South African VC firm Knife Capital has launched a second Section 12J Venture Capital Fund to allow new investors to participate in this alternative asset class.
Launched in 2016, KNF Ventures took 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 first ZAR250 million (US$16.4 million) Section 12J Venture Capital Fund, Knife Capital has now launched KNF Ventures II. It has the same investment mandate as Fund I, and will continue to build on the success and momentum created. By leveraging knowledge, networks and funding, KNF aims to accelerate the growth of South African innovation-driven SMEs to generate enhanced returns for entrepreneurial-minded investors.
Knife Capital partner Keet van Zyl said COVID-19 had rapidly increased the adoption rate of digital technologies, putting the spotlight on disruptive startups.
“There is a tangible shift towards embracing new ways of working, learning, interacting and transacting. This can also be felt in the investment space,” he said.
“Certain alternative asset classes like venture capital – where fund managers have been investing in technology companies for years – are experiencing increased interest from institutional and individual investors wanting to diversify.”
Andrea Böhmert, partner at Knife Capital, said COVID-19 had had a significant impact on the broader Knife Capital portfolio, but not necessarily all negative.
“The resilience of a long-term investment strategy is being tested and a diversified portfolio is a good thing in times like these. The portfolio value keeps growing and some of our companies like educational content marketplace Snapplify and pharmaceutical temperature monitoring solutions company PharmaScout really benefited,” she said.
“Snapplify provided free access to e-textbooks for remote learners during the crisis and while ticketing platform Quicket was hard hit initially, it launched new successful online products in high-load hosted streaming and fundraisers. In many ways the portfolio is coming out stronger and we are proud of the entrepreneurs we backed and the way they are navigating through this crisis with solid business models and a positive culture.”
Knife Capital had an active 2020, co-investing with RMB in customer journey analytics company inQuba, backing Silicon Valley-based virtual presentation startup mmhmm and participating in a US$6 million funding round for its AI for manufacturing portfolio company DataProphet. It also partnered with the SA SME Fund to enhance its Grindstone Accelerator Programme, and launched Grindstone Ventures – a post-seed fund that invests in Grindstone Accelerator cohort companies.