R400mn fund launched to help scale up small businesses in South Africa

Secha Capital, a venture capital firm focused on investing in small and medium-sized enterprises (SMEs), has recently launched a new fund aimed at scaling up businesses in South Africa. Rushil Vallabh, Co-Founder and Managing Director of Secha Capital, discussed the purpose and goals of the fund in a recent interview with CNBC Africa. The SETCHER Fund II, a follow-up to their initial fund, is intended to not only generate financial returns but also have a positive social impact by creating jobs. Vallabh highlighted the importance of supporting SMEs, which are significant job creators in the economy. The fund focuses on sectors such as consumer goods, agribusiness, healthcare, and manufacturing, where outside capital is crucial for growth. Since its inception in 2016 with Fund I, Secha Capital has already made significant strides in supporting SMEs. With a portfolio of 10 companies that have collectively created over 100 jobs, the firm has demonstrated the potential for both social impact and financial success. Vallabh noted that some companies in their portfolio have experienced growth rates of over 20 times in the last four years. The recent launch of Fund II, with an impressive size of 400 million rands, reflects Secha Capital's commitment to scaling up their investment model. Vallabh emphasized the need for more operational investors to support SMEs with growth capital and human capital expertise. The fund aims to target Southern Africa, including countries like Zambia, Mozambique, Swaziland, and Lesotho. In terms of investor response, Vallabh mentioned that they had already secured three deals shortly after the fund's first close in October. Despite the challenging economic climate, there is a growing interest from pension funds, high net worth individuals, and family offices in diversifying their portfolios with alternative investments like private equity in SMEs. Vallabh also highlighted the impressive returns generated by Fund I, with one investment experiencing a 20x growth in revenue and 40x growth in profitability. The success stories within their portfolio demonstrate the potential for SMEs to thrive and expand with the right support. For Fund II, Secha Capital is focusing on investing in companies with revenue under 100 million rands, around 150 employees, and a strong potential for growth. By writing 12 million rand checks, the firm aims to provide the necessary capital for these businesses to scale to the next level. Overall, Secha Capital's new fund represents a significant opportunity for SMEs in South Africa to access the funding and expertise needed to drive growth and create sustainable job opportunities. With a strategic focus on underserved sectors and operational support for businesses, the fund is poised to make a meaningful impact on the country's entrepreneurial landscape.