One of the best-known business people in South Africa, both for his entrepreneurship and his participation in the Dragons’ Den television programme, Vusi Thembekwayo is now backing tech startups across the continent.
At 21, Thembekwayo ran a successful consulting firm, then South Africa’s only black-owned forensic marketing agency. At 25, he was the youngest director of the Johannesburg Stock Exchange, a bourse turning over US$1.3 billion a year. Then, after exiting his advisory business, and having made some angel investments, he moved into VC.
“I used to do small ticket size investments in founders who had a compelling thesis and strong use case. After investing in more startups on Dragons’ Den, I created a VC with a focus on pan-African tech startups,” Thembekwayo told Disrupt Africa.
“We raised our first GP-LP fund three years after that. It’s very important to use your own capital to test your hypothesis.”
What became MyGrowthFund Venture Partners now has several funds, including a debt fund powered by several banks.
“This is a straight debt fund targeted at growth-stage businesses that have short-term liquidity constraints. We are currently raising a mezzanine fund that is backed by institutional investors and family offices. This is an SME fund that targets ticket sizes ranging from ZAR25 million (US$1.6 million) to ZAR100 million (US$6.4 million),” Thembekwayo said.
“Finally, we have a contract-finance fund that is backed by family offices and HNWIs.”
Though he says MyGrowthFund is at the “early stages of our growth curve”, there have already been successes.
“Off the bat I would say our investment in online marketplace BuyMyStuff has been a standout success. Similarly, our investment in medtech business 3J Medical has been hugely profitable for us,” he said.
“We believe that technology is the future, so we are interested in businesses, founders and innovations that leverage a unique technology advantage to challenge traditional business models or add value to industry in other commercial use cases.”
The firm has a mandate to make 70 per cent South African investments, and 30 per cent pan-African ones.
“Our single greatest value add is that we partner with, mentor, coach and network our investee companies aggressively,” said Thembekwayo. “As CEO, I probably have the most extensive rolodex of any VC investor in South Africa. A rolodex that unlocks global investors, partners, corporates, sponsors, consultants and thinkers that I have developed over the past 17 years.”
He says there are three main trends that are especially exciting within the African tech space at the moment, firstly the entrance of global super-funds such as Tiger Global, SoftBank and several others.
“This market has been in desperate need of liquidity. Investing was tough, but exits were even harder. The African VC scene was also over-dominated by South African VCs with the rest of the continent more a tale of well-structured angel investors. Until recently. So, it’s no coincidence that we have celebrated a record number of unicorns following the entrance of these super-funds,” Thembekwayo said.
Then there is the emergence of what he calls “native use cases”.
“We are seeing more and more of these youngsters building technology startups that are aimed at solving uniquely African problems. Whether they are solutions for water purification, access to healthcare or financial inclusion, Africa has a unique set of problems, and I am seeing so many of these tech stars developing solutions to solve these,” he said.
Last but by no means least, diaspora founders are returning home.
“Perhaps the greatest trend is that of super-smart Africans educated elsewhere in the world coming home at an increasing rate to build these tech businesses. This means that the young people are involved in building the future. They are engaged,” Thembekwayo said.
A lot has been achieved in recent years, he said.
“In the time I have been investing in these businesses, I have seen the ecosystem mature unbelievably. This is in no small measure thanks to organisations like Silicon Cape – where I am co-chair. But what we need more of is more founders, more innovations, and most importantly, more startup founders to become investors themselves,” Thembekwayo said.
For MyGrowthFund, the immediate plan is to scale large and fast.
“We are launching new funds and raising other funds. We are launching our contract-finance and SAAS annuities finance fund, Mount Fletcher. We are also raising our mezzanine fund. So, we are actively calling on institutional, financial and development funders to place capital with us,” said Thembekwayo. “We have been slow and methodical. We have tested our hypothesis. Now, we scale.”
