NEWS ANALYSIS | SA venture capital’s big shift from raising cash to lucrative exits

A group of local start-up investors have joined forces to make the case that venture capital funding has become a viable form of making good returns, evidenced by money made through exiting those investments.

Local venture capital investment is experiencing a big shift from purely raising capital to realising exits for investors through public listings of companies or acquisitions, which creates essential liquidity for the market, fuelling a pipeline of innovation and investment.

For those in the ecosystem, the market is witnessing a structural shift rather than a temporary trend.

According to separate studies by the SA SME fund Endeavor South Africa and the South African Venture Capital and Private Equity Association (Savca), South Africa’s venture capital ecosystem is moving beyond isolated success stories towards a more mature investment market capable of attracting greater institutional capital.

The “South African Venture Capital: Exit & Performance Analysis” looked at 226 realised exits reported by local venture capital fund managers in 2009-26, finding that “realised cash returns substantially exceeded invested capital, with capital-weighted realised returns ranging from 2.01 times to 2.45 times invested capital across the scenarios analysed”.

Another study, the “Exit Case Studies Analysis” — looking at 18 South African venture capital-backed exits across 21 investment rounds in 2014-26 — finds the exits delivered a median gross internal rate of return of 54%, a median gross money-on-invested-capital of 3.5 times, and a median valuation at exit of about R1.6bn.

Beyond investor returns, the broader market that these companies operate in has seen revenue growth by 256% and employment growing by 49% since 2021. Collectively, the exited companies created more than 4,000 direct jobs, averaging about 230 South African jobs per company, highlighting the broader economic impact of South Africa’s high-growth scale-ups.

The group said the findings challenge the long-held perception that South Africa can produce promising young companies but struggles to produce sufficient venture-scale exits.

“While the market remains relatively young by global standards, the data points to a clear shift: exits are increasing in size, pathways are diversifying, and several landmark transactions have taken place in the past two years,” said the group.

Overall, the findings identify four main exit routes now active in the South African venture capital ecosystem: international mergers & acquisitions, domestic mergers & acquisitions, secondary transactions and, more recently, IPOs.

Recent examples include Mastercard’s pending acquisition of BVNK, RapidDeploy’s buyout by Motorola Solutions, iKhokha’s acquisition by Nedbank, Adumo being acquired by Lesaka, Ticketmaster’s takeover of Quicket, and Optasia’s recent JSE listing.

The group said these and other transactions show South African-founded and backed companies are attracting strategic buyers, global investors and public market interest.

Savca says the combined findings provide important evidence for institutional investors assessing South African venture capital as an asset class.

“The ability to demonstrate realised exits is fundamental to the development of any private capital market,” says Savca CEO Anusha Naidu.

“These studies show South African venture-backed companies are beginning to deliver realised return characteristics comparable with more mature international markets, while also contributing to employment, innovation and financial inclusion. This provides important evidence for pension funds, family offices, development finance institutions and other long-term capital providers evaluating venture capital as part of a diversified investment portfolio.”

Endeavor South Africa MD Alison Collier said the data shows South African scale-ups are no longer only building for local relevance.

These studies show South African venture-backed companies are beginning to deliver realised return characteristics comparable with more mature international markets, while also contributing to employment, innovation and financial inclusion.

—  Anusha Naidu, Savca CEO

“The strongest companies in this study were built from South Africa, but not only for South Africa. They solved real market problems, used technology to scale efficiently, and in many cases expanded into regional or global markets. It is this combination that makes them attractive to acquirers and investors,” she said.

“The missing piece in the South African venture story has been exits. We are now seeing evidence that this gap is closing. This is critical because exits create confidence. They return capital to investors, reward founders and employees, and create the next generation of investors, mentors and repeat entrepreneurs.”

SA SME Fund CEO Ketso Gordhan said the emergence of stronger exit evidence is significant.

“South Africa has long had entrepreneurial talent, credible founders and strong technology capability. What has been less visible is the proof that investors can realise meaningful returns from backing these companies. These studies show that the exit market is no longer theoretical. It is starting to happen, and it is happening across different pathways,” he said.

Business Day

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