David v Goliath: global surge of upstart start-ups
MMI Holdings, the JSE-listed parent of Momentum and Metropolitan, has committed hundreds of millions of rands to investing in and nurturing the next wave of health and financial-technology start-ups, in South Africa and abroad.
The group, through its externally focused innovation arm Exponential Ventures, has provided the bulk of the capital for a new fund to be managed by Stellenbosch-based venture capital company 4Di Capital.
The fund had its first close this week, with R256-million in the pot for investment in promising local startups.
MMI has also announced that, with Anthemis Group, it will pump à30million (about R520-million) into financial-wellness start-ups in Europe, the US and Asia.
Anthemis, an advisory firm headquartered in the UK, has made 39 investments in early-stage companies in the financial service space to date.
Earlier this year, MMI launched Exponential Ventures to identify “potentially disruptive innovation opportunities”.
It has already invested in local fintech start-up TaxTim.
“We are looking for businesses that have the potential to fundamentally disrupt the financial-wellness market,” said Exponential Ventures CEO Jaco Oosthuizen in a statement.
4Di Capital co-founder Justin Stanford — he started the business in 2002 with businessman Erik van Vlaanderen — said this week that corporate South Africa was starting to recognise the benefits of investing in disruptive start-ups through venture capital funds.
He told Business Times that this practice had been commonplace in the US for years, but that big South African companies had been slow to come to the party.
4Di’s new fund, called the 4Di Exponential Tech Fund 1, will focus on early and growth-stage local startups in fintech, “insurtech” and “healthtech”, and in particular on businesses that have aspirations to go global.
The fund has two years to bring in additional investors before a final close.
“Globally, corporates are pricking up their ears over the disruption we’re seeing in the venture space,” said Stanford.
“Whole industries are being upended in just a few years.
“There’s Uber, or Airbnb — these are disruptions that can storm in and smash established industries overnight.”
He described MMI’s investment in the 4Di fund and its deal with Anthemis as a “future-proofing strategy” that helps it keep in touch with potentially industry-changing startups.
Stanford said the new fund had already identified potential investments, although he is not in a position to disclose details yet. 4Di, which had traditionally specialised in earlystage investment, would include growth-stage investments now, too — businesses with revenues of up to R20-million, he said.
Stanford said 4Di had already made interesting investments through its first fund, whose first anchor investor was billionaire Johann Rupert.
They include LifeQ, a digital health start-up that develops advanced technology capable of measuring human body functions.
“We invested in LifeQ four or five years ago when they were working in an attic in Stellenbosch. They have now globalised completely and have 120 staff worldwide,” he said.
Another investment that is looking promising is Johannesburg-based Snapt, which provides high-end virtualised and cloud-based load balancing,
They are pricking up their ears over the venture space They were working in an attic four years ago. Now they have globalised
web acceleration and security software.
Snapt has 10 000 customers in 50 markets around the world, and is rapidly globalising its operations.
Earlier this month, it said it had secured an additional R15-million in funding from businessman Andile Ngcaba’s Convergence Partners.