“Emancipated accountant” Brett Commaille has been around the South African – and African – venture space for longer than most, and through Hlayisani Capital he is now helping tech startups along their next stage of growth.
Commaille spoke to Disrupt Podcast as part of episode three of “The month in VC”, a new monthly podcast series focused on all things venture capital launched by Disrupt Africa in partnership with Katapult Africa, Kalon Venture Partners and Hlayisani Capital.
Now heading up Hlayisani Capital, a private equity and venture capital fund manager focused on unlocking unique high growth investment opportunities in South Africa and Africa, he is originally from Pretoria but now based out of Stellenbosch. Commaille originally trained and worked as a chartered accountant, before moving into the banking sector.
“Where I started to learn about the real things behind M&A – how to look at companies, how to value companies, and understanding their cash flows. The reason I studied CA in the first place – because I consider myself an emancipated accountant! – was that though I really don’t like accounting, I realise it is critical to understand your finances and how your finances work. Because I’d heard about businesses that were so successful that they’d traded themselves into bankruptcy, and that didn’t make sense,” he said.
With that understanding, he moved towards small business finance, an area that banks are not especially keen on, in spite of protestations to the contrary. Given the opportunity to start a corporate venture fund under a large investment firm, he from there went out on his own and got into the VC sector at large.
His first operation in the South African VC space was AngelHub Ventures, which began life as an angel group teaching high net worth individuals how to approach venture capital, before expanding in scope.
“After a while, two of the family offices we were working with said “let’s turn this into a VC fund”, and I set up AngelHub Ventures, which for quite a while, in spite of being quite small, was one of the most active venture funds on the continent. And we did a lot of interesting investments, made some mistakes, did some early stuff that didn’t work out, did some later-stage stuff that did…” said Commaille. “After a while we realised the biggest problem in the market was that people could find a bit of initial money but the moment you started to grow and you needed your US$5 million round, those sorts of cheques weren’t available.”
So he started Hlayisani Capital, partnering with more family offices to build a bigger venture fund, and start funding ventures through their next stage of growth and expansion into other markets. So far, it has been an “epic adventure”.
“The Hlayisani Growth Fund, which was our previous fund which we are still managing, has got eight investments with about ZAR355 million (US$18.6 million) under management, and that broadly went into high-growth, tech-enabled businesses. We ended up with quite a lot of focus on the education sector, into businesses like Snapplify and d6 Group, which are all significant education tech providers on the continent,” he said.
“We also went into different things like communications platforms, so businesses like Wyzetalk and GoMetro, which is in the transport space. That fund is fully invested, and those businesses are growing and doing really well. And they actually did really well through COVID, funnily enough.”
The firm is now busy raising its next fund, the Hlayisani Venture Fund II, which is getting quite close to its first close. Commaille said most of his firm’s portfolio companies are South Africa-based, but looking further afield.
“Most of them have a South African link, because that’s where our network is and where we think we have a bit of an unfair advantage. We’ve got really good networks, and our deal flow is strong here. So we tend to invest in businesses starting out of South Africa, and then growing into the rest of the world. Most of the businesses we’ve invested in do have some kind of international footprint, and some of them have more than 50 per cent of their revenue that is dollar-based,” he said.
Hlayisani primarily relies on family offices as LPs, but is also growing its institutional side having worked with Standard Bank on a previous fund. It is also an active partner to its portfolio companies.
“Everybody would like to be able to just provide money and not do much more, but we also can’t help ourselves. So we definitely do what we can to ensure a business gets as much success as possible. That means opening our network, to get them customers, to get them further funding, to provide the right expertise…” said Commaille.
This includes helping portfolio companies with setting up international structures when they expand overseas, while Hlayisani also provides access to a peer network of its startup CEOs.
“One of the main things for us is being able to share our operator and investor experience, because we’ve been doing this a long time, and we’re able to help companies in avoiding the potholes that we’ve been through previously or that we can see,” he said.
The aim is to help businesses build a long-term plan, but what that looks like differs from company to company.
“Every entrepreneur and every management team is different in experience, but for us it is about understanding the needs of that individual company, and then seeing how we can best assist,” said Commaille.