Conducive Capital, a new Venture Capital firm in South Africa, is out with the goal of helping local tech SMEs grow and employ hundreds of people.
In the medium to long term, Conducive Capital also hopes to assist in the creation of unicorns in South Africa.
The majority-black-owned company, which was launched in Johannesburg this week, stated that it would invest in post-revenue, capital-efficient, early- and growth-stage disruptive technologies with healthy unit economics and a good product market fit.
The fund, which was launched recently, was the idea of seasoned tech professionals Clive Butkow and Mitchan Adams. Together, Butkow and Adams—former CEO of Kalon Venture Partners and co-founder of fintech pioneer Ozow—have invested more than R300 million in early-stage companies over the last seven years, yielding an outstanding 30% internal rate of return.
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Within the next 24 months, it aims to secure R1 billion in funding from potential international and local partners.
The founding partners are Mitchan Adams, a co-founder of the South African fintech company Ozow and currently the CEO of Aions Creative Technology, and Clive Butkow, the founder and former CEO of Kalon Venture Partners.
Small and medium-sized enterprises (SMEs) are crucial to South Africa’s job market and economic growth, Adams said in an interview held on the eve of the launch. Over the next two years, they aim to support approximately 10 to 15 companies.
The company aims to establish environmentally friendly companies to generate long-term employment opportunities. This is something that happens frequently in South Africa, and they are opposed to helping to establish jobs that only endure for six months before being eliminated due to layoffs.
Building businesses that allow people to start careers there, stay for a long time, and leave only when they want to is their goal.
Based on data from the OECD Online Library, approximately 37% of South Africa’s 2.6 million SMEs are classified as formal.
According to the National Development Plan, the government has pledged to guarantee that small and medium-sized enterprises (SMEs) generate approximately eleven million employment opportunities by the year 2030. According to the Endeavour Jobs calculator, South Africa needs more than 49,000 SMEs to expand at a rate of 20% annually in order to reach this target.
Thousands of new jobs have been generated by the 12 local tech start-ups that Kalon Venture Partners invested in over the years. Securing funding is crucial for Conducive Capital to accomplish its goal of creating jobs.
The breakdown of the sourcing
International funders will account for half of Conducive Capital’s funding, while local funders will account for the other half.
They encounter difficulties in attracting foreign investors due to the negative image of South Africa propagated by media portrayals of the country (e.g., crime, load-shedding, corruption, etc.).
The partner also mentioned that they have witnessed exceptional ambassadors representing their African countries abroad. He is crossing his fingers that they will be one of the many positive ambassadors who promote South Africa and highlight its many talents and potential.
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However, Butkow predicts that more unicorns will join the market in the coming years, with South Africa expecting to see its first unicorns in the next five years, thanks to the continent’s rapid economic development.
The lack of unicorns in South Africa is disappointing, according to Butkow. From what he can tell, though, unicorns will be common in South Africa within the next five to ten years.
The company is experiencing daily innovation and is ahead of the curve in emerging technology like blockchain and machine learning, but they aren’t getting the funding it needs to implement its innovations. For this reason, they require the funds to make the most of the new opportunities presented to them.
Although the number of unicorns in Africa’s tech startup scene is small but increasing, experts have voiced their concern that the continent does not yet have any domestic startups that meet this criteria.