A new multimillion-rand seed funding initiative is looking to prop up South African tech start-ups and fund managers.
This, after the SA SME Fund, the Department of Science and Innovation, along with its entity, the Technology Innovation Agency (TIA), and impact investor E Squared Investments launched a R300 million Seed Fund of Funds aimed at providing critical early-stage capital to start-ups.
This initiative aims to fund at least 50 technology-driven start-ups through experienced fund managers, with a focus on innovation and transformation in South Africa.
Ketso Gordhan, CEO of the SA SME Fund, emphasises the role of seed funding as the cornerstone of entrepreneurial success, saying: “Seed capital is the lifeblood of innovation and entrepreneurial growth. Without it, many great ideas would never see the light of day.
“By injecting capital at this critical early stage, we are not just funding start-ups – we are cultivating the next generation of industry leaders. South Africa has no shortage of brilliant minds, and this fund will ensure more of them have the resources they need to succeed. Our goal is to make sure these companies have a fair chance at success and scale in the local and global markets.”
According to the SA SME Fund, the fund addresses a key gap in SA’s venture capital (VC) ecosystem, where later-stage investments, such as Series A and Series B, have historically attracted more funding.
Patrick Krappie, acting CEO of TIA, says: “Governments across the globe play a crucial role in fostering innovation ecosystems, and South Africa is no different. The partnership with SA SME Fund aims to bolster funds towards start-ups and SMMEs through a fund of funds approach.
“We understand that early-stage ventures, especially those grounded in technology, need a supportive environment to thrive. The Seed Fund of Funds will catalyse a wave of new start-ups by enabling them to transition from ideas to viable enterprises.
“This presents an opportunity for the fund to play a catalytic role in developing the country's seed stage funding ecosystem, building the foundations that will deepen investment into the innovation economy and placing the venture capital industry on sustainable footing for the future.
“The support by the DSI (through its Innovation Fund) to both TIA and the SA SME Fund has been instrumental in the establishment of this fund, with the view to create a funding platform for seed stage VC funds.”
Gladwyn Leeuw, CEO of E Squared Investments, says: “At E Squared, our mission is to empower responsible entrepreneurs driving transformative change. By making strategic capital accessible, we hope to foster innovation and ensure South Africa's tech sector reflects its diversity. This initiative aligns with our vision to be a leading early-stage investor, contributing to entrepreneurial activity and meaningfully impacting millions of lives.
“Partnering with experienced fund managers and leveraging synergies with entities like the SA SME Fund, we are confident in driving the success of numerous tech start-ups, paving the way for sustainable economic growth and transformation. By focusing on both innovation and transformation, this fund is ensuring the future of South Africa’s tech sector reflects the diversity and talent of its people.”
The partners in this fund believe that supporting entrepreneurs and small businesses will help create jobs, following the global trend where one in five jobs in the US has been created by tech companies in recent times.
With a focus on high-impact innovation, they note, this investment marks a milestone in strengthening SA’s venture capital landscape.
As the fund prepares to allocate capital to at least five skilled fund managers, it is expected to drive the success of dozens of technology start-ups over the next few years, empowering entrepreneurs to push the boundaries of what’s possible, they comment.
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