South African VC firm Grindstone Ventures has launched a ZAR100 million (US$6.5 million) fund dedicated to predominantly funding startups that have completed, or are part of, the Grindstone Accelerator programme.
An equity-free structured entrepreneurship development programme that assists high-growth innovation-driven SMEs to become sustainable and fundable, Grindstone provides participants with knowledge, networks, market access opportunities and funding readiness through growth measurement, gap analysis and value-adding interventions, all over a one-year engagement.
So far the average increase in revenue for Grindstone cohorts is 52 per cent during the one-year programme, with an increase in business efficiency of 30 per cent across functional areas. The majority of Grindstone cohort companies successfully raise significant follow-on funding, and there have also been some successful local and international exits.
Now, some of the partners behind the accelerator have got together to launch Grindstone Ventures, a female-led fund that will focus on post-seed investments in early-stage technology companies that are female-led. The fund has received its first investment from the SA SME Fund, and will target between 30 and 50 early-stage companies that possess strong intellectual property, demonstrate high growth potential and have the ability to raise follow-on funding from credible funders in the ecosystem, or deliver sustainable cash yields over the long term.
Grindstone Ventures is led by Catherine Young, Andrea Bohmert, Rapelang Rabana and Grace Legodi, an all-female team with exceptional depth of experience across value chain funding, and a proven track record in scaling startups. Knife Capital is overseeing certain of the fund management elements.
“Our aim is to provide superior returns to investors and to create sustainable yields over the long term. While the tech ecosystem deal space across Africa has shown exceptional growth over recent years, there remains a gap in the market for post-seed, pre-Series A funding across the continent. Our vision is to fill this gap and prepare these businesses for larger funding rounds, exponential growth and to ultimately exit,” Young, managing partner at Grindstone Ventures, said.
“Our secret sauce lies in our robust Grindstone Accelerator, which enables innovation-driven tech startups to access knowledge, networks, funding and markets. Typically an accelerator follows a fund, but Grindstone Ventures is turning this model on its head. Grindstone Ventures was launched as a result of the excellent pipeline of businesses emerging from Grindstone Accelerator, which provide investors with a de-risked opportunity for returns.”
Ketso Gordhan, chief executive officer (CEO) of the SA SME Fund, said he believed the fund would fill a vital gap in the post-seed market.
“As a fund, it is as innovative as the startups that it will fund. The team is deeply experienced, has a proven track record and we are excited about the opportunity and impact that they will have on this market. Watch this space,” he said.