Brendan Mullen, Rushil Vallabh and Nombuso Nkambule have spent a decade getting their hands dirty in the day to day work of running a small business. Fifteen of them to be exact. The Johannesburg-based team behind private equity firm Secha Capital invests much more than money in companies with potential for growth and job creation. Secha gets deeply involved in operations, both providing and recruiting talent to help their portfolio companies ramp up production, enter new markets, and improve efficiency.
“The upside is, it helps embed the mission and vision and strategy that we have underwritten and expedites value creation,” says Mullen. The firm recently reached a $30 million second close for its second fund, with South African impact investor E Squared Investments becoming Secha’s newest LP.
Local LPs
It has taken three years to get to its latest funding milestone, primarily because Secha is focused on raising most of its capital from local investors.
“Despite there being a decent amount of institutional capital in South Africa, it’s still not that wide and deep,” Mullen says. “There are more LPs, but not many that are flexible and proactive.”
Its goal is to close the fund at $40 million. A benefit to bringing E Squared into the fold is that Secha will be able to tap into an affiliated fellowship program with “the best and brightest high school and university students in South Africa,” says Mullen. “It’s a great talent pool for our model.”
Operational impact
Secha has been busy putting the capital to work in eight businesses since it secured its first LP for its second fund in 2020. Its latest investment is Barracuda, a Cape Town-based manufacturer of circuit boards. Secha team helped recruit a new CEO, as well as a chief of staff at the firm to support enterprise resource planning at its manufacturing facility.
While many investors avoid small business investment funds because of their perceived risks and resource intensity, the LPs Secha in engaging are aligned on its approach to deep operational engagement as a means to sustainable business growth. Mullen says the model also fosters business ownership and career opportunities for young South Africans.
“The emerging market venture capital and private equity space is increasingly realizing we can’t copy and paste models from the US and Europe,” he says. “The longer you’re in it, the more you realize how hard it is to only bring financial capital.”
