SA SME Fund raises R600m for VC Fund of Funds

The SA SME Fund, a collaboration between government and business aimed at boosting economic growth, is thrilled to announce the successful first close of its R1-billion Venture Capital Fund of Funds (VC FoF). The fund has secured R600 million in commitments from investors, surpassing its initial target of R500 million.

The VC FoF has attracted institutional and pension fund capital, positioning it as a pioneer in the venture capital asset class. It includes a first loss capital layer provided by the SA SME Fund and USAID, as well as capital commitments from the department of science and innovation and the Consolidated Retirement Fund for Local Government, represented by Sukha and Associates.

Adrian Gore, chairperson of the SA SME Fund, expressed his satisfaction with the achievement, stating, “The SA SME Fund has played a pivotal role in scaling the entrepreneurial and start-up ecosystem in our country by providing catalytic capital. The launch of the VC Fund of Funds advances this vision and solidifies venture capital as a credible asset class in South Africa. I am excited to witness the impact we have made in realising our country’s potential.”

Ketso Gordhan, chief executive of the SA SME Fund, highlighted the significance of attracting institutional and pension fund capital to the VC industry. He emphasised the importance of the first loss capital layer, a feature present in the SA SME Fund’s recent funds, which helps to de-risk investments and attract private sector players.

The SA SME Fund has already invested in 16 funds encompassing venture capital, debt, and private equity, catalysing over R3 billion of additional capital for its partner funds.

The VC FoF will continue its venture capital strategy, with a focus on later stage VC funds in South Africa. Alongside seeking superior risk-adjusted returns, the VC FoF is committed to promoting transformation in the industry. The first commitments to VC funds are expected to be finalised in June 2023.

Keet van Zyl, founder of Knife Capital, one of the SA SME Fund’s partner funds, expressed gratitude for the Fund’s support and acknowledged its significant contribution to the growth of the South African VC industry.

He stated, “The SA SME Fund has become the largest institutional investor in VC funds in South Africa and has effectively doubled the size of the VC industry in our country through its investment program. We are grateful for their support of Knife Capital and look forward to a prosperous partnership together.”

The SA SME Fund, capitalised by 52 corporates and the Public Investment Corporation with R1.4 billion, aims to support and develop mainly Black entrepreneurs. It has committed over R630 million to VC fund managers and also manages a R300 million SME debt fund with investments from the Gauteng government and the IDC. With the addition of the VC FoF, the SA SME Fund’s assets under management now total R2.3 billion.

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