Trends Watch: South African and African Venture Capital Investing

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Clive Butkow, CEO, Kalon Venture Partners.

What is your outlook for VC investing? 

I am positive that capital being deployed into South African and African startups is growing rapidly. There has been significant growth of capital being deployed into African startups, the majority being invested in Nigeria, Kenya and Egypt. Only a small amount of this capital is hitting South Africa who has a desperate need for more capital. South African fund managers need to raise larger funds to take advantage of this additional demand for capital. The total capital deployed into technology companies in Africa in 2021 was only circa 1% of the amount of capital that was deployed in the U.S. This gap has created a huge opportunity for South African and African funds to raise larger rounds and be in a position to deploy the last mile of capital required by entrepreneurs.

What are the greatest opportunities you see and why?

There is a shortage of capital for later stage companies in South Africa with a number of startups looking to scale their business but requiring growth capital. There is a significant opportunity for South African and African venture capitalists and other investors to invest in these later-stage companies raising capital for growth. What tends to happen is that the capital to scale these businesses tends to come from funds from Europe, Asia or the U.S. 

What are the greatest challenges you face and why?

Finding and investing in the best entrepreneurs who are building the next Facebook. We have found that there are many great technology ideas in South Africa but a shortage of entrepreneurs that can turn their ideas into assets of value. There is a shortage of true innovation-led entrepreneurs who can flawlessly execute their ideas into scalable businesses with or without capital. The one final challenge is that South Africa does not have sufficient technology entrepreneurs that become mentors to the next generation. In the U.S. they call this passing it forward which enables the next generation of entrepreneurs to learn from people that have developed the muscle of how to build scalable businesses. 

What keeps you up at night?

It sounds corny but the deals that we see and do not invest in that go on to become huge successes keep me awake more than the deals we make which go sour. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.