Endeavor South Africa announces R 130 million raised to date in its Harvest Fund II and doubles the fund size since its first close in late February 2021. The Fund is on track to be fully invested by 2022, a year ahead of plan, and has invested in six leading-edge technology companies to date, with a further four in the immediate pipeline. The first fund–of–its kind in Africa, 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. What is truly unique is that 20% of the Fund’s carry (profit) will be reinvested back into Endeavor SA’s non-profit activities, kick-starting a virtuous cycle of support for the next generation of high-impact entrepreneurs. 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 U.S. 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 U.S. 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 program – demonstrating the virtuous cycle at work.”
Harvest Fund II welcomes the addition of three prominent new Limited Partners who are all fully aligned to both the mission of the Fund, and the exciting opportunity that these high-impact entrepreneurs offer: Allan & Gill Gray Philanthropy Africa; Jim Chu, U.S. 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 into the Harvest Fund given the commercial returns and the impact that these high-growth entrepreneurs have in the local ecosystem.”
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 a marketing cloud platform Mobiz ahead of its USA expansion.
Previously announced investments include cybersecurity-focused Sendmarc, a company on a global mission to make email safe and subscription-based mobility platform Flexclub alongside U.S. 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. Allan Gray Limited being Africa’s largest privately owned investment management company.
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. Between 2015 and 2020, African tech startups 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 verse the prior year, with 2021 forecast to reach R6 billion.
“The same strong demographic trends that saw China, Brazil and India’s advance, are now projected for Africa in the next decade, this coupled with increased mobile penetration, data, and digital solutions, means that there is an outsized opportunity [for tech companies] to grow and in a leap-frog fashion,” says Antonia 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.”