A collaborative approach to strengthening southern Africa’s investment ecosystem
In 2024, private equity (PE) fundraising surged to a 13-year high, underscoring growing investor confidence across key sectors. Simultaneously, the venture capital (VC) ecosystem fuelled early-stage innovation, building the next generation of high-growth companies. Yet, the transition from VC-backed growth to PE scalability remains fragmented, marked by misaligned expectations and valuation methodologies. This is in contrast with global trends where the lines between PE and VC are blurring, particularly in later-stage funding rounds for tech investments.
HAVAÍC, KPMG, and Fireball Capital brought together local VC and PE stakeholders to explore how the two spheres can collaborate more effectively. While risk appetites and return expectations differ, alignment is not only possible but essential for the long-term success of the Southern African VC and PE markets.
The workshop unpacked how businesses can better prepare for PE investment to the benefit of both markets.
Navigating the VC-PE continuum
A thriving PE sector provides later-stage capital for VC-backed companies and a natural exit for early VC investments that have sufficiently matured. However, historically, PE firms are not naturally inclined towards businesses originating in the VC space.
Bridging valuation gaps
VCs prioritise revenue multiples, emphasising early-stage high growth potential, while PE firms focus on EBITDA-based valuations, seeking operational profitability.
Industry-led standardised valuation methodologies help VCbacked businesses better prepare for PE investors and reduce the misalignment between the valuation bridge and the equity story.
Startups must evolve with new financial structuring as they scale up, balancing hypergrowth with sustainable profitability while de-risking capital invested.
VC fund managers need to guide their portfolio companies to manage the future stages of post-VC accordingly.
Operational readiness and strategic positioning
Unlike VCs, who invest in companies expecting rapid growth, PE firms typically seek established, de-risked businesses with defined value drivers and returns in need of corporatisation and professionalisation.
Industry participants emphasised the importance of clean capital structures, applying intellectual property and ownership considerations, financial reporting discipline, and embedding the fundamentals of good governance. These elements significantly impact a startup’s ability to attract PE investment.
Fund managers play a key role in ensuring these building blocks are put in place or at least provided for in the growth story.
Technology as a strategic asset
Southern African tech startups must prove their innovations are globally scalable or can be aggregated into a global player’s market strategy.
RapidDeploy, a HAVAÍC-backed startup, exemplifies this transition. The business, which started in South Africa to solve a local problem, now serves more than 1,700 emergency 911 communication centres across 23 US states.
Having bridged the capital raising gap by securing $90-million in funding as well as high profile partners (including Samsung Ventures, General Motors, and Greylock), RapidDeploy emerged as a leading innovator in public safety technology and emergency response solutions.
Building an integrated investment ecosystem
A central theme was the need for more structured collaboration between VC and PE investors for opportunities to transition locally rather than exclusively to global counterparts. The reality is that the two funding models are not in competition but part of a broader investment cycle where each plays a distinct yet complementary role.
Encouraging open dialogue
One of the biggest barriers to VC-PE collaboration is misperceptions about risk, returns, and governance structures.
Encouraging collaboration across funding stages and ensuring capital is deployed or raised within the South African capital markets ecosystem will foster sustainable growth. This will reduce friction, develop the capital markets, and unlock new investment opportunities.
Supporting founders beyond early-stage growth
Too often, founders and their investors focus on securing early-stage capital without considering the evolution into a PE-attractive business.
The importance of education at all stages of the investment lifecycle ensures startups structure their businesses to attract investors across different funding stages. This includes embedding good governance early on and considering where to be domiciled.
Creating more institutional depth in the VC ecosystem
There is a need to build a more mature funding landscape, ensuring companies can graduate smoothly from one investment phase to the next without unnecessary dilution or funding roadblocks.
The road ahead: a collaborative approach to growth
The VC-PE gap is not an insurmountable challenge but an opportunity – one that requires proactive engagement from all stakeholders.
Advisors such as KPMG, with expertise in financial structuring, business valuation, and transaction advisory, are instrumental in helping businesses prepare for later-stage investment. Meanwhile, VC firms like HAVAÍC are pivotal in supporting startups from their earliest days, ensuring they build globally scalable, investment-ready businesses in line with the goals set by Fireball’s Fund of Funds. The industry needs to continue to professionalise to maximise the opportunity.
Collaboration is key, including fostering ongoing conversations, aligning methodologies, and creating a shared vision for growth. With the support of experienced advisors and professional VC and PE managers, startups will continue to thrive and mature from young businesses to meaningful companies, both locally and on the global stage.
Authors
Tyrone Moodley, principal at HAVAÍC,
Huns Biltoo, Partner at KPMG and
Lauren Tuchman, Senior Manager at KPMG
This article was originally published in the 2025 Private Capital Magazine by the Southern African Venture Capital and Private Equity Association.
Comments