Who would you turn to if you were a SA tech startup looking for venture capital (VC)?
South Africa’s VC sector has grown substantially in recent years, with over R1-billion invested in startups and early-stage companies in 2017, according to report last year by the Southern African Venture Capital and Private Equity Association’s (Savca) (see this story).
The growing amount of VC funding in SA has closely tracked the growth in technology startups that often attract funding for their ability to scale quickly.
Like this Cape Town in the early 2000s quickly became SA’s startup capital. It’s still home to some of the better names in tech startups in SA, but Joburg is catching up fast — on the back of a growth in fintech and more black entrepreneurs trying their hand at tech, according to Ventureburn’s 2017 and 2018 surveys.
Here are six SA venture capitalists tech startup founders should keep an eye on
Amendments in recent years to a 2009 VC tax incentive, Section 12J of the Income Tax Act, have led to a number of new tech funds being set up (see this list) and contributed to the growth in the VC sector (although most of the capital invested has gone to property, private equity or renewable energy — see this story).
In addition, an exciting new development is the SA SME Fund — a R1.4-billion fund which draws its contributions from a number of listed companies and the Public Investment Corporation (PIC), which oversees government pensions. The fund has a mandate to invest in black-owned companies — in many cases tech startups.
In more or less the order of how long they have been around in the VC sector, here are six SA venture capitalists you should keep an eye on:
Justin Stanford, 4Di Capital
Justin Stanford is probably what you could call a veteran in the VC sector in South Africa, having invested in tech startups since the early 2000s before formalising this into 4Di Capital with a group of fellow venture capitalists.
These include SA startups Snapt, Aerobotics, Lumkani, and LifeQ, as well as exits that include Skyrove and Motribe (which was acquired by MXit at the time). The VC has also invested in a number of East African startups.
In 2009 Stanford, together with Silicon Valley based SA entrepreneur Vinny Lingham set up Silicon Cape, Cape Town’s startup initiative.
Stanford’s story began in the late nineties, when he started out as a tech entrepreneur, which he quit high-school to pursue.
After many struggles he eventually built an online pan-African cybersecurity software company in the early 2000s, and became a reseller for Slovakian security specialist firm ESET. He has since partially exited the reseller business.
“We became early angel investors in young tech startups in the very nascent local SA ecosystem starting around 2004, and I’ve angel invested in dozens of companies since, but at the time that led us to begin visiting Silicon Valley in the mid-2000s.
“This ultimately spurred us into creating and launching the Silicon Cape Initiative in 2009, aimed at catalysing the ecosystem in SA and spreading the idea of the possibility of a ‘Silicon Valley in Africa’.
“Off the back of that we started the initial experiments that would later become 4Di Capital, aimed at formalising our investing activities and creating a true Silicon Valley inspired early-stage VC firm, which formally launched its first fund in 2011. Since then 4Di launched its second fund in 2016, and now most recently its third fund this year (with capital from the SA SME Fund — see this story).
Outside of investing in tech firms, Stanford likes keeping active. He enjoys boating and watersports, mountain biking, playing guitar, film and audio, braai’s in the bush — and says he’s interested in anything with engines or a mechanical or design element, like cars, aircraft, architecture and interiors.
It hasn’t been easy being a venture capitalist, he admits.
“Looking back 15 years, I believed that because I was a successful entrepreneur that I probably had the knowledge and experience needed to become a successful tech investor. But in truth, it’s not so — it’s an entirely new and different discipline, and it takes a long time and many mistakes to truly and deeply learn, like any specialist trade,” he admits.
Keet van Zyl, Knife Capital
Another “veteran” venture capitalist in South Africa, is Keet van Zyl. Together with Anthea Bohmert, he serves as a managing partner of Knife Capital.
Knife Capital invests via a consortium of funding partnerships, including a Sars section 12J Venture Capital Company, KNF Ventures and select family offices. The VC in 2017 set up a UK office, managed by former Springbok rugby player Bob Skinstad (see this story).
The VC also builds high-growth technology enabled SMEs through its Grindstone Accelerator (a fifth cohort was launched recently — see this story) and aims to fill critical gaps in the local entrepreneurial ecosystem through education and enterprise development initiatives.
Van Zyl trained as an accountant with an MBA and is qualified in intellectual property (IP) law.
Before founding Knife Capital with Bohmert in 2010, he helped structure various private equity funds in Southern Africa for a US fund-of-funds investor and worked at industry-leading companies such as Procter & Gamble, Investec and Mark Shuttleworth’s “Here Be Dragons” (HBD) Venture Capital. He is also on Savca’s board.
Things are going pretty well at Knife Capital. Says Van Zyl: “We currently have amazing deal flow and one of our key challenges at the moment is which opportunities to pass on. Next investment is in the edtech space and should be announced soon, with likely one more closing later this year.”
In addition, Knife Capital has since exited from all seven companies that made up part of the R150-million HBD Fund that Knife took over and managed (see this story). The seven were: CSense, Fundamo, Clicks2Customers, Moyo restaurant group, SA Cab, FlightScope and orderTalk.
It could be another cracker of a year for the VC. With summer approaching Van Zyl will likely be celebrating — by either cruising around the Cape Winelands and coastline on his Harley Davidson or surfing with his wife and two young daughters.
Paul Cook, Silvertree Holdings
Silvertree Holding‘s managing director Paul Cook is another veteran investor in South Africa’s tech scene.
Cook — a former management consultant — founded Silvertree Holdings in 2013 with Manuel Koser, who formerly headed Rocket Internet online fashion retailer Zando, and Peter Allerstorfer (both of whom share the position of managing director with Cook).
