South Africa-based business accelerator Grindstone has launched a new venture capital fund called Grindstone Ventures, dedicated to providing early-stage equity funding to its cohorts.
The accelerator takes South African SMEs with proven traction through an intensive year-long review of their strategies and provides them with the necessary support to build a foundation for growth in becoming more investable, sustainable and exit-ready.
Key growth gaps identified are addressed during the programme, opening up early-stage funding opportunities in these companies to accelerate market access. But the availability of risk capital remains one of the main challenges to the growth of South African SMEs.
Hence the launch of Grindstone Ventures, which is an open-ended venture capital fund structure that is set to invest up to ZAR5 million (US$290,000) per opportunity in scalable innovation-driven ventures – likely in co-investment arrangements with angel investors and corporate VCs.
“Linking a funding vehicle to our accelerator model complements the Knife Capital value chain approach where companies can be de-risked before raising follow-on capital from our Series A and later-stage funds,” said Andrea Bӧhmert, partner at Knife Capital.
“The Grindstone programme is essentially a thorough due diligence exercise to identify the best opportunities – already narrowed down from hundreds of applications.”
In addition, all future Grindstone Accelerator cohort companies will obtain a stake in Grindstone Ventures, thereby creating a vested interest in each other by a community of high-growth scale-ups.
“A few of our past Grindstone entrepreneurs have subsequently exited their businesses and became VC Investors with Knife Capital. We are now starting to teach our investee companies to think like investors early on – because we back them to succeed,” said Bӧhmert.
Keet van Zyl, partner at Knife Capital, said the first Grindstone Ventures investments are imminent.
“The initial capital contributions are from Knife Capital, Thinkroom and our programme partners, but encouragingly, past Grindstone cohort entrepreneurs are coming on board and respected angel investors in the South African startup ecosystem are looking to invest. We already identified the first investment opportunities,” he said.