The SA SME Fund has announced the first close of its R1bn venture capital (VC) fund-of-funds, which attracted R600m in commitments from investors.
That exceeds its first funding round target of R500m and comes on the back of capital commitments from the department of science and innovation and the Consolidated Retirement Fund for Local Government, represented by Sukha and Associates. The venture capital fund-of-funds includes a first loss capital layer, which provides investors with downside protection on their capital up to a total first loss amount of R90m across all investors, which is provided by the SA SME Fund and USAID.
The SA SME Fund was set up as part of the CEO initiative, a collaboration between the government and business to address some of the most pressing challenges to SA’s economic growth. It was capitalised by 52 corporates, which provided R900m and the Public Investment Corporation (PIC) with R500m (making for a total of R1.4bn) and invests in funds that support and develop mainly black entrepreneurs, with over R630m committed to VC Fund Managers.
In addition to the R1.4bn it has a R300m SME debt fund with the Gauteng government and the Industrial Development Corporation (IDC) as investors. This, together with the venture capital fund-of-funds takes its assets under management to R2.3bn.
The SA SME Fund is invested in 16 venture capital funds as well as debt and private equity. It is chaired by Adrian Gore and its investment committee is chaired by Michael Jordaan.
“The SA SME Fund has been instrumental in scaling the entrepreneurial and start-up ecosystem in our country by providing catalytic capital,” said Adrian Gore, chair of the SA SME fund. “The launch of the VC Fund of Funds advances this vision, and further cements venture capital as a credible asset class in SA. I am excited to see the impact we have had in realising our country’s potential.”
The venture capital fund-of-funds will continue its strategy of focusing on later stage VC funds in SA while seeking superior risk-adjusted returns and a well-defined transformation mandate. The first commitments to VC funds are expected to be concluded in June 2023.
“Attracting institutional and pension fund capital to the VC industry is a significant achievement,” said Ketso Gordhan, CEO of the SA SME Fund. “Critical to both the venture capital fund-of-funds, and the debt fund is the inclusion of a first loss capital layer, which is an important feature in the SA SME Fund’s two recent funds. The first loss advantage helps to de-risk investments, and attracts other private sector players.”
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