Other than a role as a management consultant, focusing on pan-Africa strategy, public and private sector — Cook has co-founded and headed tech for a small startup. Before that he did his PhD in theoretical physics at Caltech in Los Angeles.
Silvertree is more a holding company of tech investment than a VC per say.
In November last year Ventureburn reported that Silvertree was busy buying up companies left, right and centre — ahead of a planned listing in 2023 — relegating many of the founders to mere operators of the businesses they once founded. Not all are happy about it (see this story).
And in August Koser last year told Ventureburn that Silvertree looks to take a stake of 30% to 90% in those companies it invests in, with the view of eventually increasing this to 100% (shareholders he adds, will still enjoy “minority rights”). He calls his investment company’s approach one of fostering “co-entrepreneurs” (see this story).
Cook says Silvertree is very busy at the moment, having signed three terms sheets in the last few weeks, details of which he expects will be announced as soon as legals done.
When not investing, Cook enjoys hiking, as well as reading history and economics. Currently his young children dominate a lot of his off-time, he says.
Clive Butkow, Kalon Venture Partners
Clive Butkow is the new kid on the block in Gauteng for VC investments in tech startups.
His Kalon Venture Partners is a registered Section 12J VC company, through which investors that invest can get a tax deduction.
Since it was launched in 2016, Kalon has invested in a number of tech startups, including amon others Ozow (formely i-Pay, which netted funding in June from the investor — see here), SnapnSave and FinChatBot.
Butkow has a computer science and applied maths degree from Wits University and describes himself as being an entrepreneur from as early as eight years old.
But after graduating from university instead of starting a tech business he joined Accenture (formerly Arthur Sanderson) where he stayed for 28 years. During that time he held numerous leadership positions. He was the company’s COO before he retired at the end of 2012.
During his Accenture career he had the opportunity to work around the globe building tech businesses including Silicon Valley and other entrepreneurial ecosystems. It’s this that got him excited about starting his own VC.
A self-confessed “fitness freak”, Butkow likes to spend an hour a day boxing. He also loves watching sports and says he’s a huge Manchester United fan.
When not working out, he’s boxing clever in the VC sector. “We are closing one deal with another Cape Town based VC and have a very solid pipeline which we should have decided on investing within a month or two from now,” he says.
Gavin Reardon, Kingson Capital
Gavin Reardon is the general partner of Durban-based venture capital (VC) fund Kingson Capital, which he founded in 2015. The fund is a registered Section 12J VC company, which allows investors that invest in the fund to tap tax deductions.
In February the VC announced the launch of a R400-million VC fund aimed at investing in 30 to 50 tech startups and black-owned small businesses (see this story).
In Kingson Capital’s first fund (Fund One — see the portfolio here) the VC invested in 10 companies including Finfind – a matching platform for lenders and businesses seeking funding, Spazapp – an online ordering system for the informal marketplace (see this story) and Healthcloud – a data aggregator in the healthtech space.
Before starting the VC, Reardon served as a CFO for a local financial services business, after qualifying as a chartered accountant.
He decided to start Kingson Capital after looking for funding for his own tech startup at the time. “I then saw the opportunity for something far bigger and set out to create a fund that could invest in multiple startups,” he says.
“I have always loved creating business value and developing new things. Getting into the world of startups is the best of both combinations and something I enjoy very much,” he says.
Ketso Gordhan, SA SME Fund
Meet South Africa’s new heavyweight shaking up the VC scene.
In August last year former PPC Cement head Ketso Gordhan (pictured above, left with Spartan SME Finance CEO Kumaran Padayachee) took the helm as CEO of the SA SME Fund (see this story) and he’s already creating waves in the VC sector.
The R1.4-billion SA SME Fund is capitalised presently by 54 JSE-listed firms (having grown from 48 who’d committed earlier). The Public Investment Corporation (PIC), which manages government employees’ pension funds, has also approved a R500-million equity funding commitment to the fund.
The fund lends and invests via other investment funds, including VC funds (see this story on the list of funds).
In November last year Ventureburn confirmed that a VC deal concluded by Knife Capital’s KNF Ventures earlier that same month in SA healthtech firm 5nines Technologies had effectively become the first investment that the SA SME Fund was involved in.
In a report in March SA business daily Business Day, the fund said R725-million of the R1.4-million pledged has already been committed with the balance expected by August (this month).
The newspaper quoted Gordhan as saying that by August the fund is expected to be the “largest” institutional investor in venture capital in SA.
It said the total amount will support 10 significant black businesses, 200 SMEs, and five black entrepreneurs over the next five years.
Gordhan — a former anti-apartheid activist — has previously served as the head of private equity at FirstRand for almost a decade. He has also managed a personal impact investment portfolio with a focus on education in SA and Rwanda and has served as Africa advisor to the Omidyar Network.
He has also served as head of Africa for the Commonwealth Development Corporation where he led the Africa investment strategy for the UK government’s development finance arm.
Among his other roles, Gordhan was also first post-apartheid director general in the Ministry of Transport and served as the city manager for the City of Johannesburg in 1999 and 2000.
At the time of his appointment Gordhan told Ventureburn that he hopes to match his experience as a senior government official and private equity and impact investor to the mandate of the SA SME Fund. “This is to create and grow mainly black entrepreneurs and businesses,” he said.
Many are hoping that he will stand and deliver.
*Correction (26 August 2019): Gavin Reardon did not start Kingson Capital after struggling to find funding for his startup at the time. Rather, it was in seeking funding for his own startup that he began to see the opportunity that funding startups presented.