Convergence Partners is the newest investor in 4Di Capital’s venture capital (VC) fund. The technology investment management firm, founded and controlled by businessman Andile Ngcaba, will be an equal limited partner in the fund alongside the Rupert family (through Reinet) and E Oppenheimer & Son.
The move comes after Convergence Partners announced late last year that it was raising US$145m (about R1,6bn) in the “first close” of a new sub-Saharan Africa-focused communications infrastructure fund. The fund, which has a targeted final close of $250m, will invest in information and communications technology projects and businesses across the region.
Convergence Partners CEO Brandon Doyle says the launch of the infrastructure fund has created a new focus for the company, leaving it with a dilemma about what to do with the early-stage, VC-style businesses it has already invested in.
“The launch of the new fund gave us the opportunity to reflect and ask if it’s really wise to divert our resources given what we need to focus on. Managing VC businesses and investments, and in particular the entrepreneurs behind these businesses, is a very specialist skill that isn’t in our DNA,” Doyle tells TechCentral. However, the company wanted to remain exposed to South Africa’s VC space.
Convergence Partners then set about looking for an appropriate VC management partner, eventually settling on 4Di Capital, led by Justin Stanford, who Doyle describes as a “serial technology entrepreneur”, and US-based partner Laurie Olivier, who has extensive experience in VC in South Africa, Israel and the US.
It helped that Convergence has a long history with the investors in 4Di Capital — for example, the Oppenheimers were investors in the company’s New Dawn satellite project and the Ruperts invested in subsea cable Seacom through Remgro.
Under the deal, Convergence Partners is reversing its early-stage investments – Bloodhound Technologies, Integrat and Skillpod Media – into a sub-fund of the main 4Di Capital Fund 1. This will lead to a doubling of 4Di’s funds under management, with nine companies in the portfolio. The fund has already profitably exited one of its early investment, Motribe, founded by Vincent Maher and Nic Haralambous, to Stellenbosch-based social network Mxit.
Stanford tells TechCentral that the fund typically invests in early-stage, lean and efficient start-up businesses.
“We are looking for intellectual property businesses that leverage tech that can scale globally,” he says. “We’re not typically looking for companies that want to make a local play. We want to leverage businesses globally and turn them into large opportunities.”
These will typically be in the business-to-business space, where South Africans start-ups are stronger, rather than in the business-to-consumer space favoured by VCs in Silicon Valley, Stanford says.
4Di Capital leverages US-based Olivier to tap into opportunities in global markets. “We are looking at opportunities where you have no competitive disadvantage doing it from South Africa,” says Olivier. “South Africa has clear advantages in some areas.” — (c) 2014 NewsCentral Media
