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Venture capital (VC) firm Knife Capital has expanded into London after introducing UK-based Draper-Gain Investments as a strategic investor. It follows Knife Capital’s management buyout last week from JSE-listed African Dawn Capital.
The London office will accelerate the international growth of companies within Knife Capital’s investment portfolio. Draper-Gain is a family office with significant global resources including existing investments in South Africa.
The transaction was facilitated by entrepreneur and angel investor Bob Skinstad (pictured above, right) who is Knife Capital’s partner in KNF Ventures, a SA Revenue Services (Sars) Section 12J VC company. South African 12J schemes were created to promote early stage capital formation. They offer significant tax incentives for SA investors.
The London office will accelerate the international growth of companies within Knife Capital’s investment portfolio
Keet van Zyl (pictured above, left), investment partner at Knife Capital, said Skinstad is one of six partners in the restructured Knife Capital and has a share of just under 20% in the VC firm.
Skinstad, a former Springbok rugby captain who retired 10 years ago, moved to London last year to head up the business development function for Draper-Gain.
He said over the past year, Knife Capital had impressed Draper-Gain while conducting a number of due diligences and executing the subsequent transactions.
“This evolved into Draper-Gain taking a strategic stake in Knife Capital and committing funding as its lead international investor,” he said.
Van Zyl is optimistic about the latest moves: “The South African early stage investment ecosystem is built on the risk capital of local angels and international investors. Unfortunately local institutional investors largely avoid this space.
“While we will continue to work at changing this mind-set, we are now creating a flexible structure for those international family offices which want to invest with us alongside KNF’s local 12J backers,” he said.
In 2014, Knife Capital was sold into financial services group African Dawn. After expected synergies did not materialise, the Knife Capital team recently took back ownership of the company in a structured management buy-out.
Van Zyl said the deal was concluded last Friday (1 September) and was valued at about R7.5-million. It involved a cash component, some shares being traded back, and continued partnership on some of the Knife Capital initiatives for mutual upside, he said.
He said the London office will accelerate the international growth of companies within Knife Capital’s investment portfolio and create an appealing proposition for entrepreneurs and investors in both SA and the UK.
“We have also increased our investment size to up to $5-million per opportunity,” he added.
Van Zyl said Knife Capital is involved in conducting due diligences for “one or two” UK investment, but added that it was too early to say more on these.
He did not want to disclose the amount that Draper-Gain Investments has committed towards UK, adding that the amount in commitments would be “flexible”.
With offices in London and Cape Town, Knife Capital is creating an appealing proposition for entrepreneurs and investors in both SA and the UK, he said.
While he said Draper-Gain Investments and Knife Capital would not necessarily target SA entrepreneurs based in the UK, the arrangement would likely benefit African entrepreneurs as the two would look to assist UK companies wanting to expand to Africa.
Featured image: Keet van Zyl, investment partner at Knife Capital (left) and Bob Skinstad of UK-based Draper-Gain Investments (Supplied)