Cape Town-based venture capital firm targets first close of R150m as it seeks to address a deepening structural shortfall in early-stage technology financing
Grindstone Ventures has launched a R500m ($31.2m) venture fund aimed at high-growth, technology-enabled African businesses, targeting a persistent funding gap between early commercial validation and the scale required to attract institutional investment.
The fund, led by Grindstone Ventures CEO Thandiwe Maqetuka, has been established in partnership with Knife Capital and Thinkroom, the two entities that co-own the Grindstone accelerator programme. It follows the deployment of the firm’s first fund, Grindstone Ventures Fund I, which backed seven portfolio companies and catalysed follow-on seed investment from South African funders.
The new vehicle is targeting a first close of R150m ($9.3 million) and plans to assemble a portfolio of 15 to 20 businesses, primarily in South Africa with selective investments elsewhere on the continent. It will invest from Seed through Series A and retain capacity to provide follow-on funding to its strongest-performing companies.
The missing middle
The fund’s investment thesis centres on what Grindstone describes as “Africa’s missing middle” — businesses that have demonstrated commercial traction but remain too small to attract the larger institutional investors that typically enter at Series A.
“The evolution from Seed to Series A remains one of the clearest gaps in the African venture ecosystem,” said Keet van Zyl, Co-Founder of Knife Capital.
The structural nature of that gap has been quantified in recent industry research. An analysis found that of 105 African startups that raised seed capital in 2022, only 10 had closed Series A rounds within 34 months. Eighty-one remained active but stuck at the early stage, while 11 had shut down or been acquired.
The decline in seed-stage activity has been sharp. The number of startups raising seed rounds fell from 105 in 2022 to 46 in 2023, 31 in 2024, and a partial recovery to 42 in 2025. Separately, data indicates that only about 4 to 5 per cent of African startups that raise seed capital successfully reach Series A, compared with 10 to 15 per cent globally.
Maqetuka, who was appointed CEO of Grindstone Ventures in 2025, said the fund would focus on businesses caught between proving commercial demand and reaching the scale required to attract larger pools of capital.
“That is Africa’s missing middle,” she said. “Our opportunity is not simply to provide more capital, but to identify exceptional businesses earlier, invest at a point where capital remains scarce, take meaningful ownership positions and work actively with founders to build companies capable of scaling, attracting institutional capital and ultimately delivering realisable returns”.
Grindstone Ventures will take meaningful minority positions and concentrate additional capital behind businesses that perform strongly. Beyond financing, the fund will provide portfolio companies with support in strategy, governance, commercial growth, market access, follow-on funding and exit readiness.
The fund draws on the wider Grindstone ecosystem, which screens more than 1,000 businesses annually. Around 50 companies participate in Grindstone accelerator programmes each year, providing a pipeline of investable opportunities. Grindstone was founded in 2013 and is co-owned by Knife Capital and Thinkroom Limited.
Grindstone Ventures Fund I invested in seven companies. Three of those — Locstat, Welo and AgriLogiQ — subsequently raised further equity funding from international investors. The first fund is also finalising an exit that it says will return capital to investors.
Publicly disclosed portfolio companies from Fund I include AgrilogiQ, Welo Health, Matter Industries, Drive to Own, Sticitt, Locstat and Locumbase. PitchBook data also lists Neural Sense and Cradle Technology Services among Grindstone Ventures’ investments.
Exit discipline
Grindstone Ventures is placing explicit emphasis on generating returns through exits rather than relying on paper valuations.
“We have deliberately designed the portfolio around the realities of venture investing,” Maqetuka said. “We diversify at entry, allow performance to emerge and then concentrate capital behind the strongest performers. Importantly, we are building for liquidity from the outset. Paper valuations don’t return capital to investors, exits do”.
Alongside its financial return objectives, Grindstone Ventures aims to increase participation by underrepresented groups in the venture ecosystem. The fund aspires for at least 50 per cent of its portfolio companies to be black-owned, while pursuing gender-balanced representation among female founders and women in leadership.
“We don’t believe investors should have to choose between financial performance and building a more inclusive investment ecosystem,” Maqetuka said.
The firm has separately partnered with the Mineworkers Investment Company on a female founder funding-readiness programme. South African beverage technology startup Palé, founded by Mashokane Ramusetheli, became the third company selected for that initiative in June 2026. Earlier participants included craft beer startup Tolokazi Beer.