Endeavor South Africa announces launch of Harvest Fund III
Endeavor South Africa has announced the launch of Harvest Fund III, set to raise R500 million (c. $27.4 million) to back the most promising South African and African founded tech-enabled businesses that are scaling globally.
Harvest Fund III builds on the success of Harvest Fund II, which raised R190 million (c. $10.4 million) and has invested in 18 companies in the past 18 months – two of which have had subsequent priced rounds in excess of two times in value appreciation, and one of which is a unicorn, tech scale-up valued at more than $1 billion, Go1.
Like its predecessor, Harvest Fund III is a rules-based co-investment fund, led by a qualified lead investor. The fund is set to continue its formula of investing exclusively into Endeavor’s high-growth tech and tech-enabled entrepreneurs looking to scale globally. It already has a R91 million (c. $5 million) anchor investor in the wings.
Harvest Fund III will source the majority of its portfolio (more than 85%) from its internationally selected pipeline of Endeavor SA businesses – now expanding its mandate to allow up to 15% to be invested in pan-Africa, focusing on Endeavor’s three major hubs in Africa: Kenya, Nigeria and Egypt.
“Africa is at an inflection point, with the continent’s digital economy estimated at a strong $115 billion and set to grow six-fold to a huge $712 billion by 2050 – driven by a youthful population and a rapacious growth in smartphone and internet adoption.
“SA, Kenya, Nigeria and Egypt are at the forefront of this. Together they account for 51% of Africa’s GDP, 73% of Africa’s accelerators, 50% of the continent’s professional developers and 80% of Africa’s venture capital investment,” says Antonia Bothner, capital markets lead at Endeavor.
Endeavor is a network of, by and for high-impact entrepreneurs with six offices across Africa, 41 offices globally, 5,000 mentors, 2,500 entrepreneurs and over 550 venture capital (VC) investor partners. The Harvest Funds are designed to elevate the work Endeavor is already doing.
“Endeavor’s mission and thoughtful culture is incredible, and the network of entrepreneurs is unmatched,” says Pieter de Villiers, founder of Sequoia-backed Clickatell, and Harvest investee.
This is echoed by Coen Jonker, co-founder of Tymebank, who says, “Endeavor is by far the best networking and support community I’ve had the privilege of working with.” Tymebank is also an investee, along with Go1, MFS Africa and iiDENTIFii – to name a few of Harvest Fund II’s 18 investees.
As a general partner (GP) in Harvest Fund III, Endeavor co-invests with an approved qualified lead investor on similar terms. Bothner says this helps to minimise fund management costs, maintain alignment and, at the same time, pay it forward. This is because Endeavor’s non-profit operating model allows for 100% of its GP carry to be reinvested back into its local ecosystem to support the next generation of entrepreneurs.
“It’s clear from Endeavor’s more than 2,500 network of global entrepreneurs that there’s a multiplier effect at work. High-growth entrepreneurs believe in entrepreneurship and as they grow, they support others through mentorship and the sharing of networks, and by investing in start-ups themselves,” says Bothner.
“By reinvesting the GP carry, Endeavor is able to continue to support the next generation of entrepreneurs, driving local job creation, revenue and investment.
“The rules-based model enables the Harvest Fund III to co-invest in Endeavor companies who have already undergone the rigorous local and international selection process of one-two years, and offers an efficient investment process where small tickets come with outsize access, diversification and lower costs,” says Bothner.
“A large portion of the due diligence expenses are borne by Endeavor’s organisation – this is a big differentiator. This means more money into the hands of entrepreneurs for innovation and growth. It is a first-of-its-kind in Africa and one we are doubling down on.”
The R190 million raised for Harvest Fund II points towards an appetite for investment into a promising vein of SA-founded tech-based entrepreneurship solving global problems.
For Bothner, increasing the funds size 2.5-fold and extending the mandate to include up to 15% of Endeavor entrepreneurs in Kenya, Nigeria and Egypt is a natural progression.
“This, combined with Harvest Fund III’s rules-based co-investment, the reinvestment of Endeavor’s carry and the efficient nature of the investment process make it a unique and valuable investment opportunity at a time which makes sense.”
Harvest Fund III is set for first close during June 2023 with an aim of R150 million (c. $8.2 million), with the second and final close dated for July 2024 or at the discretion of the fund.