Grindstone Ventures is led by Andrea Bohmert, Rapelang Rabana, Catherine Young, and Grace Legodi. (Image: Supplied)
  • A new fund by Grindstone is looking to invest R100 million in tech startup companies that are female-owned.
  • But, the startups must have gone through Grindstone's accelerator programme. 
  • The fund is looking to support between 30 and 50 small businesses already displaying growth potential.
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Grindstone has launched a new investment fund, Grindstone Ventures, worth R100 million ($5.6 million) to help South African startup businesses in the tech industry. 

Grindstone is offering seed funding to small businesses which are already part of, or have completed its Grindstone Accelerator programme, which mainly focuses on growing startups.

The Grindstone Accelerator is a year-long entrepreneurship development programme for South African small- to medium-enterprises (SMEs) that Knife Capital and Thinkroom Consulting jointly own. It reviews their strategies and helps them build a foundation for growth in order for them to become investable, sustainable, and exit-ready.

This is what you need to apply for the Grindstone Accelerator programme:

  •  Must be a South African based company.
  •  Must post-revenue with some customer traction.
  •  Must have a dynamic team.  
  •  Must have an innovative business offering and have a clear competitive differentiator.
  •  Must have a scalable business model.
  •  Must have turnover of at least R75,000 ($50k) per annum or scale rapidly.
  •  Must have at least five resources working in the business, including permanent employees or  outsourced consultants or services.

The new fund will focus on post-seed investments and is led by an all-female team; Catherine Young, Andrea Bohmert, Rapelang Rabana, and Grace Legodi. It will mainly invest in other female-led early-stage companies that are innovative and operate in the technology sector, Grindstone said. It will also target small- to medium-enterprises (SMEs) that have a sustainable impact and can create meaningful jobs. 

It's touting between 30 to 50 early-stage companies that have solid intellectual property and can display high growth potential. The companies should also have the ability to raise follow-on funding from credible funders or deliver sustainable cash yields over the long term.  

"The fund's launch is in line with president [Cyril] Ramaphosa's vision to position South Africa as a startup nation. In October, Grindstone participated in a deep dive session with the president and the South African startup industry to determine a roadmap for the country's vision of becoming a startup nation. 

While the tech ecosystem deal space across Africa has shown exceptional growth over recent years, there is a gap in the market for post-seed funding across the continent, Catherine Young, managing partner at Grindstone Ventures, said. "Our vision is to fill this gap and prepare these businesses for larger funding rounds, exponential growth, and to ultimately exit," said Young. 

"Our secret sauce lies in our robust Grindstone Accelerator, which enables innovation-driven tech startups to access knowledge, networks, funding, and markets. Typically an accelerator follows a fund, but Grindstone Ventures is turning this model on its head. Grindstone Ventures was launched as a result of the excellent pipeline of businesses emerging from Grindstone Accelerator, which provide investors with a de-risked opportunity for returns," she said

The Grindstone Ventures fund received its first investment from the SA SME Fund. Its CEO, Ketso Gordhan, said the SA SME supports the Grindstone fund because it will fill a vital gap in the post-seed market.

"As a fund, it is as innovative as the startups that it will fund. The team is deeply experienced, has a proven track record, and we are excited about the opportunity and impact that they will have on this market," Gordhan said.

Grindstone's alumni include radar startup iKubu, which Garmin has acquired, augmented reality animation, and gaming company SeaMonster which recently landed R15 million ($1-million) from FirstRand's Vumela Fund. Others include the online payment gateway company Payfast, financial inclusion business Picasa, and the on-demand grocery delivery service OneCart. 

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