Venture capital (VC) firm Grovest is looking to raise ZAR200 million (US$12.8 million) to invest in highly scalable, post-revenue South African tech startups, with the strategy to “buy, build and flip”.
The fund – which has its initial close in mid-February – has a minimum target of ZAR50 million (US$3.2 million), but Grovest non-executive director Clive Butkow told Disrupt Africa the company was targeting four times that figure and was “bullish” on the chances of success.
“I know it is a tall order with the rand doing what it has done, but we’re bullish,” Butkow said.
Once raised, GroTech will invest an average of between ZAR5 million (US$320,000) and ZAR10 million (US$640,000) in disruptive, high-impact South African tech startups.
GroTech aims to achieve an investment return of five times the risk capital invested, with a Targeted IRR of in excess of 30 per cent per annum.
Butkow, former chief operating officer (COO) of Accenture South Africa, said he had seen the amount of innovation going on in South Africa in areas where corporates were struggling to innovate.
“South African corporates are very slow to innovate. That’s why we’ve set up this fund. Our strategy is quite simple – we buy, we build, and we flip,” he said.
“One of our key criteria is whether the founder of CEO is willing to flip. Because if not we are not investing.”
He said the GroTech fund will focus on highly scalable startups, post-revenue, and preferably post-profit. According to Butkow, it will avoid early-stage startups as they are too risky.
“We want to derisk our portfolio. Companies that have good, reputable clients, revenues, are highly scalable, and have high margins. And team is everything,” he said.
GroTech already has eight potential portfolio companies in the pipeline, and is willing to invest in any kind of disruptive technology, including fintech, e-health, insurance, retail, and telecoms.