South African growth equity fund manager Knife Capital is launching a later-stage business accelerator in Cape Town: ‘Grindstone’, to assist high-growth technology enabled SMEs to become sustainable and fundable.
The Grindstone Accelerator is backed by Knife Capital with support from South Africa’s Department of Trade and Industry. It will assist 50 companies over the next 3 years via a range of interventions designed to build a foundation for growth, create relevant business networks and enable these companies to take advantage of market access opportunities. Company executives will also attend a Knife Capital investment course at the start of the programme in partnership with the UCT Graduate School of Business: Find–Make–Grow–Realise.
Grindstone CEO Andrea Bӧhmert calls it part accelerator, part investor and part advisor. “Despite a flourishing start-up scene producing companies with innovative technologies and great potential, there remains a significant gap for high-growth SMEs with proven revenue traction to scale and grow organically” says Bӧhmert. “On a daily basis we get funding requests from companies that are 80% ready but in need of closing some significant strategic and operational gaps before they can scale. Grindstone focuses on getting each of the participating companies closer to 100%.” The Grindstone advisory board includes experienced venture capitalist Julia Fourie, telecoms entrepreneur Rapelang Rabana and investment strategist Guy Lundy.
KnifeCap manages the portfolio of investments of South African Venture Capital Fund HBD Venture Capital, founded by South African entrepreneur Mark Shuttleworth, and was named the South African venture capitalist of the Year in 2012 and 2013 by Acquisition International Magazine. Eben van Heerden, Knife Capital CEO, explains, “We created the Grindstone Accelerator by effectively compressing our venture capital engagement model of aggressively growing a company for 3-5 years into an intense 9-month programme“..
The Grindstone Accelerator will assist entrepreneurs to solve the problems common to scale-ups: everything from coping with accelerated growth to raising funding, taking advantage of M&A opportunities, securing international partnerships, sharpening their business model and executing on their plan. But it’s also a potential investor. Grindstone bolsters Knife Capital’s deal flow pipeline and allows it to do a thorough due diligence on the participating companies while they are on the programme. “We’re long-term partners in helping these companies grow”, van Heerden said.
“We believe that this approach to business acceleration is complementary to the SME fund raising process in emerging markets”, says Oltac Unsal, who leads infoDev’s global Access to Markets and Finance programs as a senior advisor. “South Africa does not suffer from a lack of investment capital or a lack of innovative technology companies; it suffers from a lack of professionally packaged opportunities and post-investment support”, he said at the 5th Global Forum on Innovation & Technology Entrepreneurship in East London. “The Grindstone Accelerator addresses this gap in an innovative approach that combines skills transfer initiatives with access to networks and funding.”
As each company has different strengths and weaknesses, no one-size-fits-all programme will address the requirements of high-growth companies. Knife Capital has developed a proprietary scale-up gap assessment tool where each company gets measured and assessed against industry benchmarks for various metrics. This tool will be adopted by Grindstone as the acceleration roadmap for each SME. A detailed action plan is then derived and through exposure to top subject matter experts, Grindstone will actively work with the companies to close execution gaps. The aggregated analytics provide Grindstone with unique insights into growth inhibitors of high-growth companies and enable them to measure the growth that is engineered.
The application and selection process will kick off in Aug 2013 with an interactive Funding Readiness Workshop aimed at providing tangible information to 50 SMEs about the various financing options. 20 companies will then be shortlisted for the UCT GSB early-stage investment course and gap analysis bootcamp, where 10 companies will be selected as participants for the first year of the programme.
High-growth SMEs that are interested in joining the Grindstone Accelerator Programme can start bycompleting the Knife Capital SA Venture Funding Survey.