Knife Capital, a South African venture capital firm, has launched KNF Ventures, a new fund dedicated to investing in innovation-driven ventures that aims for a minimum of 40% annualized return on investments.

The targeted investment capital is R100m ($6.33m), but initial closing will be smaller to start taking advantage of impending investment opportunities.

The minimum participation per investor is R1m, said KNF.

KNF will be based on the style and success of previous funds and investments managed by Knife Capital.

The VC firm facilitated lucrative exits of local technology companies with the likes of General Electric, Visa and Garmin and also assisted portfolio entrepreneurs with management buyouts.

Keet van Zyl, CEO of KNF Ventures and Co-founder of Knife Capital, said: “We are taking our learnings in the local venture investment space over the last ten years, partnering with value-adding investors and utilising the SARS section 12J VCC regime to create something unique.”

KNF Ventures blends Knowledge Networks and Funding in an entrepreneurial approach to venture capital investment.

“By leveraging Knowledge, Networks & Funding, KNF Ventures will accelerate the growth of strategically relevant South African scale-up companies and generate enhanced returns for investors,” he added.

KNF investees will have a solid knowledge foundation to scale from and the confidence that they are supported throughout the growth journey.

“Exploiting IP is one of the key strategies that businesses can rely upon to improve their competitiveness, but most South African innovation-driven companies we come across have not adequately taken advantage of their knowledge base,” said van Zyl.

KNF will provide market access and accelerate investee traction by drawing on a dynamic partner network.

Investors will be taken into the trenches of South African high-growth entrepreneurship through facilitated capacity building interactions and regular targeted investor/ investee networking events.

To facilitate this, KNF partnered with former Springbok Rugby Captain, entrepreneur and corporate networker, Bob Skinstad.

“Through the KNF network we believe that the solution to virtually every challenge confronting a South African high-growth business is no more than three phone calls away,” said Skinstad.

To assist SMEs with access to equity finance, the South African government has implemented a tax incentive for investors in privately owned entrepreneurial businesses in South Africa.

Individuals, companies and trusts investing through approved section 12J venture capital companies like KNF can deduct the full amount of their investment from taxable income.

Recent changes to section 12J of the Income Tax Act are beginning to have a positive impact on the South African venture capital industry with an uptake in VCC registrations.

“Through the 12J incentive, investors start the investment process in a favorable position by compensating for risk and enhancing future compound returns as a result of the immediate tax benefit,” said van Zyl.

“Combining this with sound investment principles is an exciting prospect for creating a sustainable impact on innovation, job creation and growth by catalysing entrepreneurship in South Africa. Now needed more than ever before to future-proof the country,” he added.