch and scale their products and services, the development finance institution says.
“In South Africa, the level of fundraising volume is relatively high compared to the rest of sub-Saharan Africa, but most venture capital supports early-stage companies in the country, with limited funding available for Series B or later stages of investment.
“The IFC’s investment in Knife Fund III aligns with its strategy to provide patient risk capital to fund managers in Africa and to support Africa’s technology ecosystem,” the organisation says.
“We are excited to welcome the IFC as an investor to our new Fund III and sincerely appreciate the endorsement that comes with the commitment.
"With the first close of Fund III, we are finally able to support entrepreneurs in the next stage of the scale-up journey and, thereby, address a significant gap that currently exists in the African entrepreneurial ecosystem,” says Knife Capital partner Andrea Bohmert.