A nine-digit merger for a South African academic spinout is fueling VC interest in the continent’s university tech, but investors say leadership is the critical hurdle. The recent merger of hearX Group with US-based Eargo, backed by a $100m investment to create the new entity LXE Hearing, highlights the massive potential of IP born in African university labs. However, the success stories reveal a clear pattern: brilliant science needs savvy business leadership to scale.
A Landmark Merger Sets the Tone
The deal that’s got the ecosystem talking is the creation of LXE Hearing, a new heavyweight in the over-the-counter (OTC) hearing aid market. It merges South Africa’s hearX Group with US-based Eargo, powered by a $100m investment from healthcare private equity firm Patient Square Capital.
For HAVAÍC, a South African VC firm that backed hearX since 2019, it’s a major win. But the story of hearX is a lesson in startup evolution. The company was spun out of the University of Pretoria in 2015 by two academics: Professor De Wet Swanepoel, an audiologist, and Professor Herman Myburgh, a computer engineer.
Their vision was to use mobile tech to tackle hearing loss, leading to the launch of their direct-to-consumer brand, Lexie Hearing, in 2020. While the founding IP was academic, the person now leading the combined $100m+ global entity is Nic Klopper, an entrepreneur and hearX co-founder who has served as its CEO. This structure — academic founders creating the core tech while a business-focused CEO drives commercialisation — is becoming a blueprint for success.
The Scientist-CEO Dilemma
The challenge for many deeptech spinouts is that the skills that make a great researcher don’t always translate to running a company. VCs are increasingly backing startups that solve this “founder’s dilemma” from day one.
Take Altera Biosciences, which calls itself Africa’s first cell and gene therapy startup. It recently closed a R29m (~$1.6m) pre-seed round to pursue the ‘holy grail’ of creating universal donor cells that don’t get rejected by a patient’s immune system.
Investors OneBio Venture Studio and E Squared Investments backed a classic pairing: Professor Michael Pepper, a top-ranked scientist, heads the research, while entrepreneur Alexandra Miszewski provides the business acumen.
“One of the biggest challenges in transplantation medicine is to find a suitable donor-recipient match,” explains Miszewski. Altera’s plan is to use gene-silencing to create ‘stealth’ cells that any patient’s body can accept, a potential multi-billion dollar solution.
Another example is CubeSpace, a satellite technology spin-off from Stellenbosch University, which recently secured $3m in funding from Futuregrowth Asset Management. Co-founded by a group including Associate Professor Willem Jordaan, the company makes critical systems that help small satellites maintain their orientation in orbit. The investment will help it expand into the market for larger satellites, with its CEO, Mike-Alec Kearney, focused on aggressive growth.
Ecosystem Solutions
Not every academic-led venture follows a smooth trajectory. Hyrax Biosciences, a bioinformatics spinout from the University of the Western Cape, was instrumental in the early detection of the Omicron Covid-19 variant. Founded in 2015 by a team of academics, the company develops software for clinical genetic testing.
Despite its technical achievements and backing from the University Technology Fund (UTF), its current status is uncertain, with reports that two of its co-founders have left since 2022.
Recognising this gap, a more structured approach to funding is emerging. Stocks & Strauss, an investment firm, recently announced it was finalising a R400m (~$21.4m) University Technology Fund II (UTF II). The fund will make 15 to 20 investments in spin-offs from South African universities, focusing more on the commercialization aspect, including the necessary leadership needed to fully harness the intellectual property.
“The world is witnessing a shift towards valuing university intellectual property as an important asset class,” says Wayne Stocks, managing partner at Stocks & Strauss Fund Manager. “Universities are unparalleled hubs for deep-technology investment opportunities in Africa.”
The fund is backed by heavy-hitters like the SA SME Fund and several leading universities, including Stellenbosch, Pretoria, and Cape Town. Its strategy is clear: provide the capital and support to turn academic IP into scalable businesses. Both CubeSpace and Hyrax were beneficiaries of the first UTF, showing the fund’s direct role in this sector.
For VCs scouting Africa for the next big thing, the message is clear: the labs are full of world-class ideas. The startups that succeed will be those that pair that brilliance with a leader who knows how to build a business.