South African VC firm Knife Capital has announced it is extending its Section 12J fund KNF Ventures to new investors.
Launched in 2016, KNF Ventures takes advantage of the Section 12J venture capital company (VCC) regime, where qualifying investors in approved Section 12J VCCs can deduct the full amount of their investment from taxable income in the tax year.
Having deployed most of its ZAR180 million (US$12.3 million) fund in seven startups, Knife Capital is now opening the fund up to new investors to continue the momentum.
“Based on the success of KNF Ventures so far, which is just about fully deployed and where our portfolio companies are growing in excess of 50 per cent year-on-year, we are extending the fund for further investment,” said Keet van Zyl, partner at Knife Capital.
Knife Capital takes a holistic ‘Find-Make-Grow-Realise’ value-chain approach when investing by finding exciting SMEs, making the investment with fair terms after thorough due diligence and actively growing the businesses to ultimately realise sustainability or exit goals. Van Zyl highlights the importance of looking beyond the 12J tax incentive.
“For us it is about more than the tax break. Sure, it is a good incentive as investors start the investment process in a favourable Internal Rate of Return (IRR) position due to the immediate tax benefit. But our aim is to leverage knowledge, networks and funding to accelerate the growth of South African innovation-driven SMEs and generate enhanced returns for entrepreneurial-minded investors,” he said.
“We have an amazing investor base of just over 100 private investors and institutions – including the SA SME Fund – that we are extremely proud of. So, there needs to be a mutual fit on investment philosophy and values.”
New investors in KNF will be able to participate in the further upside of the portfolio investments already made, which currently consists of cloud-based ticketing platform Quicket, machine learning company DataProphet, IoT temperature monitoring solution PharmaScout, carbonated beverage brand Pura, SaaS warehouse management solution Cradle Technologies, and ed-tech startups SkillUp and Snapplify.
“We are also launching KNF Ventures Fund 2 and working on ways to plug the Series B funding gap that exists in South Africa where there are limited local investors that lead or participate in larger Series B VC investment rounds and actively manage those portfolio investments on home soil,” van Zyl said.