Endeavor SA has announced the launch of Harvest Fund III, set to raise R500m to back the most promising SA and African founded tech-enabled businesses that are scaling globally.
Harvest Fund III builds on the success of Harvest Fund II, which raised R190m and has invested in 18 companies in the past 18 months — two of which have had subsequent priced rounds in excess of two times in value appreciation, and one of which is a unicorn, tech scale-up valued at more than $1bn, Go1.
Like its predecessor, Harvest Fund III is a rules-based co-investment fund, led by a qualified lead investor. The Fund is set to continue its winning formula of investing exclusively into Endeavor’s high-growth tech and tech-enabled entrepreneurs looking to scale globally. It already has a R91m anchor investor in the wings.
Africa is at an inflection point
Harvest Fund III will source the majority of its portfolio (more than 85%) from its internationally selected pipeline of Endeavor SA businesses — now expanding its mandate to allow up to 15% to be invested in Pan-Africa, focusing on Endeavor’s three major hubs in Africa: Kenya, Nigeria and Egypt.
“Africa is at an inflection point, with the continent’s digital economy estimated at a strong $115bn and set to grow six-fold to a huge $712bn by 2050 — driven by a youthful population and a rapacious growth in smartphone and internet adoption.
“SA, Kenya, Nigeria and Egypt are at the forefront of this. Together they account for 51% of Africa’s GDP, 73% of Africa’s accelerators, 50% of the continent’s professional developers and 80% of Africa’s venture capital investment,” says Antonia Bothner, capital markets lead at Endeavor.
Endeavor is a network of, by and for founders
Endeavor is the leading network of, by and for high-impact entrepreneurs with six offices across Africa, 41 offices globally, 5,000 mentors, 2,500 entrepreneurs and over 550 venture capital (VC) investor partners, now celebrating its 25th year in operation. The Harvest Funds are designed to elevate the work Endeavor is already doing.
“Endeavor’s mission and thoughtful culture is incredible, and the network of entrepreneurs is unmatched,’’ says Pieter de Villiers, founder of Sequoia-backed Clickatell, and Harvest investee.
This is echoed by Coen Jonker, co-founder of Tymebank, who says, “Endeavor is by far the best networking and support community I’ve had the privilege of working with.” Tymebank is also an investee, along with Go1, MFS Africa and iiDENTIFii — to name a few of Harvest Fund II’s 18 investees.
Reinvesting for future growth
As a general partner (GP) in Harvest Fund III, Endeavor co-invests with an approved qualified lead investor on similar terms. Bothner says this helps to minimise fund management costs, maintain alignment and, at the same time, pay it forward. This is because Endeavor’s non-profit operating model allows for 100% of its GP carry to be reinvested back into its local ecosystem to support the next generation of entrepreneurs.
“Endeavor is by far the best networking and support community I’ve had the privilege of working with.”
— Coen Jonker, co-founder of Tymebank
“It’s clear from Endeavor’s more than 2,500 network of global entrepreneurs that there’s a multiplier effect at work. High-growth entrepreneurs believe in entrepreneurship and as they grow, they support others through mentorship and the sharing of networks, and by investing in start-ups themselves,” says Bothner.
“By reinvesting the GP carry, Endeavor is able to continue to support the next generation of entrepreneurs, driving local job creation, revenue and investment.”
Endeavor SA’s group of 61 high-growth entrepreneurs has grown impressively over the past year with revenues growing at 47% delivering R13bn at the end of 2022, and all fuelled by private capital. These companies employed 16,000 personnel during 2022, growing jobs by 36% from the previous year, with 80% of new jobs occupied by local youth (defined as younger than 35 years) and 75% by black South Africans.
A first-of-its kind in Africa
“The rules-based model enables the Harvest Fund III to co-invest in Endeavor companies who have already undergone the rigorous local and international selection process of one-two years, and offers an efficient investment process where small tickets come with outsize access, diversification and lower costs,” says Bothner.
“A large portion of the due diligence expenses are borne by Endeavor’s organisation — this is a big differentiator. This means more money into the hands of entrepreneurs for innovation and growth. It is a first-of-its-kind in Africa and one we are doubling down on.”
The R190m raised for Harvest Fund II points towards an appetite for investment into a promising vein of SA-founded tech-based entrepreneurship solving global problems.
For Bothner, increasing the funds size 2.5-fold and extending the mandate to include up to 15% of Endeavor entrepreneurs in Kenya, Nigeria and Egypt is a natural progression.
“This, combined with Harvest Fund III’s rules-based co-investment, the reinvestment of Endeavor’s carry and the efficient nature of the investment process make it a unique and valuable investment opportunity at a time which makes sense.”
Harvest Fund III is set for first close during June 2023 with an aim of R150m, with the second and final close dated for July 2024 or at the discretion of the Fund.
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This article was sponsored by Endeavor SA
