Activity around African venture capital firms raising funds continues to increase as we head towards the end of the year. In the latest development, Abuja- and Lagos-based Ventures Platform is today announcing the first close of its $40 million pan-African fund.
The fund, founded by one of Nigeria’s most active early-stage investors, Kola Aina, has made 69 investments since 2016. Ventures Platform’s news is also coming a day after another pan-African VC firm 4DX Ventures secured the final close of its $60 million fund.
Aina, the firm’s founding and general partner, said he used his own money for the first set of investments made by the firm. Then, Ventures Platform experimented with an accelerator model, where it gave a standardized check of $20,000 to pre-seed to seed-stage startups in exchange for 10% equity.
In 2017, Ventures Platform took outside capital for the first time by forming syndicates. Within this two-year period, some of the startups it invested in included Piggyvest, Paystack, Kudi and Thrive Agric.
“We wanted to perfect our style of finding high-performing companies early before they become obvious and backing them with everything we bring to the table from our experience as operators ourselves,” Aina told TechCrunch over a call.
“We didn’t want to go out and try to fundraise when we didn’t really have evidence that we could make money out of this.”
Ventures Platform became one of the local investors that cashed out from Paystack’s $200 million+ exit to Stripe. With a few other secondary exits under its belt, Aina said he felt this was the perfect time for the firm “to go to the market and raise its first institutional fund.”
Though the first close of Ventures Platform’s first institutional fund is undisclosed, Aina noted that “it is a sizeable amount.” Interestingly, the limited partners (LPs) involved are Nigerian- and African-based, which is a testament to the growth in the size of local investors’ checks in funding the region’s most innovative companies.
Paystack CEO Shola Akinlade is one of these LPs. Others include the Nigeria Sovereign Investment Authority (NSIA); UAC Nigeria, one of Nigeria’s oldest companies; VFD Group; and global investors such as Y Combinator CEO Michael Seibel and Adam Draper.
“We’re proud that for this first close, a large part of our capital came from local funding. I gave a TED Talk titled ‘who would own our future unicorns’ and I’m so proud of this because it seems Africans are answering loud and clear that we would own them too. So this was a nice mix of Nigerian corporates, family offices, institutions, as well as global investors.”
Aina mentioned that it took a conscious effort to accept only local capital for its first close. And while a few investors from Europe, the U.S. and Asia took part, he said they would feature heavily (including institutional investors and DFIs) in the second close, which will occur early next year.
“It was very deliberate. For us, it was strategic, getting local capital for our first close. I mean, the second close, as you will see, will be from global fund of funds and DFIs where we’ve got commitments. Still, ultimately, as much as foreign capital is critical, I think it’s an interest of foreign capital to be in bed with local capital from a derisking standpoint.”
Ventures Platform sees itself as a thesis-centred fund. Aina said the fund’s thesis is centred around funding market-creating innovations that solve non-consumption and create innovative new ways to deliver goods and services or services to low-income markets. The firm is focused on six core verticals: fintech, edtech, agritech and food science, healthtech and bioscience, enterprise SaaS and digital infrastructure.
Because the pan-African firm relied on syndicate and proprietary capital funds in the earlier stages of its lifecycle, it couldn’t take on follow-on rounds in its portfolio companies, including the likes of Tiger-backed Mono and SeamlessHR.
These startups have cumulatively raised more than $500 million in follow-on rounds, and Aina notes that his firm is keen on participating now that it has secured the first close of this fund.
“We have a pretty robust pipeline of companies that we’ll be looking at across the continent, as well as our portfolio companies that have raised new rounds of financing. We’re looking for interesting companies that fit our thesis and what’s compelling now is that we have a follow on capital to fund them,” he said.
Ventures Platform primarily focused on pre-seed and seed with an average check size of $50,000, but this fund provides the opportunity to participate in Series A deals. Now the firm will be able to write more than $1 million to companies (including follow-on rounds) over their life cycle.
The Abuja-based venture capital firm is also deepening activity in other regions outside Nigeria — Kenya’s MarketForce and Tambua Health, Zambia’s Union54 and Egypt’s MoneyHash. It plans to invest more in these regions and Francophone Africa.
Of the firm’s 69 companies, 30% have passed through Y Combinator. Aina says that while part of this success can be attributed to YC being a partner, he believes his firm has a knack for picking quality companies.
Only a few venture capital firms in the Nigerian and African tech ecosystem can boast similar YC stats with Ventures Platform. For startups, being part of these firms’ portfolios represents a marker of success, but some VC critics believe these sorts of numbers are inevitable for firms that employ “pray and spray” tactics.
Aina defends his firm, saying that as an “early-stage discovery fund,” Ventures Platform’s role involves identifying many companies to back early and invest in subsequent rounds of few.
“I think every fund has its strategy. Ultimately, because of the stage at which we invest, a key part of our strategies is to fund a large batch of companies at the pre-seed stage, and what you see is that funnel would narrow as time goes on. With this new fund, we now can double down on our winners, which is good for the companies and also good for us at the point of exit.”
Ventures Platform said it would onboard well-known figures across African tech as venture partners as part of a move to deepen its expertise further. The first and only disclosed partner for now is Seni Sulyman, the former vice president of global operations at Andela and CEO of BlackOps, a talent marketplace for African venture builders and operators.