Venture capital funds are starting to make bigger bets on African startups

Yaba, Lagos’ startup ground zero.
Yaba, Lagos’ startup ground zero.
Image: Reuters/Akintunde Akinleye
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Funding has long been a challenge for African startups but the tide has started to turn in the last year as the sector heats up and both investors and entrepreneurs start to see some of their long term efforts come to fruition.

In the recent past the biggest issue startups from Lagos to Nairobi or Cape Town and Johannesburg would complain about was the lack of venture funding and the lack of options when it came to seeking funding. They’d look on forlornly as startups in admittedly much bigger markets like Silicon Valley or New York literally raised tens of millions of dollars in a Series A round.

One of the key challenges has been that much of the capital the drives global venture funding are in markets in the United States or London where the investors are used to deploying sums that were often too large for the early stage of development of the African startup sector. This ended up often meaning little capital was being deployed outside the scope of grants and a narrow slice of impact investing.

That’s beginning to change this year as more funds are being launched to focus specifically on African startups with loftier ambitions than providing a $50,000 grant.

This week, Africinvest, a Tunis-based private equity firm partnered with Cathay Innovation—a subsidiary of Paris-based private equity firm Cathay Capital to launch a new pan-Africa focused tech venture fund with a target raise of $168 million.

Meanwhile, Seedstars, the Swiss group which organizes startup competitions in emerging markets, is partnering with First Growth Ventures’ founders Tamim El Zein and Maxime Bouan to launch a $100 million sub-Saharan Africa venture fund.

Unlike the Africinvest fund, which is focused on the development and scaling up of innovative companies that have previously demonstrated strong growth in Africa, the Seedstars fund is focusing on early stage investments in promising ventures across sectors and countries. The Africa venture fund is the first of a series of regional funds Seedstars will launch in the coming years to continue the mission of accelerating and supporting entrepreneurs at all stages.

AfricInvest partnership with Cathay Innovation is looking to capitalize on presence of both companies and their networks in Africa and Europe to provide mentorship and partnerships that will lead to geographical expansion with the aim of building leaders in the funded sectors.

The fund is focused primarily on Series A to C-stage investments in African technology companies and will be looking towards the creation of new digital infrastructures and services to speed innovation in the continent.

The fund is looking to increase human capital in the continent by creating high-tech jobs could make its first investments as early as summer 2019.

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