High-impact entrepreneurs benefit from success of investment vehicle

Venture capital fund Endeavor SA has raised double its initial target for its Harvest Fund II, with R190m raised in the fund’s final close.

Endeavor SA is the local arm of Endeavor Global, an international non-profit organisation with headquarters in New York. It aims to identify and mentor high-impact entrepreneurs in emerging markets to accelerate the growth of such businesses and, in doing so, to drive job creation and long-term economic growth.

The fund has already invested in 10 companies in the past year, the first being Flexclub and the most recent being Sequoia-backed Clickatell, making it the most active venture capital (VC) fund in SA over the past year. 

Harvest Fund II is a founder-aligned, rules-based, co-investing fund into a vetted pipeline of medium-sized, high-growth Southern Africa-founded “Endeavor Entrepreneurs” which are enrolled in its global programme. The co-investment and rules-based nature of Harvest Fund II makes it an extremely efficient fund and the first of its kind in Africa. 

Harvest fundraising lead Antonia Bothner says: “What also differentiates our fund is the spectrum of stages it invests in, which range from pre-Series A to Series D, mimicking the companies Endeavor works with in its portfolio of high-growth entrepreneurs.” 

Fund II follows the terms of the lead investor, enabling Endeavor to actively assist entrepreneurs to raise capital through access to Endeavor’s investor network and supporting them in negotiating terms before joining the round. 

“When we were designing Fund II, we wanted to stay aligned with Endeavor’s overall mission, but also carve out a business model that would create a sustainable revenue stream to support the work Endeavor SA does,” explains Bothner. “We were fortunate to win a catalytic grant from USAID which enabled us to assemble a dedicated team and reduce fees for investors by waiving the standard 1% success fee.”

A unique approach in that 20% of Fund II’s carry will be reinvested back into Endeavor SA's non-profit activities in growing the tech ecosystem. This will contribute to SA's economic growth by fuelling a positive cycle of support for the next generation of entrepreneurs. Endeavor’s high-growth model has successfully been rolled out in 40 countries worldwide.  

“It is an important milestone for Endeavor SA who, together with the support of our board, partners, mentors and entrepreneurs, is the first country office to launch a local fund that complements our Global Endeavor Catalyst funds,” says Endeavor SA chair Herman Bosman. “Capital remains an essential enabler for our local high-growth entrepreneurial ecosystem. This is a first for Africa and for Endeavor and something we are proud of.”

Harvest welcomes three new notable limited partners into the Fund, namely Norsad Capital, SA SME Fund and FireBall Capital.

Norsad Capital investment manager Matthew Pratt says: “We are excited to gain exposure to some of SA’s fastest growing companies and are well aligned with Endeavor’s mission of driving economic growth through entrepreneurship in SA and Africa. As an investor, Norsad’s purpose is to ‘build a better Africa’ by supporting partner companies that deliver substantial social and environmental impact.”

SA SME Fund CEO Ketso Gordhan says the fund is “passionate about nurturing our country’s vast entrepreneurial spirit by providing much-needed capital and thereby driving job creation and economic growth. Where there are existing structures that are efficient and expected to deliver strong, we will support these.” 

Fireball Capital also welcomed the new fund. “At Fireball Capital, we believe venture capital is growing exponentially across the globe as technology leaders are revolutionising the way we work, live and interact,” says CEO and head of direct investments Paula Mokwena. “Endeavor and Harvest Fund II are aligned with our goal of building and providing global networks to enable local businesses to scale internationally and we’re delighted to be backing Fund II, a majority female-led team.

“Venture capital is the most impactful asset class as the monies are going into the real economy, solving important problem, and creating new jobs and GDP growth.”

The latest three investments include TymeBank, a digital bank offering low-cost banking; Synatic, a modern data automation platform and Clickatell, a global mobile messaging API. 

Harvest Fund II expects to be fully invested by the end of 2022, with deals to continue at a similar pace. 

“The growth sector in Southern Africa is still nascent and the opportunities are still plentiful and growing. The beauty of the way our Harvest Fund II is structured and positioned is that there is ample room for both growth and impact,” says Bothner. 

The rich investment landscape comes as no surprise, as Partech Africa recorded that, in 2021, 640 African tech start-ups raised a total of $5.2bn (R75.7bn) across 681 equity rounds, meaning a 3.6x year-on-year growth and making African tech venture capital the world’s fastest-growing ecosystem globally. 

“Given this, we are looking forward to the multitude of returns on both the existing fund and Harvest Fund III will bring to our local entrepreneurial ecosystem — entrepreneurs and VCs — and most importantly the broader South African economy,” Bothner says.

This article was paid for by Endeavor SA.