Knife Capital

Knife Capital is a growth equity fund manager headquartered in Cape Town, South Africa. The firm was founded in 2010. In addition to its core fund management activities, Knife Capital provides consulting, training and business acceleration services to high-growth ventures in South Africa.

The Firm

The Knife Capital team is deeply involved in skills, technology and knowledge transfer initiatives to foster entrepreneurial activity in the Southern African region. In 2013 the firm launched the Grindstone Accelerator, an initiative focused on enabling high-growth technology enabled companies to become sustainable and Fundable. The firm also provides a periodic Executive Education Program in partnership with UCT Graduate School of Business, to equip investors and entrepreneurs with a deep understanding of the high-growth investment process.

KnifeCap manages HBD Venture Capital's South African portfolio of investments. HBD VC is a South African Venture Capital Fund founded by Mark Shuttleworth in 2000. HBD (an acronym for "Here Be Dragons" - a term used in ancient times to mark unchartered territories on maps) offers growth capital to a range of early stage businesses.

In November 2013, a cautionary announcement was released stating that Knife Capital was entering into negotiations to be acquired by African Dawn Capital Limited, a Johannesburg STOCK Exchange listed company.

Investment Portfolio

Knife Capital’s recent investments include:

EDH:

EDH, maker of FlightScope, is a global high-tech company, a world leader in the development and manufacture of 3D Doppler ball tracking monitors, golf radars and launch monitors for sports.

Ordertalk:

OrderTalk provides online ordering solutions to the restaurant industry. Its proprietary software allows restaurant chains to quickly acquire an online ordering presence on their existing websites. Via orderTalk, restaurant patrons are able to place real-time orders over the Internet, regardless of the complexity of order. The software can easily be integrated with point-of-sale systems, as well as to live calls to a customer contact centre. orderTalk has a strong and growing presence in the US and the UK.

SACAB:

SA Cab is an innovative South African metered taxi operator that introduced the country's most sophisticated call centre technology. Through the SA CAB call centre, metered taxi operators throughout the country are connected via a single tollfree number. SA CAB has brought a new level of professionalism to the metered taxi industry and is perfectly poised to take advantage of increased demand brought about by infrastructural development and SA's hosting of major international events.

Exits

Grindstone

Grindstone is a growth and funding platform by Knife Capital to assist post-revenue high-growth technology enabled SMEs to accelerate strategy execution. The programme has been developed as a result of interactions with thousands of South African high-growth SMEs where it is evident that most are not sufficiently prepared and positioned to:

• Cope with accelerated growth
• Pass an investor due diligence
• Raise adequate growth funding
• Take full advantage of M&A opportunities
• Secure international partnerships

Grindstone supports +-50 companies via a range of interventions designed to build a foundation for growth, transfer skills, create relevant business networks and enable these companies to take advantage of market access opportunities. Business support resources and services include elements of training, corporate advisory, coaching, mentorship and funding.

10 Companies are selected each time to participate in a 9-month programme. These companies are selected based on certain qualifying criteria:

• Existing South African SMEs
• Post-revenue with positive customer testimonials and traction
• Innovation-driven
• Technology/ knowledge-enabled
• High growth potential in search of achieving scalability
• Profile and passion of the management team
• Vision for the future
• Market attractiveness
• SA Job creation ability and 'success story' potential

The 9-month acceleration programme consists of the following:

The Programme:

Quarterly: a 2-Day networking and growth workshop are held every quarter where all the Grindstone companies participate in strategic review of key business functions. Partnerships with leading independent subject experts ensure that the programme delivers thought-provoking business insights. Monthly: Key gaps are then closed to mitigate risks and facilitate growth in monthly one-on-one sessions with each company.

In addition, regular CEO networking dinners take place where the programme participants have the opportunity to interact with some of the most admired business personalities from South Africa as well as some of Knife Capital's international contacts.

Growth Measurement:

Baseline growth indicators are developed at the beginning of the programme and progress across these metrics are constantly measured. Company specific interactions are developed and implemented to achieve measurable growth and put the companies onto a sustainable growth platform for their individual strategic growth path.

Graduation and On-going Support:

Companies graduate with a Closing Data Room that includes all documentation that was developed throughout the acceleration programme. Companies that raise equity funding via the Grindstone platform gain a long-term growth partner in Knife Capital. Grindstone continues to provide access to networks and ad-hoc advisory services to all programme graduates to enhance market access.

Grindstone 2013/14:

Between June 2013 and June 2014, the first class of ten Grindstone companies:

• Created 43 new direct jobs;
• Added R43 million in revenue across the ten companies;
• Grew by 61% year-on-year in revenue;
• Increased their number of key customers by 120%;
• Doubled their company valuations on average;
• Increased their mastering of business fundamentals index by 20% - from 65% to 78%.

The company that showed the most improvement in the program was invited to attend the AGC Partners East Coast Technology Growth Conference in the US. Computer vision and radar company, iKubu, achieved the best growth metrics while mastering and documenting their business fundamentals. CEO, Franz Struwig is attending the conference in October 2014 where he will have the opportunity to present to leading private equity investors, corporate buyers and other leading private company CEOs.

Find-Make-Grow-Realise

Knife Capital provide an Executive Education Program in partnership with UCT Graduate School of Business, to equip investors and entrepreneurs with a deep understanding of the high-growth investment process This participative, case-study-driven programme is designed to provide delegates with a deep understanding of the high-growth investment process. Delegates with an interest in entrepreneurship and business building are through participation develop practical skills in investment selection, due diligence, intellectual property protection, valuation principles and legal closing. They learn to appreciate the balance between scaling an early-stage high-growth venture while managing the process through control mechanisms to ultimately realise the potential of the business. Delegates also gain access to various players in the South African entrepreneurial eco-system and obtain a number of investment- and draft legal templates.

In 2013, Knife Capital commenced rollout of the FMGR course into the rest of Africa.