Knife Capital reached final close for its $50 million or R941 million African Series B expansion fund, Knife Fund III. The Fund supports the expansion of African innovation-driven companies to fill a critical follow-on funding gap, as lead investor and through co-investment with other credible funders across the continent.
The focus is on high-growth scalable South African B2B technology companies that have impact potential and show strong returns through exit optionality. The fund will also back entrepreneurs in other African countries who fit this investment profile in collaboration with experienced local partners.
Support to African startups at the early growth stages is key to advancing innovation, job creation, and economic growth on the continent. Despite their immense potential, promising African startups that have managed to grow beyond the Series A funding stage often struggle to find the capital they need to scale further and take their innovations to a global level.
A broad range of investors committed to Knife Fund III, including the team itself, the International Finance Corporation (IFC), the Mineworkers Investment Company (MIC), the SA SME Fund as well as its new Venture Capital Fund of Funds (a pioneering collaboration between government and business that attracted capital from investors like The Department of Science and Innovation, USAID, The Consolidated Retirement Fund for Local Government and Rand Mutual Assurance), Standard Bank, AfricaGrow (a German Fund of Funds backed by DEG, KfW and AllianzGI), Skybound Capital, Fireball Capital and the Draper-Gain family office in partnership with Rand Merchant Bank.
“We are delighted to bring together such a credible investor base with a reason to care about the growth of venture capital investments in Africa,” says Keet van Zyl who co-founded Knife Capital in 2010 with Eben van Heerden.
“Most of our investors are co-investment partners who share deal flow openly and can augment the investments with alternative funding instruments and follow-on funding for enhanced growth. Raising a venture capital fund in Africa is a long and challenging journey, but we could not have scripted the outcome any better,” he added.
Credentials in a local environment matter when raising funds from international investors. Martin Ewald, MD at Allianz Global Investors and Lead Portfolio Manager Impact Investments reflected on the due diligence process:
“The investment strategy of AfricaGrow is funding private equity and venture capital funds domiciled and active in Africa, which is both challenging and very rewarding. In Knife Capital we have found an excellent partner generating real impact on the ground by building and exiting successful companies utilising their deep experience, value-adding network, and local expertise. We look forward to a fruitful cooperation.”
Fund managers need to advance the credibility of the venture capital asset class in Africa through sustained success. Knife Capital has a proven track record of exit-centric business building and preparing South African technology startups for strategic acquisition by the likes of General Electric, Visa, Garmin and Uber Eats. It successfully divested its entire Fund I, which is a rare achievement in the African venture capital space.
It is critical that asset allocators back fund managers throughout their growth journey as it can have a catalytic effect.
“Being an early investor in both Knife Fund II and the Knife-backed Grindstone Accelerator, the SA SME Fund is extremely proud of what the Knife Capital team has been able to achieve here,” says Ketso Gordhan, SA SME Fund CEO.
“Having a home-grown VC fund in Knife Capital with assets under management of ZAR1.3bn is just a phenomenal growth story for the industry, and testament to what can be done with support of the broader ecosystem.”
Knife Fund III is already partnering with successful entrepreneurs on the continent.
“Since first close, the Fund invested in AI-enabled process optimization company: DataProphet and digital health access platform: Kasha and has a strong pipeline of transactions in various stages of closing out,” says Julien Draper, Knife Capital partner and deal flow custodian.
