SOUTH AFRICA – The International Finance Corporation (IFC), a member of the World Bank Group, has invested US$10 million in Knife Fund III, a new fund managed by Cape Town-based venture capital firm Knife Capital to support growth in South Africa’s digital economy and increase access to financing for the country’s tech entrepreneurs.
The investment will provide financial support to tech startups in high-growth sectors in South Africa with strong potential for expansion across Africa and internationally, including enterprise technology, software, health-tech, and fintech.
“We are excited to welcome IFC as an investor to our new Fund III and sincerely appreciate the endorsement that comes with the commitment,” said Andrea Bohmert, Partner at Knife Capital.
“With the first close of Fund III, we are finally able to support entrepreneurs on the next stage of the scale-up journey and thereby address a significant gap that currently exists in the African entrepreneurial ecosystem.”
Knife aims to raise US$50 million for Fund III, which will primarily target investments in the series B (second round of funding) stage. Fund III follows Knife Fund II, which was launched in 2016, and Fund I, which was launched in 2010.
“Increasing access to venture capital promotes digital entrepreneurship and innovative tech solutions that enable better delivery of vital services such as healthcare, fintech, and logistics,” said Adamou Labara, IFC’s Country Manager for South Africa.
“By supporting funds such as Knife III, IFC can help more startups and digital entrepreneurs innovate and expand in South Africa and beyond.”
IFC’s investment in Knife Fund III aligns with its strategy to provide patient risk capital to fund managers in Africa and to support Africa’s technology ecosystem.
According to the IFC-Google report eConomy Africa 2020, South Africa’s Internet economy has the potential to grow in size from US$21 billion to US$31 billion between 2020 to 2025—and up to US$125 billion by 2050.
To support this growth, it will be critical to provide local tech startups with the capital they need to launch and scale their products and services.
In South Africa, the level of fundraising volume is relatively high compared to the rest of sub-Saharan Africa, but most venture capital supports early-stage companies in the country, with limited funding available for Series B or later stages of investment.