How Knife Capital once turned down JoJo Tanks because VC ‘didn’t see use case’

With Cape Town in the grip of its worst drought in living memory JoJo Tanks has been catapulted into an overnight success story, and can barely keep up with demand. But the SA company was once turned down by one of the country’s top venture capital (VC) firms, Knife Capital.

Since its inception in 2010 Knife Capital has invested in some big names such as CSense (which exited to General Electric just a few months ago) and recently concluded a $110-million exit of Fundamo to Visa. But along the way the VC company has also made mistakes — turning down big names that have gone onto make significant exits.

These include cloud computing startup Nimbula, which was acquired in 2013 by Oracle for $110-million and fintech company MyGate which in March last year was acquired by Wirecard for €23-million. The VC also turned down Yoco and Clickatell — two other fast growing SA startups.

Read more: Are these the 10 all-time biggest exit deals for SA startups? [Digital All Stars]
Read more: Wirecard AG acquires MyGate Communications

“I have so many fuck-ups,” admits venture capitalist Keet van Zyl, a partner at Knife Capital, while speaking at FuckUp Night Cape Town, held at Bob’s Bar in Cape Town on Tuesday (20 March) evening. The event was hosted by Aspiring Black Leaders and Cape Town Office.

Knife Capital once turned down Nimbula, MyGate and even admits didn’t see use case in JoJo Tanks

However, of all these the missed opportunities, turning away JoJo Tanks must today hurt the hardest. The company was acquired in 2012 by RMB Ventures for an undisclosed sum.

Jokes van Zyl: “(I mean) who is going to need plastic water tanks, with some moulds and whatever. I mean really. What is this use case? How big is the market for water storage in South Africa, really. You can’t transport the IP to Mauritius, we don’t understand it, no,” he said.

Referring to Yoco he said: “They’re 10 000, 20 000 users, I can’t keep up and giving back to the ecosystem in terms of SME development.

“Katlego (Maphai) was in our office at some stage. Hopefully we mentored him and they gave him the respect he deserves. He can now play the ‘I told you so’ still,” said Van Zyl.

‘We all make mistakes’

But he says, everyone makes mistakes and “that’s okay”. “I’m not so sure why people find that so surprising. To me it is just a statistical reality.”

The presence of an industry expert for each deal helps to mitigate the risk of a wrong investment decision. Van Zyl says it also helps to do a pre-mortem – by thinking of everything that “could go wrong”, before making a decision on something.

Meanwhile things are going well in some ways at Knife Capital. The VC promises investors a rate of return of 40% and Van Zyl points out that he thinks they’ve “almost clicked it” in terms of meeting this target.

The former financial analyst has come a long way. He recalls how when he was job hunting years ago he got rejected many times – by big names such as Investec, Remgro, Andersen Consulting and Unilever. Van Zyl has kept all these rejection letters.

He ended up getting a job at Proctor & Gamble and as a kind of souvenir never cashed his first cheque of R4900. Instead he decided to laminate it and hold onto it to remember that time he received his first pay.

Today he uses it as a bookmark. “When times are tough I am going to (cash) this,” he jokes.

And his dream? It’s to take all the rejection letters he has ever received and make an art work out of it and place this on a wall in his wine cellar. Then he’ll invite the heads of all those companies who ever rejected him and together they will enjoy a good glass of wine, all while contemplating this strange piece of art.