Bank-startup collaborations are increasingly the rage in Africa, but relatively few banks, or any other types of corporates, are making direct investments in growth-stage companies. South Africa’s Nedbank is bucking the trend.
The bank set up a venture capital (VC) team as part of its Corporate and Investment Banking (CIB) division two years ago, which is headed up by Janade Du Plessis. He told Disrupt Africa the team was formed as a “critical driver” of Nedbank’s “First in Digital / Digital First bank” strategy, and was an on-balance sheet fund.
“Within 24 months, we have executed on 11 investments into eight technology companies that are solving problems on a global scale,” he said.
These include data-sharing startup Omnisient; Snapt, a provider of software-based load balancers and application delivery controllers (ADCs); and agri-tech startup Aerobotics, which make up what Du Plessis says is a diversified portfolio with companies that range in terms of market segment, geographies, business models and sectors.
“We invest in early-stage, post-revenue, scalable and high-growth companies globally providing scaling opportunities on the African continent, with a distinctive focus on scalable disruptive technologies,” he said, adding the fund is sector and technology agnostic.
“As an example, to date we have invested in San Francisco, Ireland, London and across Africa in various verticals, such as health-tech, cybersecurity tech, agri-tech, drone technology, data privacy, IoT and fintech.”
Nedbank invests in these businesses in two ways – firstly, in the form of funding for equity, and secondly in order to partner with the business and distribute the innovation to improve the growth of the business but also Nedbank’s clients’ businesses and potential banking offerings.
“The work being done by Nedbank CIB in partnership with our first portfolio company, Aerobotics, is a prime example of our commitment to going beyond innovation to lead in transforming the traditional understanding of what an investment bank does, and how it adds value to its clients,” said Du Plessis.
The VC team’s mandate, simply put, is to invest in, work alongside and scale global tech companies, across different technologies and different industries.
“We understand that technology disruption requires a completely new way of thinking about market and client segments, new investment approaches and new ways on how to value and account for investments,” Du Plessis said.
“The primary objective of Nedbank VC is to not only invest in early-stage technology companies, but as disruption is happening in every industry, to add value to the entire technology value chain through collaborations with large corporates.”
From a personal perspective, Du Plessis said he has always been interested in assisting entrepreneurs in order to grow their businesses. He qualified as an executive coach in 2008 through the American Coaching Federation, and since then has worked with hundreds of entrepreneurs on a results-based framework to help them raise capital, acquire customers and grow into new markets.
“I also created my own pan-African fund that invested in early-stage companies throughout the African continent. During this time, I realised the power of technology to leapfrog many of the developmental challenges in Africa – be it in healthcare, education, logistics, financial inclusion, agriculture – and hence shifted my focus to invest in tech-enabled startups,” he said.
“Today, I am driven and wake up with a passion to unlock funding opportunities in emerging markets and to form a bridge between other emerging market technologies onto the African continent. I believe that by addressing the significant funding gaps in emerging economies, especially in Africa, it will create a meaningful impact on the quality of lives of all Africans.”
Those funding gaps are slowly closing, with Du Plessis pointing to the growth in VC on the continent, but he says startups in Africa often also lack access to things like support, critical mentorship and limited infrastructure layers. COVID-19 has brought a host of additional challenges, which means Nedbank will be focusing on assisting its portfolio startups for the foreseeable future.
“The impact of the global COVID-19 pandemic has accelerated our need to assist startups in Africa as they navigate the challenges of surviving in the world where capital preservation will become more focused. However, the pandemic has also highlighted the change in the world to more digital and technology innovation that will forever change the way in which we live, interact, work and invest capital,” said Du Plessis.
“COVID-19 has forced the world to jump the technology curve, based on the need for access, at least 5-years forward. And this is a defining moment for Africa – allowing Africa to leapfrog and be more aligned to the global fourth industrial revolution movement. Our priority given the COVID-19 crisis is to support our existing portfolio companies and provide a guiding hand through this time.”