Endeavor’s Harvest Fund II closes after two-month extension due to popular demand
The fund has raised double its initial target and has invested in 10 companies in its 1st year — making it the most active venture capital fund in South Africa.
Endeavor South Africa announces R190m raised in the final close of its Harvest Fund II, double the size it initially set out to raise and now the most active venture capital investment fund in South Africa having made 10 co-investments in the past year. A year ago, Fund II announced its first close and investment into SA founded e-mobility play, Flexclub. Since then, Fund II has made 10 investments (with another 6 in the immediate pipeline) the most recent being into the world’s leading chat commerce platform and Sequoia backed Clickatell in its $91m Series C round.
Harvest Fund II is a founder-aligned, rules-based, co-investing fund, into a vetted pipeline of medium-sized, high-growth Southern Africa founded Endeavor Entrepreneurs which are enrolled in its global program. The co-investment and rules-based nature of Fund II, makes it an extremely efficient fund and the first-of-its-kind in Africa. Fund II follows the terms of the lead investor, enabling Endeavor to actively assist entrepreneurs to raise capital through access to Endeavor’s investor network and supporting them negotiate terms with the lead investor, before Fund II joins the round. This enables Fund II to rapidly deploy capital into its network of Endeavor Entrepreneurs and stay aligned with the founder. “What also differentiates our Fund is the spectrum of stages it invests in which range from pre-Series A to Series D mimicking the companies Endeavor works with in its portfolio of high-growth entrepreneurs.” explains Antonia Bothner, Harvest Fundraising lead.
Something unique and worth explaining is that 20% of Fund II’s carry will be reinvested back into Endeavor South Africa’s non-profit activities to continue its work, to crowd-in high-growth entrepreneurs to grow revenue, attract capital, and create jobs and thereby contribute to South Africa’s economic growth. This in turn fuels a positive cycle of support for the next generation of entrepreneurs, a model Endeavor has successfully built on for the past 20 years and one that is now active in 40 countries worldwide.
“When we were designing Fund II, we wanted to stay aligned with Endeavor’s overall mission, but also carve out a business model that would create a sustainable revenue stream to support the work Endeavor South Africa does,” explains Bothner. The Fund received catalytic support from USAID Southern Africa, which enabled it to assemble a dedicated team to establish the fund, fundraise and reduce fees for investors by waiving the industry standard 1% success fee.
“It is an important milestone for Endeavor South Africa, who together with the support of our board, partners, mentors and entrepreneurs, is the first country office to launch a local fund that complements our Global Endeavor Catalyst funds. Capital remains an essential enabler for our local high-growth entrepreneurial ecosystem,” says Herman Bosman Endeavor South Africa Chairman, “This is a first for Africa and for Endeavor and something we are proud of.”
Endeavor catalyses what it coins ‘high impact’ entrepreneurship globally and in Southern Africa through a rigorous selection process and mentorship programmes with over 5000 global mentors and 180 in South Africa. Endeavor South Africa now supports +100 high-growth businesses, which encompass early to growth stage teams with annual revenues of R1m to over R1bn and growth rates north of 50%. These businesses deliver impressive impact and in 2021 the 30 fully fledged Endeavor Entrepreneurs (EEs) collectively achieved revenue growth of 69%, job growth of 31% with more than 75% of employees being black, 29% of the EEs being black founder-led, while 70% of jobs being created are by female entrepreneurs. In 2021 these 30 EE’s generated revenue of R6.8bn, employed 13,000 staff and raised R5.8bn in capital.
Harvest welcomes the incremental commitments to its fund since the first close, not only from new institutional LPs, but also from existing LPs, including its first institutional LP: Sphere Holdings which it sees as a great endorsement of Fund II’s success so far. The new LPs include high calibre additions namely Norsad Capital, SA SME Fund, and FireBall Capital.
“We are excited to gain exposure to some of SA’s fastest growing companies and are well aligned with Endeavor’s mission of driving economic growth through entrepreneurship in South Africa and Africa,” says Matthew Pratt, Investment Manager of Norsad Capital. Norsad Capital is an impact investor and private credit provider that offers tailor-made debt solutions to profitable growth companies that deliver the desired social impact in Africa. As an investor, Norsad’s purpose is to ‘build a better Africa’ by supporting partner companies that deliver substantial social and environmental impact.
“SA SME Fund is passionate about nurturing our country’s vast entrepreneurial spirit by providing much-needed capital and thereby driving job creation and economic growth. Where there are existing structures that are efficient and expected to deliver strong commercial returns, we will support these, instead of duplicating efforts — this makes our investment into Harvest Fund II a natural fit,” says Ketso Gordhan, CEO of SA SME Fund, “as we continue to build on our existing relationship with Endeavor South Africa and look forward to future successes.”
“At Fireball Capital, we believe venture capital as an asset class is growing exponentially across the globe as technology leaders are revolutionising the way we work, live and interact. South Africa and Africa have also experienced this growth and the more we can accelerate the growth of the local ecosystem and support the networks that are driving this, the greater our success will be. Endeavor and Harvest Fund II are aligned with our goal of building and providing global networks to enable local businesses to scale internationally and we’re delighted to be backing Fund II, a majority female-led team, and the high-impact, high-growth entrepreneurs it represents. Venture Capital is the most impactful asset class as the monies are going into the real economy, creating new jobs, and stimulating GDP growth let alone some of the major environmental and sustainable problems it is looking to solve for.” says Fireball Capital’s CEO and Head of Direct Investments, Paula Mokwena.
The latest three investments by Harvest Fund II include TymeBank, Synatic and Clickatell.
TymeBank International is the first bank in South Africa to fully operate off a cloud-based network, and the first bank to be granted a commercial banking licence since 1999. Harvest co-invested behind Tencent and the CDC Group to complete its $180m Series B capital raise, which is intended to enhance the growing presence of TymeBank in South Africa and to launch GOTyme in the Philippines later in 2022.
Synatic is a data integration and AI platform which enables data optimisation within complex systems. Harvest co-invested behind Allan Gray E-Squared Ventures as a lead investor to complete a $2m seed round. The round is intended to help the next phase of growth into the US market.
Clickatell, the world’s leading chat commerce platform, secured $91 Million in Oversubscribed Series C Funding for US Expansion and Product Acceleration. The round was led by Arrowroot Capital, with participation from Kennedy Lewis Investment Management, Endeavor Global and Harvest.
Harvest Fund II expects to be fully invested by the end of 2022, with deals to continue at a similar pace. “The growth sector in Southern Africa is still nascent and the opportunities are still plentiful and growing. The beauty of the way our Harvest Fund II is structured and positioned is that there is ample room for both growth and impact,” says Bothner. The rich investment landscape comes as no surprise, as Partech Africa recorded that in 2021, 640 African tech start-ups raised a total of $5.2-billion across 681 equity rounds, meaning a 3.6x year-on-year growth and making the African tech venture capital the world’s fastest-growing ecosystem globally. “Given this, we are looking forward to the multitude of returns both the existing fund and Harvest Fund III will bring to our local entrepreneurial ecosystem — entrepreneurs and VCs — and most importantly the broader South African economy.”
About Endeavor
Endeavor is a global non-profit organization with HQ in New York with offices in 40 markets with more than 2800 entrepreneurs, +5000 pro-bono mentors and +500 investors in its global network. Endeavor’s model is aimed at identifying and accelerating the growth of the most innovative and scalable entrepreneurs in emerging markets as these high-growth businesses are the key drivers of job creation, revenue growth and hence economic growth and overall prosperity. Herman Bosman is the Chair of Endeavor South Africa and Alison Collier is the Managing Director.
