$100m Pan-African venture fund targets start-ups


A Sub-Saharan Africa fund targeting $100mn to make early-stage minority investments from USD 250,000 to USD 5 million in the most promising and innovative ventures across sectors and countries in Africa, is being launched by Seedstars in partnership with First Growth Ventures.

Called the Seedstars Africa Ventures, the fund is expected to make its first investments by the end of this year. The partnership between Seedstars and First Growth Ventures was announced last month at the Seedstars Summit in Lausanne. Seedstars, a notable startup community for emerging markets active in over 80 ecosystems, says it offers unrivalled deal flow, market access and startup support programs. With activities in over 20 sub-Saharan Africa markets and physical hubs in key countries such as South Africa, Nigeria, Ivory Coast and Tanzania, the fund is being developed on strong foundations, the company says in a statement.

The First Growth Ventures founding team brings investment and support experience covering tech startups and high growth enterprises in Africa, Europe and MENA. The partnership structure allows for independent decision-making, enabling the fund to target both Seedstars accelerated start-ups and other companies.

African growth has consistently exceeded that of developed economies in the past 15 years according to the World Bank, providing numerous investment opportunities. While later-stage funding is becoming increasingly available with analysts recording an increase of late-stage transactions of up to 45 percent in 2018, enterprises across the continent struggle to find long term, early-stage capital. Early stage transactions have only grown by 10 percent in 2018, emphasizing a VC gap for young companies, Seedstars noted in a statement.

Charlie Graham-Brown, the Chief Investment Officer at Seedstars, said the organisation has been working for six years to close the entrepreneurial ecosystem gap in emerging markets through various startup focused initiatives.

“Since 2017 we have been actively investing at a seed stage and although venture capital investment volumes in Africa grew to over a $1bn in 2018, Europe, a similar sized region, had volumes near $20bn. This fund will help reduce this VC funding gap and in turn contribute to reducing the GDP gap,” he said

The investment team’s experience in portfolio support and institutional fund management will be leveraged to accompany entrepreneurs in their growth. Entrepreneurs will also benefit from the support of Seedstars’ local and international networks, training programs and infrastructure, which it says have so far allowed 44 per cent of their cohorts to raise significant follow on funding, similar to what the best US accelerators have achieved.

“The challenge of providing quality early-stage support across the continent is one of the main reasons explaining the lack of early-stage funding at this scale. Partnering with Seedstars who has a demonstrated ability to assist companies where they need it most will help us bridge that gap,” said Tamim El Zein, partner at First Growth Ventures.

Most venture funds focus on finding the next African tech unicorn in only a few ecosystems, and according to Seedstars, unicorns are rare on the African continent. Seedstars Africa Ventures will also be searching for “Gazelles”: post-commercialisation, scalable, high growth companies that abound on the continent outside the three main VC markets. Some of Africa’s most successful companies have developed products and services addressing the needs of the entire population, beyond the digital frontier, and these ventures will also be on the radar for the fund.