Business accelerator Grindstone, based in South Africa, has launched a new venture capital fund called Grindstone Ventures, dedicated to providing early stage equity funding to its cohorts.
Grindstone Accelerator is a structured entrepreneurship development program jointly owned by the venture capital fund manager Knife Capital and Thinkroom Consulting, a market access specialist.
The accelerator brings South African SMEs with proven traction through a year-long intensive analysis of their strategies and provides them with the requisite resources to create a base for growth to become more investmentable, competitive and ready for exit.
During the programme, key growth gaps identified are resolved, opening up early-stage funding opportunities for these companies to improve market access. But risk capital availability remains one of the key challenges to South African SME development.
Hence the launch of Grindstone Ventures, an open-ended venture capital fund structure that is expected to invest up to ZAR5 million ( US$ 290,000) per chance in scalable innovation-driven projects – presumably in co-investment agreements with angel investors and corporate VCs.
“Linking a financing mechanism to our accelerator model complements the value chain strategy of Knife Capital where businesses can be de-risked before raising follow-up capital from our Series A and later-stage funds,” said Knife Capital partner Andrea B.
“The Grindstone software is simply a rigorous due diligence exercise to find the best prospects-already narrowed down from hundreds of applications.”
In addition, all future cohort companies in Grindstone Accelerator will acquire a stake in Grindstone Ventures, thereby creating a vested interest in each other through a community of high-growth scale ups.
“Subsequently, some of our past Grindstone entrepreneurs went out of business and became VC investors with Knife Capital. We are now beginning to encourage our investor firms to think early on like investors – as we are helping them to succeed, “Buhmert said.
The first Grindstone Ventures investment is imminent, said Keet van Zyl, partner at Knife Capital.
“The initial funding investments come from Knife Funding, Thinkroom and our program partners but encouragingly, former Grindstone cohort founders come on board and esteemed angel investors are looking to invest in the South African startup ecosystem. We have already established the prospects for initial investment, “he said.