E Squared invests R1bn in start-ups since 2017

E Squared Investments, the Allan Gray-backed venture capital firm, says it has invested more than R1bn in local start-ups since its inception in 2017. 

E Squared said in a report it had deployed more than R1.02bn into 177 ventures across the continent, “combining financial investment with capacity building and ecosystem partnerships to unlock their mission”.

The firm describes itself a “South African impact investor that provides funding and end-to-end business support to high-growth businesses”. It owns just under 18% of Allan Gray Proprietary, benefiting from dividends from Allan Gray, which are used as a source of capital for its investment activities. 

Over the years, the venture firm has backed a number of local technology-based start-ups such as agriculture firm Khula!, Synatic, a data integration and automation company and financial literacy platform Fintr. 

In 2024, E Squared disbursed R369.7m through its investment activities, from pre-seed to growth stage. The firm has backed founders tackling poverty, unemployment and inequality with bold, scalable solutions. These ventures have collectively created, supported or sustained more than 32,000 jobs.

According to the Southern African Venture Capital and Private Equity Association (Savca) capital flow to SA start-ups in 2023 reached R3.28bn, driven by investment into local technology businesses. 

The report, which covers the state of the 2023 venture capital ecosystem in SA, said it was the highest total capital flow to start-ups since the launch of the survey 14 years ago. SA’s venture capital asset class, which excludes small business support by the government, development finance and a number of corporate investment programmes, had R10.73bn invested across 1,106 active deals.

E Squared’s investment highlights for 2024 include R304.3m towards Allan Gray Fellow-led ventures; R294.4m into seed to Series A+ ventures; R44.4m in pre-seed capital; R30.8m for “purpose-led social enterprises” and 46% of investment value for 2024 directed to black women-owned businesses. 

The firm said it has realised R103.8m in investment returns, including R23.6m in 2024 alone through partial exits. Its venture portfolio’s fair market value rose 44% year on year to R772m, translating into a 42% return on capital.

“We are deliberately backing black and female-led ventures, addressing structural gaps in capital access. In our social entrepreneurship portfolio, we support mission-driven organisations tackling youth unemployment, education inequality, micro-entrepreneurship and access to essential services,” E Squared chair Nazeem Martin said.

The firm has also worked on collaborations with other start-up investors. 

In October 2024, the SA SME Fund, in partnership with the Technology Innovation Agency and E Squared Investments, launched a R300m fund earmarked for investment in early-stage start-ups, to help entrepreneurs access venture capital.

Risk appetite in SA for early-stage start-ups has tended to be low and funders typically shy away from putting money into ideas or getting businesses off the ground, unlike the US which has historically made large and sometimes risky bets on unproven business models.

The story is no different in the rest of Africa. 

Data from the African Private Capital Association (Avca) shows that in 2023 West Africa attracted the largest proportion of venture capital deal volume in Africa, at 26%, driven by Nigeria, which was the most active country by volume, at 19%. 

With the inclusion of venture debt, venture inflows to Africa last year clocked in at $4.5bn across 603 deals, $2bn less than the previous year, Avca said. 

In capital raising, seed funding denotes the first official investment for a start-up, usually provided by private investors for a share of equity in the business. Once done, a start-up moves to the series A stage, having achieved a number of milestones, making it ready for the first stage of venture capitalist investment. 

gavazam@businesslive.co.za