Grindstone Ventures is raising a R500 million venture fund to back technology-enabled African companies from Seed through Series A, with South Africa set to form the core of its investment strategy and selected deals planned elsewhere on the continent.

Grindstone Ventures has launched a new R500 million venture fund, valued at about $31 million, as it looks to put more capital behind African startups caught in one of the market’s toughest financing stages: the move from early commercial traction to institutional-scale investment.

The fund will invest from Seed through Series A and is targeting an initial close of R150 million. Grindstone plans to build a portfolio of between 15 and 20 companies, with South Africa remaining its main investment market while the team selectively backs businesses in other parts of Africa.

Led by Thandiwe Maqetuka and established in partnership with Knife Capital and Thinkroom, the vehicle is being built around companies that have already shown evidence of customer demand but may not yet have the scale, governance structures or operating maturity typically expected by larger investors.

That positioning gives the fund a fairly specific job. Rather than backing businesses at the earliest experimental stage, Grindstone wants to enter once a company has begun proving that there is a market for what it is building, then help it prepare for the next level of institutional funding.

A R150 million first close before the wider R500 million target

Grindstone is seeking R150 million for the fund’s first close before moving towards the full R500 million target.

Its approach will not involve spreading capital evenly across every portfolio company. The manager plans to take meaningful minority positions and retain follow-on capital for businesses that show stronger execution and growth. This gives the fund room to invest across a broader initial portfolio and increase its exposure to companies that perform well over time.

That follow-on capacity is important to Grindstone’s wider Seed-to-Series A strategy. The fund is designed not only to provide an initial cheque, but also to stay involved as selected companies grow and require additional capital.

The investment model will be paired with support covering governance, strategy, commercial expansion, market access, fundraising and preparation for future exits.

Grindstone is going after Africa’s “missing middle”

The fund describes its target market as Africa’s “missing middle”, referring to companies that have moved beyond early testing and established evidence of demand but have not yet developed far enough to attract larger pools of institutional capital.

The timing comes against an uneven funding environment for African technology companies.

African tech startups raised about $4.1 billion in equity and debt funding in 2025, an increase of 25% from the previous year. But Seed-stage investment moved in the opposite direction, falling 4% to $462 million. The decline marked a third consecutive year of pressure on Seed funding, even as investment at later stages strengthened.

For Grindstone, that creates an opportunity to focus on companies that have already crossed the first hurdle of market validation but still need capital and operational support before they can compete for larger Series A rounds.

A sourcing pipeline built before the cheque is written

One of the more distinctive elements behind the new fund is the scale of Grindstone’s existing startup pipeline.

The wider Grindstone ecosystem screens more than 1,000 businesses each year and works with around 50 companies annually through accelerator programmes. Its post-seed investment model uses that accelerator network to identify businesses with scaling potential and help prepare them for Series A funding.

That means the fund can potentially evaluate businesses over a longer period before deploying larger amounts of capital, rather than relying only on conventional deal sourcing.

For founders, the model combines financing with the kind of operational work that can become increasingly important as a business moves from early traction towards larger rounds.

Fund I gives Grindstone an earlier portfolio to build on

The new vehicle follows Grindstone Ventures Fund I, which invested in seven companies.

That portfolio included Locstat, Welo and AgriLogiQ, with several of the businesses later securing additional equity investment from international investors.

Grindstone also says it is finalising an exit from Fund I that is expected to return capital to investors.

The emphasis on exits is built into the new strategy as well. Rather than relying primarily on increases in paper valuations, Grindstone wants portfolio companies to develop potential routes to liquidity through acquisitions, secondary transactions or other events capable of returning cash to investors.

Inclusion forms part of the fund’s portfolio targets

The fund has also set inclusion objectives alongside its investment strategy.

Grindstone aspires for at least 50% of its portfolio companies to be black-owned and is pursuing balanced representation of female founders and women in leadership positions. The investment manager describes the new vehicle as a female-led, black-empowered fund.

For Grindstone, the R500 million vehicle is therefore being built around more than capital deployment alone. Its plan combines investment, accelerator-led sourcing, operational support, follow-on funding and exit preparation, all concentrated on a part of Africa’s startup market where companies can struggle to make the jump from early traction to institutional readiness.

If the fund reaches its R500 million target, its progress will ultimately be judged by whether the companies entering that pipeline can move successfully from Seed-stage validation into larger financing rounds, and eventually into sustainable liquidity outcomes for investors.

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