South African venture capital fund manager 4Di Capital has launched its third investment vehicle with a first close of ZAR130 million (US$9.4 million), with the SA SME Fund as the initial anchor investor.
Founded in 2009, 4Di Capital launched its first fund in 2011 and invests in high-growth tech startup opportunities across seed, early and growth funding stages. Recent additions to its portfolio include Lumkani, InvestSure and Aerobotics.
The firm has now launched the 4Di Capital Fund III with the SA SME Fund as the anchor investor. The first close of the fund is ZAR130 million (US$9.4 million), but it will remain open to other qualified or institutional investors for a limited period.
Its mandate includes early- and growth-stage investments into startups in the fintech, insurtech, e-health, ed-tech and agr-tech spaces, among others, while it will also be co-investing with 4Di’s Exponential Fund I, which focuses on insurtech, e-health and fintech. The fund will be investing in startups from South Africa, but which have continental or global ambitions.
“Naturally, we are only looking for opportunities that satisfy the typical venture capital requirement for significant scaling potential, which entails pursuing significantly large market opportunities,” said Justin Stanford, co-founding general partner at 4Di.
Stanford said South Africa does not have much of a history of institutional LPs or investors that invest in venture capital funds, meaning it is very difficult to raise money for the asset class locally. Thus the creation of the SA SME Fund as a new local institutional LP, with venture capital as a part of its mandate, is a “very welcome development” for the local ecosystem.
“For 4Di, it is helpful for the seeding of new funds such as our Fund III, which then assists us in attracting further capital from investors – local and foreign – interested in allocating to the world of South African tech startups,” he said.
SA SME Fund chief executive officer (CEO) Ketso Gordhan said the fund was pleased to work with 4Di, which it said was one of only a handful of experienced VC fund managers.
“It increases the likelihood of finding and supporting a new generation of mainly black entrepreneurs. The SA VC ecosystem is small and fragmented and needs huge investment and focus so that it can contribute meaningfully to innovation and economic growth. This partnership is one more significant step in the right direction,” he said.