Private equity investment firm Ethos is looking to raise R1 billion to invest in South African companies involved in artificial intelligence (AI).
Yesterday, Ethos announced the first close and first two investments by its maiden AI Fund, Ethos AI Fund I.
The fund is targeting R1 billion and already has R600 million from first close investors, including Ethos Capital and Standard Bank.
Ethos notes the fund has been established in partnership with Nic Kohler and Roger Grobler, both former insurance industry CEOs. It is the first fund of its kind in SA, the investment firm says.
Speaking about the fund's establishment, Stuart MacKenzie, Ethos CEO, says: "As part of Ethos' ongoing evolution into alternative assets, we are delighted to launch the AI Fund, in partnership with Nic and Roger.
"This fund will co-invest alongside other Ethos-managed funds, originate proprietary investments, and is expected to generate differentiated value for our investors by helping our portfolio companies to navigate and benefit from artificial intelligence."
Roger Grobler, Ethos AI Fund partner, adds: "For both Nic and I, this fund is the culmination of over two decades of working in data-driven businesses, and leverages the entrepreneurial blood, sweat and tears that comes from starting and managing businesses in South Africa, Australia and India. We have seen first-hand the immense value of algorithmic decision-making."
Grobler points out the fund's aim is to identify and invest in businesses that Ethos believes will benefit enormously from AI, specifically algorithmic decision-making. He explains these algorithms typically help companies make high-frequency decisions in multiple places along the value chain.
"As these decisions are not ideally suited to human capabilities, typically due to computational complexity and volume of data utilised, the use of algorithms releases intellectual capacity, allowing people to focus on other rewarding areas of work, such as creativity, relationships, strategy or communication," says Grobler.
"With R600 million in first close commitments, we have already successfully concluded two investments: Channel VAS in the fintech sector, and Vertice, an Ethos-established medtech group," comments Kohler.
"Channel VAS already deploys industry-leading algorithmic decision-making, and we will assist them to diversify and expand their product offering. Vertice seeks to disrupt the medtech value chain by leveraging AI to enable smarter decision-making."
The Channel VAS and Vertice investments have been made alongside Ethos Fund VII and Ethos Fund VI.
Ethos has been successfully attracting capital to a number of specialist fund offerings, raising R4.5 billion in the past 24 months from institutional and development investors: R2.5 billion for Ethos Mid Market Fund I; over $100 million in the first close of Ethos Mezzanine Partners 3, which is targeting $150 million by mid-2019; and R600 million in first close commitments to AI Fund I.
In addition to its specialist funds, Ethos has achieved a first close of Ethos Fund VII, which is expected to have a final close in mid- to late-2019, the company says.
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