South Africa has never lacked entrepreneurial talent. Over the past two decades, the country has produced founders who have built high-growth businesses that solve meaningful problems, compete internationally and attract world-class investors.
What has been less certain is whether South Africa’s venture capital (VC) ecosystem could consistently produce the successful exits that underpin a mature innovation economy and deliver compelling investment returns.
This is important, because VC is unlike most other forms of investment. Investors provide patient capital to businesses often years away from profitability. When those businesses are acquired, list on a stock exchange or attract new investors who buy out the earlier shareholders, capital is returned and recycled into the next generation of entrepreneurs.
Two new studies by the SA SME Fund, Endeavor South Africa and the Southern African Venture Capital & Private Equity Association paint an encouraging picture of an ecosystem starting to build a track record. They provide growing evidence that South African VC can deliver attractive returns while creating jobs and driving innovation.
Research
The first study analysed 226 VC exits between 2009 and 2026. It found return characteristics broadly consistent with those observed in more mature markets, with South Africa’s multiple on invested capital at 2.01–2.45.
This does not mean South Africa’s VC market has reached the scale or depth of those ecosystems but suggests that local VC is beginning to demonstrate the performance long-term investors look for.
The companion study examined 18 South African venture-backed companies that successfully exited across 21 investment rounds, generating a median gross return of 3.5 times invested capital and a median internal rate of return of 54%.
Importantly, the exit market itself is diversifying, with companies now exiting through four pathways: global and local mergers & acquisitions, listings and secondary transactions. This reduces reliance on any single route to liquidity.
But the significance of these businesses extends well beyond the exits themselves. They also illustrate what successful scale-ups contribute to the broader economy. Collectively, the 18 companies created more than 4,000 direct jobs over the past five years. Since 2021 the businesses have increased revenue by 256% and staff count by 49%.
Endeavor’s experience across more than 50 emerging markets points to the same pattern. Ecosystems rarely inflect because of how many companies get started but do so when a small number reach real scale and begin to multiply. Their alumni teams leave to found the next wave of businesses, the founders become angel investors and mentors, and operating know-how becomes widely available. From Latin America to Türkiye to Southeast Asia, a handful of outsized outcomes have repeatedly seeded an entire generation of founders.
Successful exits are what set this process in motion and build confidence: for the founders that globally competitive companies can be built from South Africa; for international investors that South African innovation deserves attention; and for institutional investors that VC can play a meaningful role in a diversified portfolio.
Nothing in the research suggests that VC is without risk. It remains a long-term asset class in which many investments will disappoint and a small number will carry the portfolio. What the research does show is that diversified portfolios managed by experienced VC fund managers are increasingly producing realised outcomes that warrant serious consideration.
South African institutions can now look at the risk they are being asked to take and see, in the same dataset, the return it has produced. When risk is based on sound evidence, it underpins and reinforces investment decisions.
More than 1,100 South African companies have received VC funding since 2016, and the capital deployed over the past five years is roughly double the vintage before it. With exits typically taking six years or longer to materialise, most of that capital is simply too young to have reached the exit window.
Looking ahead
This suggests that the largest wave of South African VC exits may still lie ahead. Every successful scale-up demonstrates that innovative businesses can be built locally, employ South Africans, compete globally and attract international capital. Every successful exit creates founders with experience, employees with new skills and investors with greater confidence to back the next generation.
There is still much work to do to deepen the pool of growth capital available to founders, strengthen support for scaling businesses and encourage greater participation from institutional investors. But these studies provide something that has been missing for a long time: evidence that South African VC is beginning to deliver realised returns, and that an ecosystem that was once defined by potential is increasingly demonstrating performance.
The journey is far from complete, but it is increasingly backed by proof.
Collier is MD of Endeavor South Africa
