Savannah Fund, a seed capital fund specialising in US$25 000 to $500 000 investments in sub-Saharan Africa, has made its first move into South Africa, buying into two Cape Town-based start-ups.
The fund, which already has investments in East Africa and West Africa, has invested in e-commerce site BabyGroup, an online shop and information service for new parents, and Wyzetalk, a social business platform developer.
“South Africa is now one of our key markets in addition to East and West Africa. For us, it’s a big step into realising our vision to build a truly pan-African venture fund and positioning ourselves to assist and connect start-ups across the continent,” Savannah Fund says in a statement.
“Our first investment, biNu — started in Sydney, Australia — recently opened an office with a current staff of five in Cape Town. That means three start-ups in our portfolio are now present in South Africa,” it says.
Savannah Fund is the lead investor in BabyGroup’s Series A funding round, which includes strong local investor participation. “With the investment in BabyGroup, we continue our thesis to invest in the e-commerce space and on the Africa retail transformation representing about 40% of our portfolio in capital deployed to date. South Africa is the most advanced e-commerce market on the continent in terms of readiness, market size and payments and delivery infrastructure.”
Its investment in Wyzetalk is part of an R8m funding round with Clifftop Colony, a Cape Town-based investment advisory firm focused on private and illiquid assets in Africa.
“After scaling in South Africa, we look forward to helping Wyzetalk expand across sub-Saharan Africa as well as connecting the company to Silicon Valley.”
Savannah Fund focused at first on East Africa. It was founded to bridge the early stage and venture capital investment gap on the continent by combining capital with mentor networks both in the region and from Silicon Valley via an accelerator programme and an independent seed fund.
The fund has invested in 15 start-ups in five countries: Kenya, Uganda, Ghana, Nigeria and South Africa. Start-ups are on average two years old and together have raised more than $8m.
Explaining its reasons for expanding its focus to South Africa, Savannah Fund says talent in the country is among the best educated on the continent.
“The strongest technical universities in Africa are present in South Africa and some of the top technology companies have been started here,” it says.
“There is a middle class that acts as an important early adopter market for technology with a willingness to try new things like e-commerce or enterprise software. While South African GDP was recently eclipsed by Nigeria, South Africa continues to play an important role as an early market when you factor in infrastructure, education levels, etc.”
It says Cape Town is a “leading hub” in Africa, along with Nairobi, Accra and Lagos. “Johannesburg is not far behind, with many companies able to generate revenue/traction rapidly given the ease and level of business environment.”
In addition, it says, South Africa is “an important trade and exit market in African companies that want to go public”, such as by listing on the JSE.
“When it comes to pan-African scaling, South Africa has led the way in companies going across the continent after succeeding in their home market from banking, retail to mining. We believe the same will happen with technology start-ups, although Accra, Lagos and Nairobi will constantly challenge this.” — © 2014 NewsCentral Media