R500m Fund Targets South Africa’s Startup Funding Gap

R500m Fund Targets South Africa’s Startup Funding Gap. Grindstone Ventures has launched a R500 million venture fund targeting high-growth, technology-enabled African businesses from Seed through Series A, with a focus on companies seeking capital to move from early commercial validation to institutional-scale investment.

Led by Thandiwe Maqetuka, the fund was established in partnership with Knife Capital and Thinkroom. It follows the deployment of Grindstone Ventures Fund I, which invested in seven portfolio companies and helped attract further seed investment from South African funders.

The new fund is targeting a first close of R150 million and plans to build a portfolio of between 15 and 20 businesses, primarily in South Africa, with selective investments elsewhere on the continent.

Grindstone Ventures said the fund is focused on businesses that have progressed beyond early validation but may face difficulties securing funding to scale and attract larger institutional investors.

Maqetuka described this stage as Africa’s “missing middle”, saying the fund aims to provide capital while identifying businesses earlier and working with founders to build companies capable of scaling and attracting institutional funding.

The fund will take meaningful minority positions in businesses and has capacity to provide follow-on funding to its strongest-performing companies. Portfolio support will include strategy, governance, commercial growth, market access, additional funding and exit readiness.

The investment team will draw on the wider Grindstone ecosystem, which screens more than 1,000 businesses annually and has around 50 businesses participating in accelerator programmes each year.

The fund is also placing emphasis on exits and investor returns. Maqetuka said the strategy would involve diversifying at entry before concentrating capital behind stronger-performing businesses, with liquidity considered from the outset.

Grindstone Ventures Fund I invested in companies including Locstat, Welo and AgriLogiQ, which subsequently raised additional equity funding from international investors. The fund is also finalising an exit that it says will return capital to investors.