Grindstone Ventures has launched a $27.7 million venture fund targeting high-growth, technology-enabled African businesses from Seed through Series A, seeking to close a financing gap that often leaves startups struggling between early commercial traction and 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 companies and helped attract additional seed and growth capital from South African and international investors.
Targeting Africa’s “missing middle”
Grindstone Ventures is targeting startups that have moved beyond initial product and market validation but have yet to reach the scale typically required to attract larger institutional investors.
Keet van Zyl, co-founder of Knife Capital, stated that the evolution from Seed to Series A remains one of the clearest gaps in the African venture ecosystem.
The funding challenge comes as Africa’s technology investment market remains uneven, with Seed-stage funding declining for a third consecutive year despite broader improvements in startup financing across the continent.
Capital and operational support
The new fund is designed for businesses caught between demonstrating commercial demand and reaching the scale required to attract larger pools of capital.
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Maqetuka stated that the opportunity is not simply to provide more capital, but to identify exceptional businesses earlier, invest at a point where capital remains scarce, take meaningful ownership positions and work actively with founders to build companies capable of scaling, attracting institutional capital and ultimately delivering realisable returns.
The fund will invest from Seed through Series A, with additional capital available for portfolio companies that demonstrate strong performance.
Grindstone Ventures plans to take meaningful minority stakes and concentrate follow-on investment behind its strongest-performing companies.
The wider Grindstone ecosystem screens over 1,000 businesses annually, providing a pipeline of potential investments at various stages of development, which will be key in building a diverse portfolio.
Focus on exits
Beyond funding, portfolio companies will receive support in areas including strategy, governance, commercial growth, market access, follow-on fundraising and exit preparation.
The partners bring experience across venture investing, entrepreneur development, acceleration and technology company scaling.
Grindstone Ventures is also placing a strong emphasis on realised returns, as venture investors ultimately need liquidity rather than simply higher paper valuations.
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Maqetuka stated that they have deliberately designed the portfolio around the realities of venture investing, diversifying at entry, allowing performance to emerge and then concentrating capital behind the strongest performers.
She said that paper valuations do not return capital to investors, exits do.
Grindstone Ventures Fund I invested in seven companies, including Locstat, Welo and AgriLogiQ. The companies subsequently raised additional equity funding from international investors, while the fund is also finalising an exit that it expects will return capital to investors.
The strategy reflects a broader effort by African venture investors to demonstrate that startup portfolios can generate actual liquidity for limited partners, rather than relying primarily on successive funding rounds to establish higher valuations.
Expanding access to venture capital
Alongside its returns strategy, Grindstone Ventures intends to increase participation by businesses that remain underrepresented in Africa’s venture capital ecosystem.
The fund aims for at least 50% of its portfolio companies to be black-owned while pursuing gender-balanced representation among female founders and women in leadership.
Maqetuka stated that they do not believe investors should have to choose between financial performance and building a more inclusive investment ecosystem.
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The fund will primarily target South African companies, with selective investments elsewhere in Africa.
By focusing on the Seed-to-Series A stage, Grindstone Ventures is positioning the new vehicle around a part of the African startup market where founders often face a sharp increase in capital requirements before they become attractive to larger institutional investors.
The fund’s ability to provide follow-on capital, combined with operational support and a focus on exits, is intended to help companies cross that gap while building a portfolio capable of delivering returns to investors.
They are concentrating on a specific part of the market.
Grindstone Ventures Fund I has already shown promise, with its portfolio companies attracting additional funding and the fund finalising an exit.
This experience will inform the new fund’s strategy, as it seeks to support businesses in Africa’s “missing middle” and deliver returns to investors.
