Clive Butkow, a former management consultant who spent 28 years at Accenture (formerly Arthur Andersen), is building a new, R100m fund for high-potential .
Butkow, who was chief operating officer at Accenture South Africa until 2013, when he quit the corporate world to strike out on his own, wants the new fund, led by his business Grotech, to invest only in start-ups that have the potential to get big quickly, usually by going global. And he says he has already lined up a number of interesting prospects.
Grotech raised R62m in a first close in February this year, and is looking to raise a further R38m by the end of the November to get to R100m, Butkow said. Some R40m of the initial close came from local wealth management firm Caleo Capital. The remaining money has mainly come from retail investors, with an average cheque size of between R200 000 and R300 000.
Clive Butkow, a former management consultant who spent 28 years at Accenture (formerly Arthur Andersen), is building a new, R100m fund for high-potential South African start-up technology businesses.
Butkow, who was chief operating officer at Accenture South Africa until 2013, when he quit the corporate world to strike out on his own, wants the new fund, led by his business Grotech, to invest only in start-ups that have the potential to get big quickly, usually by going global. And he says he has already lined up a number of interesting prospects.
Grotech raised R62m in a first close in February this year, and is looking to raise a further R38m by the end of the November to get to R100m, Butkow said. Some R40m of the initial close came from local wealth management firm Caleo Capital. The remaining money has mainly come from retail investors, with an average cheque size of between R200 000 and R300 000.
“We fund start-ups from our balance sheet, with no more than 20% of the fund to be used in any one company,” Butkow said in an interview with TechCentral in Johannesburg.
He said Grotech “thinks like a Silicon Valley venture capital company” and wants to demonstrate to its investors that it can find and invest in Silicon Valley-type companies in South Africa.
“I want 10x exponential growth from the companies we invest in. If I put R10m in, if I don’t see we can get back R100m when looking at the forecast, I won’t make that investment. We understand that some of them are going to go into the ground, but if we just get a few at 10x, we’ll be able to pay our investors 5-6x,” he said.
Grotech’s first investment is in SMEasy, an online business management and accounting system designed specifically for people in small business who don’t understand accounting. SMEasy recently signed a deal with MTN to white-label its solution to the mobile telecommunications group’s customers. Other investors in SMEasy include Investec and 4Di Capital.
Grotech has a number of other companies in its pipeline, Butkow said, including a “courier aggregator” that works out the cheapest option for sending parcels. It hopes to sign an investment deal with the company, which he declines to name, in the next month. He said the company has the potential to disrupt the local courier market, much like Uber disrupted public transport. “It is very capital efficient and doesn’t own any assets. We are going to take it global.”
Grotech has a defined exit strategy for its investments, Butkow said. “We will buy them, build them and sell them. If we don’t see an exit, we won’t invest. I’m not here to get a dividend of 5%/year. We will exit investments, maybe to a private equity company, by exiting to the trade, through a management buyout, or even a full-blown IPO (initial public offering). Of course, the chance of an IPO is one in 100.”
Other companies that Grotech has looked at or is considering investments in include start-ups that develop blockchain-based technologies, artificial intelligence software, Internet of things solutions, sensing systems, e-commerce services and software as a service.
Butkow said he expects Grotech’s investments to average about R10m each, for between 10% and 30% of the equity.
“Our vision is to be most successful disruptive tech fund in Africa, solving African problems,” he said. “We want to raise R1bn eventually. We will probably want to raise our biggest money from overseas, but we won’t attempt it yet. We first want to get some wins on the board.”
Butkow, who has a BSc in computer science and applied mathematics from Wits University, said he has always been an entrepreneur. He became a salesman at the age of 9 and paid his own way through university. After graduating, he wanted to start his own business, but was persuaded to join Arthur Andersen after being told he would have the opportunity to travel abroad. “At that point, I’d never been overseas. I said I’d join the company. Twenty-eight years later, I gave up,” he said.
“I gave up because I asked: ‘What makes you successful?’ I used to think making money makes you successful. I had achieved financial independence. But I didn’t have a brand, I wasn’t a person in my own right. I wanted to make a difference in South Africa.
“For 28 years at Accenture, I helped grow companies. I was so privileged to learn lessons working all over the world. I wanted to give back to South Africa. There are so many good entrepreneurs here, but they lack the skills [to build successful businesses]. There’s a mile between an idea and a business.”
“We fund start-ups from our balance sheet, with no more than 20% of the fund to be used in any one company,” Butkow said in an interview with TechCentral in Johannesburg.
He said Grotech “thinks like a Silicon Valley venture capital company” and wants to demonstrate to its investors that it can find and invest in Silicon Valley-type companies in South Africa.
“I want 10x exponential growth from the companies we invest in. If I put R10m in, if I don’t see we can get back R100m when looking at the forecast, I won’t make that investment. We understand that some of them are going to go into the ground, but if we just get a few at 10x, we’ll be able to pay our investors 5-6x,” he said.
Grotech’s first investment is in SMEasy, an online business management and accounting system designed specifically for people in small business who don’t understand accounting. SMEasy recently signed a deal with MTN to white-label its solution to the mobile telecommunications group’s customers. Other investors in SMEasy include Investec and 4Di Capital.
Grotech has a number of other companies in its pipeline, Butkow said, including a “courier aggregator” that works out the cheapest option for sending parcels. It hopes to sign an investment deal with the company, which he declines to name, in the next month. He said the company has the potential to disrupt the local courier market, much like Uber disrupted public transport. “It is very capital efficient and doesn’t own any assets. We are going to take it global.”
Grotech has a defined exit strategy for its investments, Butkow said. “We will buy them, build them and sell them. If we don’t see an exit, we won’t invest. I’m not here to get a dividend of 5%/year. We will exit investments, maybe to a private equity company, by exiting to the trade, through a management buyout, or even a full-blown IPO (initial public offering). Of course, the chance of an IPO is one in 100.”
Other companies that Grotech has looked at or is considering investments in include start-ups that develop blockchain-based technologies, artificial intelligence software, Internet of things solutions, sensing systems, e-commerce services and software as a service.
Butkow said he expects Grotech’s investments to average about R10m each, for between 10% and 30% of the equity.
“Our vision is to be most successful disruptive tech fund in Africa, solving African problems,” he said. “We want to raise R1bn eventually. We will probably want to raise our biggest money from overseas, but we won’t attempt it yet. We first want to get some wins on the board.”
Butkow, who has a BSc in computer science and applied mathematics from Wits University, said he has always been an entrepreneur. He became a salesman at the age of 9 and paid his own way through university. After graduating, he wanted to start his own business, but was persuaded to join Arthur Andersen after being told he would have the opportunity to travel abroad. “At that point, I’d never been overseas. I said I’d join the company. Twenty-eight years later, I gave up,” he said.
“I gave up because I asked: ‘What makes you successful?’ I used to think making money makes you successful. I had achieved financial independence. But I didn’t have a brand, I wasn’t a person in my own right. I wanted to make a difference in South Africa.
“For 28 years at Accenture, I helped grow companies. I was so privileged to learn lessons working all over the world. I wanted to give back to South Africa. There are so many good entrepreneurs here, but they lack the skills [to build successful businesses]. There’s a mile between an idea and a business.”
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