VC Fund Research

Most institutional and private investors find it difficult to navigate the South African and African Venture Capital (VC) landscape due the myriad of funds currently available, lack of information & published data and the relative nascency of the industry in Africa. Most funds are largely privately held and managed making it difficult to obtain information on the best funds to invest in.

We offer VC Fund research to investors and advisers looking to allocate funds to this asset class; or those seeking better understanding of the VC landscape in South Africa and across the continent.

We are a suitable service provider and partner with:

Independent Financial Advisers: Independent fund and portfolio advisory
Multi-managers looking into VC: Fund research (adding to own in-house research / bespoke research)
Institutional investors / Asset Owners (Pension and umbrella funds; Insurance companies)
Public sector investment vehicles and DFIs
Private Investors (HNW / Private Clients)

1. INDEPENDENT FUND REVIEWS & ANALYSIS

Qualitative & Quantitative Fund Analysis:

We research venture funds and other entities investing in startup and emerging businesses in South Africa and across other parts of Africa. We also look at international funds investing in African startups.

We use a qualitative, in-depth analysis and approach based on established (e.g. ILPA guidelines) due diligence practices.
In addition we also use an Algorithm based approach to drive our quantitative analysis and scoring. Where data is available and funds have sufficient past performance, we add standard quantitative factors such as IRR and Multiple (such as ‘Multiple on Invested Capital‘ and ‘Distributions per Paid-In Capital‘) indicators to our fund analysis.

Incorporating ESG factors:

We also evaluate emerging trends such as the role ESG (Environmental, Social & Governance) factors play in venture investing and incorporate this in our fund reviews and grading.

We believe that only through an understanding of the drivers of success in venture funds will investors and institutional funds make informed investment decisions about the risks and rewards of investing in this emerging asset class.

2. ABOUT OUR FUND GRADINGS

We rate each fund researched based on our three main grading levels (from C- to A+):

A Graded Funds

A Graded funds are rated either A+ or A-

These are typically well-established funds by experienced managers who are in their second, third (or more) funds. These funds would have demonstrated strong past investment performance, successful exits and skill to pick and support winning portfolio companies.

B Graded Funds

B Graded funds are rated either B+ or B-

These are typically newly established funds by experienced managers who have demonstrated past investment performance and skill at other funds / investment houses or as successful entrepreneurs / founders. Established funds that are currently under-performing or likely to under-perform their benchmarks may also be classified under this grade.

C Graded Funds

C Graded funds are rated either C+ or C-

These are typically newly established funds by first time managers who have not demonstrated investment performance. In addition, poorly performing funds that risk sever ongoing under-performance and are likely to raise further funds will receive our lowest grading of C-.

WHAT WE LOOK FOR AND GRADE:

Investment Team behind the fund (track record together, background, etc)
Investment Approach & Philosophy
Investment Strategy – Stage & Specialisation
Past Performance of current fund / other funds
Strength & Independence of the Investment & Advisory Committee
Structure of the Fund (domicile, type of vehicle)
Business & ownership of the VC firm
Access to VC and Founders’ Networks
Original Thought, Leadership and Conviction

HOW WE SELECT FUNDS TO RATE:

We aim to rate funds which are in the best interest of our clients. Our research is largely client driven but we conduct an ongoing market assessment to see if there are additional funds which we need to cover. Currently we cover:

South African and Offshore (Africa focused) domiciled VC funds
VC Funds across the rest of Africa
International VCs investing in Africa
Africa-focused Funds from other entities (such as DFIs, government support funds) open or closed to external investors

3. THE GRADING PROCESS

We cover each fund comprehensively by following the steps below. We generally spend between 50 and 100 hours on each fund and the full grading process can take up to 4 months.

Step 1 – Information Gathering