Local Venture Capital Fund Formation Is On The Rise In Africa, Led By Nigeria

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Tuesday, October 30, 2018  05.25AM  / By Jake Bright for TechCrunch 7 days ago / Image Credits: TechCrunch

 

Of the 22 African managed and located funds, 9 (or 41 percent) were formed since 2016 and 9 are Nigerian.

 

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Africa’s VC landscape is becoming more African with an increasing number of investment funds headquartered on the continent and run by locals, according to data from Crunchbase.

 

The study also tracked the emergence of homegrown corporate venture arms and more Africans in top positions at outside funds. These results derived from a year-long project to boost Crunchbase’s Africa data capture and increase awareness of its platform across the continent’s tech ecosystem.

 

Drawing on its database and primary source research, Crunchbase identified 51 “viable” Africa-focused VC funds globally—defining viable as formally established entities with 7-10 investments or more in African startups, from seed to series stage.

 

Those who made the list with 7 investments indicated they would reach 10 by early 2019.  

Of the 51 funds investing in African startups, 22 (or 43 percent) were headquartered in Africa and managed by Africans.

 

Of the 22 African managed and located funds, 9 (or 41 percent) were formed since 2016 and 9 are Nigerian.

 

Four of the 9 Nigeria located funds were formed within the last year: Microtraction, Neon Ventures, Beta Ventures, and CcHub’s Growth Capital fund.

 

The research prioritized organizational viability and number of investments over fund and round size. Therefore, the range in typical investment values across the group was wide, with some offering $25K seed investments, and others doing $1 to $10 million rounds at the series A and B stage.

 

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In the group of 51 total funds, TPG’s Growth Fund led the largest round on the continent in 2018 (so far):  $47.5 million to Kenyan fintech startup Cellulant.

 

This has only been topped by the $52 million round to South Africa’s Jumo, but that was led by Goldman Sachs—which (by the information we have) hasn’t invested significantly in African startups, aside from Jumia.   

 

The Nigerian funds with the most investments were

1.       EchoVC (20) and

2.      Ventures Platform (23).

 

Notably active funds in the group of 51 included Singularity Investments (18 African startup investments) Ghana’s Golden Palm Investments (17) and Musha Ventures (36).

At least one corporate venture arm—Safaricom’s Spark Venture Fund—made Crunchbase’s list of 51. The research also tracked a rise in corporate venture funding and acquisition activity.

 

MTN has invested in African startups and Standard Bank added $1 million to Founders Factory’s new African accelerator. Fintech firm Interswitch has been in the acquisition market and established its E-growth Fund to invest in startups.

 

Cellulant CEO Ken Njoroge indicated recently his company will likely go acquisition shopping for local startups in the near future.

 

During the course of Crunchbase’s research sources speaking on background flagged the pending launch of three new African corporate venture arms within the next 12 to 16 months.

 

In addition to tracking more funds on the continent, another emerging trend point was Africans in senior positions at those located elsewhere—including the three that raised the most capital over the last 24 months.

 

Former Nigerian ICT minister Omobola Johnson is a senior partner at TLcom Capital’s $40 million fund. Yemi Lalude is Managing Partner of TPG Growth’s Africa fund, which announced $2 billion in its coffers last year. And at French firm Partech—which raised $70 million for its Africa fund—Tidjane Deme is General Partner.

 

Crunchbase’s overall findings come as a several recent articles (and a heap of Twitter debate) have expressed concern about possible outsized influence of external actors in Africa’s tech ecosystem — primarily East Africa — and bias among VC investors toward non-African founders.

 

More accurate data on Sub-Saharan Africa’s VC could help better inform these discussions.

 

Pinning down solid stats on the region’s nascent startup scene is a budding exercise. The core growth in Sub-Saharan Africa’s tech sector has occurred over the last 5-7 years so there’s less accompanying infrastructure—i.e., analyst reporting, long-term databases, and robust media coverage—than other markets.

 

Some VC firms have taken stabs at quantifying the value of VC investment over select timeframes. In 2017, Village Capital did a report tracking fintech funding in East Africa.

 

The last two years, Partech and media firm Disrupt Africa have done reports on Africa’s annual VC values. Their diverging numbers demonstrate the continued challenges to producing confident stats. Partech’s study tallied 2017 funding to African startups at $560 million, while Disrupt Africa came up with $195 million for the same year.

 

For its part, Crunchbase aims to create as accurate a VC representation for Africa as it does for other global markets. In addition to tracking stats on African funds, the platform has extended its  Venture Program—which allows partners to directly update their Crunchbase data and investments.

 

To date, Crunchbase has added 33 African focused Venture Program partners including Greenhouse Capital, TLcom Capital, Draper Darkflow, Silvertree Internet Holdings, Naspers, Orange Digital Ventures, and Accion Venture Lab.

 

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About The Contributor

Jake Bright is a writer and author in New York City. He is co-author of The Next Africa. He can be contacted vide @JakeRBright

 

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