Investing in South African Startups
We have just completed our first South African investments into 2 startups out of Cape Town. South Africa is now one of our key markets in addition to East and Western Africa. For us, its a big step into realizing our vision to build a truly pan African venture fund and positioning ourselves to assist and connect startups across the continent. In fact our first investment, biNu, started out of Sydney Australia, recently opened an office with a current staff of 5 in Cape Town- that means 3 startups in our portfolio are now present in South Africa.
If you had told me 3 years ago I would be investing in South Africa this rapidly I would have thought you were kidding, but after spending a steady amount of time learning and connecting with the ecosystem in the last 2 years. We realized a few key things:
- Local talent in South Africa are among the most well educated on the continent. The strongest technical universities in Africa are present in South Africa and some of the top tech companies have been started here.
- There is a middle class that acts as an important early adopter market for technology with a willingness to try new things like e-commerce or enterprise software. While South African GDP was recently eclipsed by Nigeria, South Africa continues to play an important role as an early market when you factor in infrastructure, education levels etc… There is also large base of the pyramid market similar to many other African countries if you venture outside traditional urban areas .
- There is a strong desire from many other investors we have connected with in strengthening pan Africa links. For example we have partnered with Knife Capital and University of Cape Town business school to expand the VC course to East Africa in July. We recognize Cape Town as a leading hub along with Nairobi (where we are initial based), Accra/Ghana and Lagos/Nigeria where Savannah Fund also has investments. Johannesburg is not far behind with many companies able to generate revenue/traction rapidly given the ease and level of business environment.
- We think South Africa holds promise in Financial tech space, we have decided to bring Afrikoin, a pan African payments and currency innovation conference to Cape Town end of 2014 after the inaugural event in November 2013 in Nairobi, where we covered topics from mobile money, Bitcoin/virtual currencies to remittances and commerce. More details on the event soon.
- Finally, South Africa is an important trade and exit market in African companies that want to go public e.g. Johannesburg stock exchange. When it comes to pan African scaling, South Africa has led the way in companies going across the continent after succeeding in their home market from banking, retail to mining. We believe the same will happen with technology startups (although Accra, Lagos and Nairobi will constantly challenge this). Whichever organizations can leverage the best of all the ecosystems (talent, market, infrastructure) in building out their presence in Africa, success will follow. Growth in multiple markets is an important imperative for venture backed startups.
Announcing 2 new Investments- Our First in South African Companies
- We are the lead investor in BabyGroup’s Series A round with strong local investor participation. BabyGroup provides Moms with the best online shop, information and support during pregnancy, birth and parenthood.. With the investment in BabyGroup, we continue our thesis to invest in the Ecommerce space and on the Africa retail transformation representing about 40% of our portfolio in capital deployed to date. South Africa is the most advanced e-commerce market on the continent in terms of readiness, market size and payments and delivery infrastructure.
- We also invested in Wyzetalk, part of their R8M ($750k) Seed Financing with Clifftop Colony. Wyztalk secure social business platform that accelerates the performance of organisations that believe in the power of communication, collaboration, innovation and engagement. Enterprises in Africa, both private and public sector, continue to seek effective ways to communicate and do business in their workforce from feature phone owners to smart internet connected devices in a variety of sectors…After scaling in South Africa, we look forward to helping them expand across Subsaharan Africa and as well as connect them to SiliconValley.
Savannah Fund now has 15 investments in 5 African countries (Kenya, South Africa, Ghana, Nigeria and Uganda). These companies have created 100+ jobs and raised over $8M in co-investments and follow on funding within 2 years.