Endeavor South Africa, a community of high-impact entrepreneurs, has raised R130 million to date in its Harvest Fund II, doubling the fund size since its first close in late February.
The firm says the fund is on track to be fully invested by 2022, a year ahead of plan, and has invested in six technology companies to date, with a further four in the immediate pipeline.
Harvest Fund II is a founder-aligned, rules-based fund, investing in a vetted pipeline of medium-sized, high-growth Endeavor Entrepreneurs.
The fund follows the terms of lead investors, helping entrepreneurs negotiate first, before joining the investment round, on terms set by the lead investor – thus allowing Harvest Fund II to rapidly deploy capital into its network of Endeavor Entrepreneurs and at the same time crowd in additional capital, says the company.
It notes that 20% of the fund’s carry (profit) will be reinvested in Endeavor SA’s non-profit activities, kick-starting a virtuous cycle of support for the next generation of high-impact entrepreneurs.
Job market boost
According to the firm, over the past four years, the full cohort of 29 Endeavor SA Entrepreneurs collectively generated an additional 5 800 jobs, a 20% average increase each year, as well as R3.8 billion in incremental revenue and annual growth ranging from 20% to 150%.
“South Africa is fast emerging as a wonderful platform for high-tech entrepreneurs to experiment and test out their ideas, particularly given its varied cross-section of customers, distribution and product, as well as its sophisticated regulatory, financial and telecommunication services backbone. Harvest Fund II is capitalising on this development and investing in the companies that are seeing early successes,” says Herman Bosman, Endeavor SA chairman.
By leveraging funding from the US Agency for International Development (USAID), Harvest Fund II was able to draw in new investors, fast-track its timelines and reduce the costs for investors.
“Private investment helps local businesses grow, creates jobs and generates inclusive economic growth. The US government sees the potential of innovative approaches like Endeavor's to visibly catalyse investment and sustainable growth at scale in Southern Africa – a region of great opportunity for entrepreneurs and investors alike,” says Andy Karas, USAID/Southern Africa Mission director.
“Support from USAID enabled us to assemble a dedicated team to focus on the capital raise, accelerating investment timelines and ultimately raise the fund with a direct impact on the ecosystem,” says Antonia Bothner, Harvest fundraising lead.
“What’s been even more encouraging to see is the successful alumni entrepreneurs at Endeavor not only coming into the fund as anchor investors, but also investing directly into the rounds of entrepreneurs on the programme – demonstrating the virtuous cycle at work.”
Harvest Fund II has added three new limited partners: Allan & Gill Gray Philanthropy Africa; Jim Chu, US investor and founder of Untapped Global; and a third financial institution that invests in Sub-Saharan Africa.
“Africa is home to the next billion consumers and South Africa is at a unique vantage point to be part of that,” says Chu. “We’re thrilled to be an investor in the Harvest Fund, given the commercial returns and the impact these high-growth entrepreneurs have in the local ecosystem.”
Notable investments
The fund recently invested in unicorn and trailblazer Go1, a global edtech training platform; fintech payments company Ozow, in a round led by Tencent Cloud; Pan-African remittances company MFS Africa; and marketing cloud platform Mobiz, ahead of its US expansion.
Previously announced investments include cyber security-focused Sendmarc and subscription-based mobility platform Flexclub, alongside US-based Kindred Ventures.
“Harvest was a natural fit for us as we see a strong alignment of missions when it comes to creating employment and youth opportunities via high-impact entrepreneurship,” says Rob Dower, executive director at Allan & Gill Gray Foundation.
Harvest Fund II expects to raise a third fund towards the end of 2022 and will be ready to cast a wider net for fundraising, says Endevor.
It points out that between 2015 and 2020, African tech start-ups were financed at a rate nearly six times faster than the global average, according to venture capital firm Partech Partners; in 2021 venture capital investments in Africa are expected to reach an all-time high.
In 2020, Endeavor SA’s portfolio of 29 Endeavor Entrepreneurs raised over R2 billion in funding from investors – a threefold increase on the prior year, with 2021 forecast to reach R6 billion, it adds.
“The same strong demographic trends that saw China, Brazil and India advance, are now projected for Africa in the next decade. This, coupled with increased mobile penetration, data and digital solutions, means there is an outsized opportunity [for tech companies] to grow and in a leap-frog fashion,” says Bothner.
“We’re starting to see signs of more traditional players paying increasing attention to South African and African tech-based opportunities, and we’re cautiously optimistic about both the impact and the returns.”
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