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.
The new fund is targeting an initial close of about $8.3 million and plans to build a portfolio of 15 to 20 businesses, primarily in South Africa while selectively backing companies elsewhere on the continent.
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.
“The evolution from Seed to Series A remains one of the clearest gaps in the African venture ecosystem,” said Keet van Zyl, co-founder of Knife Capital.
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.
Maqetuka said the new fund is designed for businesses caught between demonstrating commercial demand and reaching the scale required to attract larger pools of capital.
“That is Africa’s missing middle,” she said. “Our 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.”
Capital and operational support
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.
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.
The wider Grindstone ecosystem screens more than 1,000 businesses each year, with around 50 companies participating in accelerator programmes annually. That pipeline will give the fund access to businesses at different stages of development as it builds its portfolio.
Focus on exits
Grindstone Ventures is also placing a strong emphasis on realised returns, arguing that venture investors ultimately need liquidity rather than simply higher paper valuations.
“We have deliberately designed the portfolio around the realities of venture investing,” Maqetuka said. “We diversify at entry, allow performance to emerge and then concentrate capital behind the strongest performers.”
“Paper valuations don’t return capital to investors, exits do,” she said.
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.
“We don’t believe investors should have to choose between financial performance and building a more inclusive investment ecosystem,” Maqetuka said.
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.