South African growth-stage investor Knife Capital has successfully concluded its latest venture capital fund, raising an impressive $50 million. This significant milestone marks the final close of the third fund, which addresses a critical funding gap in the growth stages of startups, where local investors have historically fallen short.
In a February 2021 interview with Knife Capital's managing partner, Andrea Bohmert, she emphasized that Africa had emerged as an incubator for international investors keen on supporting growth-stage companies. However, these investors often faced challenges in providing the necessary local support due to funding gaps. This scarcity of local venture capitalists in the growth stage had deterred many international investors from proceeding with their investments.
Knife Capital III, also known as "Knife Capital Fund III," is set to tackle this funding void by focusing on South African entrepreneurs in the Series B stage. The firm, with its twelve-year history, aims to back startups demonstrating strong potential for returns and exit strategies. Additionally, the fund plans to co-invest in businesses from various African countries, fostering collaboration with local investors.
The journey of Knife Capital since its establishment in 2010 has been one of steady progress and success. The firm's initial fund, Knife Capital Fund I, provided seed capital to startups and was managed by Eben van Heerden and Keet van Zyl. The subsequent Knife Capital Fund II, launched in 2016, focused on Series A investments and is still active with a fund size of $25 million. The cumulative experience from both funds has positioned Knife Capital as a notable player in the venture capital space.
The firm's strategic approach is exemplified by its track record of seven successful exits across its previous funds. These exits include significant acquisitions such as Visa's $110 million acquisition of fintech startup Fundamo and orderTalk's acquisition by UberEats. Knife Capital's co-founder and partner, Keet van Zyl, highlighted the firm's unique perspective, stating, "What Knife Capital does is look at the business from exit backward."
The successful close of Knife Capital III demonstrates the confidence of a diverse group of investors, including the International Finance Corporation (IFC), the Mineworkers Investment Company (MIC), and Standard Bank, among others. The fund plans to invest in approximately 10-12 startups, primarily from South Africa, with an emphasis on capital-efficient, high-growth sectors such as edtech, healthtech, fintech, AI, and agritech.
The challenges faced during the fund's fundraising journey were acknowledged by the firm's leadership, including Keet van Zyl. The difficulty in converging different limited partners (LPs) and aligning fund mandates contributed to the extended timeline. However, Knife Capital's strong exit track record and the management team's experience played a pivotal role in attracting investment.
Looking ahead, Knife Capital remains committed to supporting the growth of the venture capital ecosystem across Africa. While primarily focused on South African companies, the firm is venturing into more pan-African investments, as exemplified by its investment in the Rwandan health access platform Kasha.
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