South Africa is home to many venture capital (VC) firms, however, with a growing number of startups there is definitely room for more. In a world of overhyped valuations and post-pandemic market corrections, South African founders and investors alike are asking the hard questions: What does it really take to build a startup that lasts? And who’s helping founders focus on what truly matters, beyond the next flashy pitch deck?
Enter Baobab Venture Partners (Baobab), a newly launched South African company with a clear mission: to back South Africa’s most resilient and sustainable early-stage businesses. But instead of chasing the next African unicorn, Baobab is doubling down on the foundations of a successful startup – governance, internal controls, operational discipline, and unit economics from the start.
“In our view, resilience means the ability to navigate market volatility, regulatory shifts, and funding cycles with strong governance and clear commercial logic,” says Fred Pelser, co-founder of Baobab Venture Partners. “Sustainability isn’t about greenwashing; it’s about business models that endure.”
Venture Capital in South Africa: A Growing Landscape
The VC landscape in South Africa is quickly growing. According to a report by theSouth African Venture Capital and Private Equity Association (SAVCA), a total of R3.29 billion was deployed to startups in 2024. Of this, R2.62 billion was allocated to equity deals, with an additional R670 million issued as venture debt, the first time this asset class was formally reported by fund managers.
Notably, Series A funding accounted for 42.5% of all deals, more than double the amount recorded in 2023, indicating a decisive shift toward funding ventures at the early-growth stage.
This signals growing investor confidence in scalable South African businesses and underscores the increasing need for firms like Baobab, who are offering more than just capital, they are delivering long-term value through governance, operational support, and accountability.
What Baobab Venture Partners Brings to Early-Stage Startups
Founded earlier this year, Baobab Venture Partners is an early-stage investment firm focused on supporting South African entrepreneurs with capital, strategic guidance, and hands-on support. Their model emphasises governance and execution as equally important to funding.
The company’s investment thesis is rooted in five pillars:
Stage: Early revenue or meaningful traction, pre-revenue considered if supported by credible contracts, pilots, or technology.
Role in funding rounds: Primarily participate as a co-investor, partnering alongside aligned investors in pre-seed, seed, and selective Series A rounds.
Ticket size: Guided by venture fundamentals
Geography: Primarily South Africa, with selective pan-African or international opportunities where synergies exist.
Sectors: Fintech and technology-enabled ventures, with preference for scalable, sustainable businesses demonstrating a clear path to profitability.
“While many VC models are comfortable backing a concept at the idea stage, at Baobab we look for something more tangible,” says Pelser. “Credibility at the pre-revenue stage means you have validation, whether that’s a reliable technology stack, signed commercial agreements, or real pilot engagement with users.”
Why Startup Governance Is Now Non-Negotiable in African VC
When speaking to local investors about the weaknesses of early-stage ventures, one of the most critical aspects is weak governance and governance structures. As the ecosystem matures, system fragilities become more visible, from poor internal controls to lack of strategic oversight.
To address this, Baobab has made governance a pillar of its VC support. Fred says that governance and operational clarity are no longer ‘nice-to-haves’ but critical growth levers that enable resilience.
“Governance and operational clarity are no longer ‘nice-to-haves’,” Pelser asserts. “They’re critical growth levers. Startups that neglect these aspects often fail not because of product-market fit, but because of operational chaos.”
For Baobab, startup resilience is grounded in the following:
Strong internal controls
Clear go-to-market strategy and execution
Clearly defined KPIs
Scalable unit economics
A credible and measurable route to revenue
“We often see startups with no formal board, no financial separation between personal and business accounts, and limited cash burn discipline,”,” Pelser notes. We believe in tailoring the right level of support for startups enabling them to focus on product, innovation, and execution."
In early-stage investing, mentorship and strategic input are often as valuable as capital. Baobab's hands-on approach reflects this understanding, as the firm prioritises founders who are building with discipline.
Here’s what Baobab looks for:
Operational Benchmarks
Demonstrated product-market fit
Pilot contracts or user adoption data
Early signs of repeatable revenue
Comprehensive go-to-market strategy
Governance benchmarks:
Advisory board structures (even if informal)
Basic financial controls and clear separation of duties
Leveraging of increase-based reporting, not just tracking of cash
Scenario planning and early KPI discipline
“Startups don’t need a CFO from the start, but they do need the bones of structure. At Baobab we address this by working with founders to develop lightweight but effective reporting and controls that evolve with growth,” explained Pelser.
GRC and Investor Confidence: What Startups Must Know
When investors do due diligence, they want to see that a startup is compliant. Here is how:
Trust – Compliance demonstrates that founders care about safeguarding data, managing risk and protecting operations.
Transparency – Transparency is a great way to gain investor attention. Startups that are compliance ready make it easier to share accurate information during investor due diligence and help streamline the funding process.
Futureproofing – Startups prioritising governance and compliance are seen as less risky and more futureproof to investors. They present themselves as prepared for any legal challenges or audits and investors can clearly see they won’t hit any unexpected legal troubles.
“Many founders underestimate the importance of legal and IP structuring in the early stages of their venture. It’s critical for the founder to have a clear plan and understanding of the commitments being made, both at inception and as the business scales. We guide founders by helping them prioritise decisions in line with their growth objectives, ensuring alignment between their product roadmap, investor expectations, and the long-term market opportunity,” explains Pelser.
The Road Ahead: Unlocking the Future of VC in South Africa
Looking, Fred says the aim is to go beyond capital deployment. He sees a future where VCs play a stronger role in advocating for regulatory reform, engaging governments, and unlocking capital from institutional players.
“At Baobab, we are committed to strengthening governance in new ventures while advocating for more enabling, less cumbersome regulatory frameworks. This combination should make it easier for founders to bring their businesses to market,” he says.
In terms of sectors to watch, Pelser is particularly excited about the potential of edtech to drive long-term impact.
“Unlocking access to quality education has the power to liberate potential, fuel innovation, and create long-term economic resilience.Edtech can play a transformative role in shaping Africa’s next generation of entrepreneurs and problem-solvers. However, its ability to scale will depend heavily on advances in infrastructure, particularly improvements in data access and affordability.”
Building Durable Startups for Africa’s Future
Baobab Venture Partners is betting not on hype or unicorn chasing, but on disciplined, well-governed startups that can withstand the unique challenges of building in Africa. By focusing on governance as a growth catalyst, they are not only de-risking their investments, but helping to shape a stronger, more resilient startup ecosystem.
In a fast-evolving market where capital is increasingly available, Baobab Venture Partners’ governance-first approach might just be what separates the startups that scale, from those that stumble.
Lungile is the Digital Editor for Startup.Africa, with a knack for storytelling, technology and innovative ideas. Working with Startup.Africa, she takes simple ideas and turns them into amazing stories.
Lungile Msomi
