Futuregrowth Asset Management launches US$11m fund to invest in startups

SOUTH AFRICA – Futuregrowth Asset Management, a South African manager of R193 billion (US$11.85bn) in fixed-income assets, is launching a fund to invest in startups with a significant developmental impact.

According to a statement from Futuregrowth, the business intends to raise as much as R600 million (US$36m) by the end of the year for the Futuregrowth High Growth Development Equity Fund, a closed-end, limited-life fund. Andrew Canter, the money manager’s chief investment officer based in Cape Town, believes that South Africa’s second-largest city offers ample investment potential.

“There are some real hives of activity going on out there,” Canter said, adding that he had witnessed a great deal of commercial activity while cycling 30 kilometres to and from work.

Futuregrowth has invested in companies such as Retail Capital, a small business lender observed by Canter on his commute to work.

Futuregrowth joins investors such as Naspers in supporting the resurgence of Africa’s biggest industrialised economy’s startup scene.

Last year, early-stage companies attracted almost R12 billion (US$736.49m) in venture finance, a ninefold increase since 2016. To capitalise on the potential, Naspers established Naspers Foundry, which invests in startups.

Futuregrowth, which is supported by Old Mutual Ltd., has a 16-year-old Development Equity Fund with R3.4 billion (US$208.67m) under management that has made approximately ten early-stage investments and “can see it working,” according to Canter.

The fund’s mandate is expansive, encompassing infrastructure, social services, clean energy, agriculture, and regional development.

In 2016, amid an era of alleged rampant corruption under former President Jacob Zuma, the specialist money manager garnered attention when it ceased lending money.

“Don’t promise the earth, do what you can do, deliver it,” he said. “That’s why my infrastructure fund has been going since 1995 — just keep doing it properly in a sustainable, appropriate way. It’s not a get-rich quick scheme, it’s a sustainable business.”

According to the business, the High Growth fund would have a four- to five-year draw period and a five- to six-year repayment period.

“What’s exciting for the rest of my career is establishing this early stage fund and doing those deals, dealing with those entrepreneurs is much more inspiring than dealing with malfunctioning SOEs,” Canter said.

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