Infinite Partners closes R2.8 billion fund to back South African businesses

South African private equity firm Infinite Partners has raised R2.8 billion ($169.3 million) for its second fund, giving it fresh capital to buy stakes in established businesses and help them expand. The fund closed above its R2.5 billion target, with all the money coming from local institutional investors, including pension funds, banks, insurers and asset managers.

Infinite Partners plans to invest between R100 million and R500 million per company. It is looking at businesses across several industries, rather than focusing on technology alone. Edward Pitsi, the firm's co-founder and CEO, said Infinite Partners wants companies with strong management, good margins and the ability to generate cash. The firm also looks at how difficult it would be for competitors to enter a market and whether there is a realistic opportunity to sell its stake later. “We are a generalist South African mid-market investor, and we have certain restrictions on committing too much capital to any particular sector,” Pitsi told TechCabal.

The first two deals

The firm has already put money into two businesses: e4, a software provider serving the banking and property sectors, and CYNK, which builds and owns fibre networks. e4 works on the processes behind mortgage applications and property transactions. These can involve several parties and lengthy paperwork, leaving buyers waiting for approvals and documents to be completed. Pitsi said e4 has helped cut the home-buying process from 96 days to around 40 days. Its platform has processed R2.8 trillion in mortgages since the company was established.

The business is also exploring the UK market through an early stage operation. CYNK operates in a different part of the economy. Its fibre network reaches more than 667,000 South African households, including communities in townships and areas with limited connectivity. For small businesses, access to reliable internet can make a practical difference to how they receive payments, communicate with customers and run their operations. CYNK owns the infrastructure that supports those connections. The two investments give Infinite Partners exposure to software and physical infrastructure, with both companies operating in markets where there is room to expand.

Where the money could go next

Infinite Partners is looking at business services, education, alternative lending and software-as-a-service businesses for future investments. The fund can finance expansion or provide replacement capital, which allows existing shareholders to sell some or all of their stakes. But raising money is only one part of the job. The firm still needs to find companies that meet its investment requirements, agree on valuations and determine how each business can grow without weakening its finances.

Pitsi said some investors who backed Infinite Partners in its early days increased their commitments after the firm completed its first two deals. Those investments gave them a clearer view of how the firm intended to deploy their money. The R2.8 billion fund now gives Infinite Partners more room to pursue deals in South Africa's mid market. For business owners, it is another potential source of funding beyond bank loans. The difference is that private equity investors typically take an ownership stake and expect to make money when that stake is eventually sold. That makes the arrangement more suited to companies prepared to share ownership in exchange for capital and a partner with a financial interest in the business's growth.