Standard Bank and the SA SME Fund have joined other investors in backing venture capital firm Knife Capital’s new $50 million African Series B expansion fund, Knife Fund III.
The fund’s aim is to invest behind the expansion of African innovation-driven companies and fill a critical follow-on funding gap.
The commitment positions Standard Bank as key investor to the Fund alongside other local and international investors. Speaking on the announcement, Akash Maharaj, executive: equity finance and investments at Standard Bank Corporate and Investment Banking, said: “Standard Bank believes in the positive impact that investment into early-stage high-growth businesses can have on innovation, job creation and economic development of South Africa.
“We have partnered with a number of the leading investors in this space and are excited to add Knife Capital to our venture capital portfolio. With Standard Bank’s expansive African footprint, our suite of bespoke banking products and extensive client base, we can facilitate the growth journey of businesses that scale internationally.”
The lack of support of local institutional investors for the venture capital alternative investment asset class is a huge stumbling block for high-impact entrepreneurship in Southern Africa. With commitments to various growth equity funds, Standard Bank is paving the way for how financial institutions can approach this asset class.
Standard Bank has already invested in Hlayisani Capital and is finalising investment into a few other Funds that have a transformative impact through investments in technology and innovation to achieve a better and more sustainable future for all.
The second close of Knife Fund III brings provisional commitments to just over $40 million and Knife Capital is finalising the due diligence and legal process of a few remaining funders to close out on the $50 million target raise. Other credible funders already committed include the IFC, Mineworkers Investment Company, the SA SME Fund, international development funders and prominent family offices.
The SA SME Fund has already made a meaningful impact on the South African early-stage investment space by backing a portfolio of local venture capital funds, including Knife Capital’s KNF Ventures and Grindstone Ventures.
Ketso Gordhan, CEO of the SA SME Fund, said: “We nurture South Africa’s vast entrepreneurial spirit through long-term partnerships and are delighted to follow-on into Fund III to continue supporting Knife Capital.”
Knife Fund III builds on the success and momentum created in Knife Capital’s previous funds and supports its value chain approach to investment. The focus will be on scalable business-to-business technology companies that have attractive exit optionality.
The fund is well positioned to directly invest behind the aggressive expansion of South African breakout companies and co-invest with other credible funders in companies across the rest of Africa. It has already made its first investment by leading the $10 million round in DataProphet, a business that provides AI-as-a-service software in the manufacturing sector.
“We are very excited to gain a not only a funder, but also a growth partner for our portfolio companies in Standard Bank, said Keet van Zyl, co-founder at Knife Capital.
“With their infrastructure throughout the continent they are already proving themselves to be a value-adding banking partner that have the funds and experience to responsibly deploy capital as well as the vison to influence positive change in African emerging markets.”
Knife Fund III addresses the critical follow-on funding gap that has characterised the venture capital asset class in Southern Africa, resulting in businesses not reaching full potential or exiting too early. The fund consists of two main funding vehicles: a USD-denominated limited partnership in Jersey and a ZAR-denominated limited partnership in South Africa, which will co-invest alongside one another in portfolio companies.