The GroTech venture capital (VC) fund has raised ZAR62 million (US$4 million) for investments in disruptive South African tech startups with a significant injection of capital by Caleo Capital.
Disrupt Africa reported in January VC firm Grovest was 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 – named GroTech – has now held its initial close, attracting ZAR62 million (US$4 million), well above its minimum target of ZAR50 million (US$3.3 million).
Caleo Capital, a wealth and asset management business, has invested significant capital into GroTech to help build and grow their venture capital interests.
“We have funding and are ready for business, so we want to engage quality tech entrepreneurs who aim to disrupt industries and grow rapidly,” said Clive Butkow, GroTech chief executive officer (CEO).
“Once this capital has been deployed, we will open for second round funding to investors who want to take advantage of great returns and the tax relief offered by our Section 12J status.”
Nicholas Liebmann, co-founder and joint-CEO of Caleo Capital, said his company was seeking a replacement for its Jemstep investment, having recently exited that position when the US-based tech disruptor was acquired in January.
“We made a decision that a partnership with the strong GroTech team would be a good way to build on the success of our venture capital interests. Our exposure to Jemstep means that we have a good understanding of the ecosystem and the sector,” he said.
GroTech, in association with Caleo, 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. The fund will invest in entrepreneurs looking for growth capital to scale businesses disrupting traditional industries, such as banking, insurance, health and wellness, telecommunications, retail, media and entertainment.
Butkow previously told Disrupt Africa the GroTech fund will focus on highly scalable startups, post-revenue, and preferably post-profit, avoiding 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.