Seed funding may help create startups with several branches
October 2, 2024
Key institutions like the South African SME Fund, the Department of Science and Innovation (DSI), the Technology Innovation Agency and E Squared Investments have formed a consortium to launch a R300 million (app. $17 million) seed fund to support tech startups in South Africa.
The fund will be exclusively aimed at providing early-stage capital funding to local startups. This will address a critical funding gap for emerging tech-driven businesses in the country. Dubbed the “Seed Fund of Funds”, this initiative seeks to provide seed capital to at least 50 startups in a bid to foster innovation and transformation in South Africa.
Ketso Gordhan, CEO of the SA SME Fund, emphasised the importance of seed capital in driving entrepreneurial success.
“Seed capital is the lifeblood of innovation and entrepreneurial growth. Without it, many great ideas would never see the light of day. By injecting capital at this critical early stage, we are not just funding startups – we are cultivating the next generation of industry leaders. South Africa has no shortage of brilliant minds, and this fund will ensure that more of them have the resources they need to succeed”
Gladwyn Leeuw, CEO of E Squared Investments, says this of the initiative: “At E Squared, our mission is to empower responsible entrepreneurs driving transformative change. By making strategic capital accessible, we hope to foster innovation and ensure South Africa’s tech sector reflects its diversity. This initiative aligns with our vision to be a leading early-stage investor, contributing to entrepreneurial activity and meaningfully impacting millions of lives.”
Patrick Krappie, acting CEO of TIA, stated: “Governments across the globe play a crucial role in fostering innovation ecosystems, and South Africa is no different. The partnership with SA SME Fund aims to bolster funds towards start-ups and SMMEs through a fund of funds approach. We understand that early-stage ventures, especially those grounded in technology, need a supportive environment to thrive. The Seed Fund of Funds will catalyse a wave of new startups by enabling them to transition from ideas to viable enterprises.”
South Africa’s venture capital ecosystem has traditionally focused on later-stage investments such as Series A and Series B, leaving early-stage startups with limited access to funding. This fund aims to fill that gap, ensuring that emerging entrepreneurs can thrive in a supportive environment.
The fund’s backers believe that supporting tech startups will also contribute to job creation and economic transformation in South Africa, which is in line with global trends where technology companies are major job creators, especially in innovation-driven sectors.
With a focus on high-impact innovation, the R300 million investment represents a major milestone in bolstering South Africa’s venture capital landscape. The fund is set to allocate capital to at least five skilled fund managers, who will drive the growth of numerous technology startups, empowering entrepreneurs and pushing the boundaries of innovation over the next few years.
