Investment

What are the top VC firms investing in African startups?

Top VC firms investing in Africa - Startup Lagos

As venture capital (VC) investment in Africa continues its accelerated spread, across many market sectors, it is interesting to see which VC firms are investing the most in African startups. While investments are increasing rapidly, it is apposite to note that a bulk of African startups are still cut off from easy access to these funding opportunities. A significant number of locally-led startups struggle with access to these opportunities for growth, especially with challenges that come from mistrust and apprehensiveness from foreign investors.

With investment reaching over $2.5 billion already this year, according to Maxime Bayen and Max Cuvellier, understanding which VC firms are stimulating growth for tech startups is important for startups looking to positioning themselves to capture investment. As VC firms that have concluded deals with African startups from 2019 number over 800+ on the continent, about 86% of that number are headquartered in Africa.

Five of these investors share a combined pool of over 176+ completed deals in investments in African startups from 2019 till date. These investors have not only been actively involved in funding on the continent, they are likewise actively interested in co-creating and fostering the growth of these startups across Africa.

Kepple Africa Ventures

From 2019 till date, Kepple Africa have invested in over 45+ deals on African tech startups. With the singular goal of co-creating value and stimulating growth on the African continent, Kepple Africa Ventures is a Japanese VC firm, with branches in Nairobi and Lagos, focused on funding early-stage startups on the African continent. Its investment portfolio spans over 96 companies, in over 11 countries across Africa. From Riby to Bamboo Finance, to Termii, to Decagon, this VC firm is tech-focused, and sector agnostic, with interests in East and West Africa predominantly.

Top VC firms investing in Africa - Startup Lagos
Founders of Kepple Africa Ventures

The VC firm generally make seed investments between $50,000 to $150,000, with a due diligence infrastructure that helps them vet and complete deals within two weeks from end to end. This year alone, the VC firm has invested in over 29+ deals, with footprints in many top performing startups across the continent.

Launch Africa Ventures

A pan-African fund, aimed at solving the funding gap challenges on the continent, Launch Africa ventures targets B2B and B2B2C early-stage tech startups. Managing Partner at Launch Africa Ventures, Zach George, describes the work he’s doing with the VC firm as an extension of his initial motivations with the Startupbootcamp accelerator. He highlights in a very insightful interview session with Marc Bromhall of African Tech Story, that it would be pitiable if startups fail because of lack of access to funding. The most understandable reason for failure for startups would rather be, for him, the inability to attain product-market fit.

Top VC firms investing in Africa - Startup Lagos
Zach George, Managing Partner at Launch Africa Ventures

As a result, the primary aim of Launch Africa Ventures is to fill this need of startups in Africa to easily access funding for their initiatives. Backing over 56 companies since their inception in 2020, Launch Africa Ventures is focused on startups that are beyond the ideation/MVP stage, and are on, at least, over $20,000 in monthly revenue, and have interests in geographical expansion after 12 months of investment backing.

With a 7-year aim, the VC firm’s key strategy to exit is through selling selective stakes in portfolio companies, whether fully or partially, as subsequent funding rounds happen. Since 2019, the company has completed over 44+ investment deals, with support for startups like Chekkit (Nigeria), MarketForce (Kenya), Omnibiz (Nigeria), Strove (South Africa), among others.

Y Combinator

With a revolutionary model for funding early-stage startups, Y Combinator has transformed the tech ecosystem in the continent, funding a large number of African startups. With a broad portfolio spanning more than 2,000 companies globally, with a combined valuation of over $300 billion, Y Combinator has made wide impact across the globe. The VC firm invests a meager amount of $125,000 on a large cohort of startups, twice a year, aside from other investments that the startup may get on pitching day.

Shola Akinlade, CEO of Paystack, at the ongoing global fintech conference, Money20/20, points out how as a startup, Paystack were the first Nigerian company to get into Y Combinator and five years later, over 28 Nigerian companies, and about 60 African companies have made it into the renowned accelerator programme. Nale, the Tanzanian-based fintech startup, was the first African startup to get into the programme in 2016.

This year, Y Combinator has completed over 27 deals in African tech startups, with a focus on early-stage growth.

LoftyInc Capital Management

An African-focused fund, targeting early-stage startups across Africa, LoftyInc Capital Management was created in 2017, with its base in the United States. As the Founding Director and Managing Partner at the firm describes, LoftyInc Capital Management is dedicated to investments that help to align profit with purpose. Co-founded by Michael Oluwagbemi, Marsha Wulff, and Idris Ayodeji Bello, the fund is impact-focused, with interests in investing in logistics, printing services, commercial services, fintech, edutech, and a number of other specific sectors.

Top VC firms investing in Africa - Startup Lagos
Michael Oluwagbemi, Marsha Wulff, and Idris Ayodeji Bello, Co-founders of LoftyInc Capital Management

Just recently, the fund had launched its third fund at about $10 million for African tech startups, with support and participation from other institutional investors. This year, the fund has invested in over 23+ deals on the continent, with a track record of success in investing in African startups. The VC firm had reaped significant returns from its investment in Flutterwave (pre-Series A) in its second fund.

Flat6Labs

This VC firm is the most prominent seed and early-stage VC firm in the MENA (Middle-east and North Africa) region, with investments in over 100 tech startups. The startup accelerator is interested in funding startups with innovative and scalable solutions to different challenges. With micro-seed funds run for Bahrain, Lebanon, Egypt, Tunisia, Saudi Arabia and the UAE, the VC firm has pronounced impact on the Northern region of Africa. It was founded in 2011 by Ahmed El-Aifi and Hani El-Sonbaty.

Top VC firms investing in Africa - Startup Lagos
Bahrain Bourse signs an agreement with Flat6Labs
Source: BizBahrain

In Egypt, they have continually invested in over 40+ companies since last year, with one exit in less that two years, and a number of these startups raising follow-on funding. According to Hani El-Sonbaty, Co-founder of the regional VC, there are a wealth of opportunities that the digitization of various industries in Africa offer for growth and investment returns. This new revolution of companies would be financed by venture-type and risk-type capital. This marks, in his opinion, the beginning of hyper-growth of the venture capital industry in the continent.

The future focus of VC firms

With Africa’s increasing success in exits especially this year, VC firms are keen on the impact-driven dividends of investing in Africa, as well as the financial rewards that come alongside. With this, there is significant growth across the various sectors, financed by these top institutional investors stimulating innovation and technological disruption across multi-sector channels on the continent.

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