Meet the Investor: Justin Stanford, 4Di Capital

0

Justin Stanford believes entrepreneurship became a necessity for him at a young age, providing the inspiration for later successful businesses and the launch of his venture capital (VC) firm 4Di Capital.

“I grew up on an apple farm in Elgin, and went to school in Somerset West,” Stanford, whose operations are now based out of Cape Town, told Disrupt Africa.

“I always loved engineering and technology and grew up building or disassembling lots of different things. If we wanted anything as kids, we had to earn money ourselves to buy it, so I became entrepreneurial from a young age.”

Later, with the arrival of the internet in South Africa swiftly followed by the dot-com boom, Stanford knew he wanted to be an internet entrepreneur.

“After being in a car accident that was fatal to my mother and sister I eventually quit high school to pursue this dream, moving to Cape Town on my own as a largely clueless farm kid,” he said.

“I spent three years trying various startup ideas from a garage in Claremont and failing in the early 2000s, mostly focused around my interest in internet security, an industry I believed would become substantial due to the inevitable growth of the internet.”

He eventually succeeded in the fourth year, building and rapidly growing an internet business that sold security software online across many African countries.

“Over the years we have started various other businesses too, which led to the formation of 4Di Group,” Stanford said.

The experiments with angel investing that eventually led to the creation of 4Di Capital and the Silicon Cape Initiative began in the middle of the last decade, when Stanford and partner Erik van Vlaanderen began putting their own money into businesses after people began to approach them.

“The potential we saw in the very nascent, siloed and undeveloped local tech startup ecosystem eventually lead to us founding the Silicon Cape Initiative in 2009 with my friend Vinny Lingham, in order to try and kickstart and catalyse things, and the creation of 4Di Capital as a Valley-style early-stage tech VC fund here in South Africa,” he said.

“We saw a gap between the positive emerging potential in tech startups here and the negative availability of Valley-style early-stage funding and support. Startups and tech are just in me so it seemed obvious to me that there was an opportunity to leverage our experience as a team, and the under-serviced market opportunity.”

Johann Rupert was the first outside investor to back 4Di, which aside from funding also looks to provide support, mentoring and access to networks.

4Di’s portfolio includes the likes of HealthQ and Snapt, while it has also successfully exited Skyrove and Motribe, the latter of which was acquired by Mxit in 2012.

Stanford believes 4Di has taken a leading role in bringing Silicon Valley-style VC thinking and methods to South Africa, especially legal and investing structures and concepts, as well as spearheading the formal early-stage tech investing sector.

“We have 12 entities under management as of today in our portfolio, many of which we funded alone from day zero as complete seed-stage startups,” he said.

“I believe we add a lot of value in that we operate very hands-on with our investees in a partnership-like manner, helping to grow and evolve both businesses and founders. We are also unusual in that we have a United States (US) office and one of us lives in the US in Atlanta, Georgia, which is very useful in assisting our investees in globalising or finding opportunities for investment or exit.”

The firm plans to use 2015 to primarily focus on the growth of its portfolio companies in order to generate the best possible chances of future successes.

“As we are operating in a largely unproven and very new market, it is critical for us to show success in early-stage tech investing as a proof-of-concept for the longer term. This kind of VC in South Africa is still an asset class that is widely viewed very skeptically and is very hard to raise money for. If we can help prove that it’s doable, it will improve things for everybody,” Stanford said.

4Di only focuses on tech businesses with strong and compelling founder teams and the potential to scale substantially.

“Usually this means the business is aiming to start here but globalise and tackle large markets such as Africa, the US, Europe or other developing markets,” Stanford said, though he said the company planned to only invest in locally originated startups as it feels it needs to be close by in order to add value.

Stanford does not see this as a hindrance to 4Di’s ambitions, however, as he believes the tech startup sector in South Africa in general and Cape Town specifically has “grown in leaps and bounds” over the last five years.

“There is an increasing uptick in both the quantity and quality of interesting businesses and opportunities out there. We are starting to see more foreign exits at good multiples too, which we really need,” he said.

“Investor interest is at an all-time high without doubt, although coming off a very low base. In particular I am encouraged at the rapidly developing angel investor community. This is something we’ve been doing since around 2003, and it’s been quite a lonely space for over a decade. I have personally put my own money to work in over 25 companies to date and there are now many others that are getting involved and will probably overtake me soon, which is great!”

About Author

Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

Leave A Reply