Five Years of Knife Life!

— The Entrepreneurial Journey of a South African VC

Today marks the 5th birthday of Knife Capital! Time to think and reflect on how we cut our teeth in the South African Venture Capital (“VC”) space by becoming entrepreneurs…

Here Be Awesome!

Our amazing journey began at Mark Shuttleworth’s HBD Venture Capital Fund in 2007 where Eben van Heerden and I met, working under the inspiring leadership of Julia Fourie. Our first successful portfolio company exit happened quickly when FedGroup bought smartphone technology startup: Red Five Labs. This led to an incentive trip to anywhere in the world… In many ways the crazy road-trip across the fjords of Norway formed the foundation for a very special and lasting relationship between Julia, Eben and I. Through HBD we invested in several innovative post-revenue companies, including predictive analytics company: CSense, digital marketing specialist: Clicks2Customers and mobile financial services provider: Fundamo. Knife Capital still manages the remaining portfolio of HBD VC investments: 3D Doppler ball tracking enabler: Flightscope, online ordering solution provider: orderTalk and metered taxi call centre technology operator: SA Cab.

Nothing Ventured…

HBD awakened the entrepreneurial dragon within, and in 2010 the opportunity was created for Eben and I to spin out the SA venture capital division of HBD into our own venture. And so it was that 5 years ago with vuvuzelas droning in our ears, we took the giant leap and co-founded Knife Capital on 1 July 2010. Even though it was just the two of us, we spent day 1 on nothing other than defining our company culture: celebrate small wins as they happen; be yourself; create time to think; complete trust in the inner circle; unquestionable ethics; quarterly offsite strat sessions; collaborate; learn; just be awesome! Luckily we didn’t have to wait too long before celebrating big wins: In 2011 General Electric acquired CSense and Visa acquired Fundamo (for US$110M). In the process we exceeded the full fund value under management.

A New Lease on Knife

When we started, we named the company: ‘PoweredbyVC’, thinking that South African institutional investors would be ready to back this space by committing to a traditional VC fund structure. It was like taking a knife to a gunfight. We underestimated the low tolerance for risk, and it quickly became apparent that backing local entrepreneurs just meant sponsoring the odd event but not necessarily investing in their growth. The term ‘Venture Capital’ was perceived as too risky and out of mandate for most. What’s in a name? A lot when it contains ‘VC’ and screams risk. It was time to pivot. Andrea Bӧhmert (angel investor and founder of Hasso Plattner Ventures Africa) joined as equal partner and we diversified our business model to include additional business building activities and advisory services in the high-growth scale-up space. And let’s just say that you need to choose your restaurant carefully when you have a few hours and more than a few bottles of wine to come up with a new name for your company ;-)

Where Angels Fear to Tread

If you analyse it carefully, the South African VC industry is built on the wings of so-called ‘super angel’ investors. It is scary to think where the local high-growth entrepreneurial ecosystem would be without contributions by individuals with entrepreneurial DNA such as Mark Shuttleworth, Hasso Plattner, Koos Bekker, Paul Harris, Michael Jordaan, the Oppenheimers and the Ruperts. With support from the New York Angels and the Angel Investor Forum (Craig Mullett) we co-founded local Angel Investment Group: AngelHub with Brett Commaille and Wesley Lynch. AngelHub (backed by the IDC) created a platform for private investors to invest in local startups. It was subsequently taken over by Michael Jordaan and matured into an early stage Venture Capital firm: AngelHub Ventures.

Nose to the Grindstone

In our endeavours we launched a few more ground-breaking initiatives that underpin our business and support the entrepreneurial ecosystem in South Africa:

• The Grindstone Accelerator is our year-long entrepreneurial development programme to assist 10 post-revenue scalable innovation-driven businesses in accelerating strategy execution. The positive results of Grindstone 1 surpassed our own expectations, even before Grindstone company iKubu was acquired by NASDAQ-listed navigation giant Garmin. And Grindstone 2 is living up to the high bar that was raised.
• We partnered with the UCT Graduate School of Business to present an Executive Education Programme: Find-Make-Grow-Realise: Investing in early-stage growth companies. Upcoming courses: 19–20 Aug (Joburg) and 28–29 Sept (Cape Town).
• YueDiligence is an actionable due diligence tool for entrepreneurs, investors and service providers to assess gaps in key business disciplines to advance partnerships and fundraising preparation. It has become core to our investment process and some other investors are using the platform successfully. (Commercial launch soon).
• At our annual Exit Conference we focus on the process of reaching a successful exit and celebrate some of the dynamic entrepreneurs who have built and sold their high-growth ventures. This year’s Conference forms part of the Moneyweb Money Expo in Sandton: 21 Aug.

Breaking Dawn

Since the early days of Knife Capital we considered raising capital in the open market. In 2013 JSE AltX-listed niche finance provider/ micro-lender African Dawn Capital changed its vision to become an active investment holding company, acquiring shareholding in entrepreneurial and innovation-driven companies with proven growth strategies. I joined the board in May 2013, and in March 2014 Afdawn acquired Knife Capital to capacitate the group to execute this vision. Recapitalisation of Afdawn by way of a rights offer followed, Jacques Groenewald took over as Afdawn CEO and head office overheads were reduced. The process of divesting from non-core assets continues, as does the process with SARS regarding settlement of tax obligations. Resolving legacy issues remain a huge challenge but we are edging closer.

Fives Alive!

As with any company in its growth phase we have our trials and tribulations, but I am very proud of what we have built in a short/long 5 years. There are some exciting imminent opportunities to take advantage of. Launching our new VC Fund being core to the next phase.

So did we anticipate the road ahead when we became combined entrepreneurs and VC’s? Not even close. In hindsight one would maybe tweak a few things — but I wouldn’t want to change the battle-scars and lessons learnt along the way. I wanted to list the many individuals, corporates, team members, interns and partners who supported us — but fear that I may leave someone out. You know who you are. THANK YOU! We continue drawing strength and inspiration from you, and strive to make a positive dent in the SA innovation-driven entrepreneurial space.

And so we venture fifth (beyond venturing forth)!