PLANS to transform African Dawn Capital – formerly a specialist micro-lending business – into a cutting edge venture capital developer and funder, have gone somewhat awry. Legacy issues, stemming from the company’s past endeavours – have come back to haunt African Dawn, stifling efforts to bring the full effects of a reverse takeover by Cape Town-based venture capital specialists Knife Capital to book.
Knife Capital is spearheaded by some of the best known venture capital specialists in South Africa with previous associations with projects backed by technology heavyweights Mark Shuttleworth and Hasso Plattner. Knife’s influence at African Dawn, however, has been somewhat negated by the fact that the JSE-listed company is still embroiled in sorting out legacy issues that mainly revolve around micro-finance subsidiary Elite. This seems a great pity since some of the businesses associated with Knife Capital appear to be hitting their straps.
In the meantime, the results from Knife Capital’s venture capital advisory subsidiary – Grindstone – look extremely promising. Knife Capital reported in late January that promising results from entrepreneurial leadership programme Grindstone validated SMEs (Small to Medium-sized Enterprises) Africa’s future growth engine.
The dozen ‘scale-up’ companies on the Grindstone programme experienced a 64% average increase in revenue and created 70 jobs, while mastering business fundamentals. This was Knife Capital’s second intake of venture capital companies under the Grindstone banner, where the participating companies experienced explosive business growth.
The year-long Grindstone programme takes businesses with proven traction through an intensive review of their strategies – providing the necessary support to build a foundation for growth through skills transfer and introduction to business networks. Grindstone has partnered with entrepreneurial-spirited corporates like FNB, ENS Africa, Microsoft BizSpark, Moneyweb, M&C Saatchi Abel, Ansarada, PwC and Mazars to provide services and expand networks.
The statistics are fascinating. On intake, the average Grindstone SME had been running for six-and-half years, employed 12 people and the founders were 36 years old. Aside from the average growth of 64% in year-on-year revenue, companies saw an addition of R65m in revenue across the companies, the creation of 70 new jobs, a doubling of key customer numbers and an expectation of 72% compound annual growth rate over the next three years (compared with 49% at the start of the programme.) There was also a 14% increase in efficiency measured by average revenue generated per employee.
Grindstone director Andrea Bӧhmert argued that the real value of the programme was that participants were enabled to rapidly react to windows of opportunity for corporate activity.
“The inbound interest from local corporates and international investors to partner with these companies are encouraging, and there are some real success stories in the making.”
She pointed out that over half of the Grindstone II participants received offers for full or partial acquisition during the past 12 months. Bӧhmert said some of these opportunities were still under evaluation and negotiation.
“But being in the position to decline such offers, if not optimal, is a clear sign that the companies back their own growth strategies.”
Specifically, transport information startup WhereIsMyTransport raised a R12m funding round from a group of investors to internationalise its operations and enable the company to build solutions that serve developing cities worldwide.
Grindstone Alumni iKubu was acquired by GPS navigation giant Garmin for its bicycle radar technology.
But the company that showed the most improvement in the programme against set growth metrics was B2B (business to business) marketing agency MPULL. MPULL was responsible for almost half of the jobs created on the programme and increased its revenue tenfold.
Knife Capital is now planning to launch a value-adding Grindstone III programme. Hopefully by then African Dawn will have got its ducks in a row…
By Jenni McCann