South Africa: Five35 Ventures start-up fund seeks $30m to invest in women

By David Whitehouse
Posted on Monday, 31 January 2022 13:11

Hema Vallabh
Hema Vallabh, founding partner at Five35 Ventures. Photo supplied.

South African fund Five35 Ventures is seeking to raise $30m over the next three years to invest in women’s start-ups, founding partner Hema Vallabh tells The Africa Report.

The fund is planning a first close at the end of February with a target of about $1m, Vallabh says in Johannesburg. The fund is sector-agnostic, but investments needed to have technological enablement, she adds.

The fund concentrates on equity investments in female-focused businesses. To qualify as such, a business needs to be either co-owned or co-founded by a woman, have a large female employment contingent or an intentionally large female consumer base. The fund also prioritises women as investors, and more than 80% of backers to date are women, Vallabh says.

Africa won’t be able to create enough jobs for its growing population if businesses run by women can’t achieve scale. Sub-Saharan Africa, according to the World Bank, is the world’s only region where women are more likely to be entrepreneurs than men, with almost 50% of women in the non-agricultural labour force running a small business. The African Development Bank (AfDB) has estimated that women in the continent face a $42b financing gap, and $15.6b in agriculture alone.

High interest rates and collateral requirements are among the factors holding women back, according to an AfDB report in 2019.

  • Women are more likely than men to self-exclude themselves from the credit market due their low perceived creditworthiness.
  • The AfDB  found that 13.1% of women gave high interest rates as a reason for not applying for a business loan, compared with 8.2% of men.

On the radar

Vallab’s fund to date has invested in PricePally, RxAll and Shuttlers in Nigeria, and Zindi in South Africa. These investments are “warehoused” until the first close at the end of February, Vallabh says.

The fund will likely focus on South Africa, Nigeria, Kenya and Egypt as Africa’s largest markets, she says, and make maximum investments of $500,000 in seed-stage companies. It is tracking a further three to five investments which it hopes to close by the end of the first quarter.

  • Investments in agri-tech and educational tech in Nigeria, media tech in South Africa and e-commerce in Kenya are among those under consideration.
  • Frontier markets such as Democratic Republic of Congo (DRC), Madagascar and Ethiopia are also on the radar.

Vallabh, an engineer by training, is seeking to encourage first-time women investors with a limited number of openings to invest $35,000. The fund is open to investment from men – but they have to pay the full minimum ticket of $100,000.

The fund has partnerships with the WomHub venture builder and accelerator and the Launch Africa Ventures fund.  As well as the financial investment, founders also get access to the fund’s advisory network.

  • This includes Nicky Newton-King, former CEO of the Johannesburg Stock Exchange, Sneha Shah, managing director for business acceleration at the London Stock Exchange, and Launch Africa Ventures managing partner Zach George.

Bottom line

Five35 Ventures is betting that the time has come for Africa’s women entrepreneurs.

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