Pan-African venture capital fund Launch Africa Ventures today is announcing the close of its $ 36.3 million fund, which it has primarily used to invest in B2B and B2B2C startups across Africa.
In an interview with TechCrunch, managing partner Zachariah George said Launch Africa has backed 108 startups across 21 African countries. They include the likes of Nigerian neobank Kuda, Kenyan B2B e-commerce retail platform MarketForce and Tunisian edtech startup GOMYCODE.
Although these startups have progressed to growth stages, the Mauritius-based firm invested in them earlier in their journey. It typically backs seed and pre-Series A startups and cuts an average check size between $ 250,000 to $ 300,000. Some startups in these stages include Sudanese fintech Bloom, Bostwana-based insurtech Alpha Direct and South African big data platform Carscan.
George says the firm, considered the most active early-stage VC on the continent, will continue to expand its geographic footprint and back startups in other countries. “I can’t think of a single fund that covers many markets as we do,” the managing partner said. “We’re doing deals in the DRC, Madagascar, Sudan, Botswana, Benin, Togo. People use the word pan-African loosely, but when we say pan-African, we truly mean what we do. ”
George launched the firm’s Fund 1 alongside Janade du Plessis at the height of the pandemic in July 2020. The fund achieved its first close in September 2020 and a final close by March 2022.
Both partners had huge finance and investment experience before starting Launch Africa. An angel investor, George worked as a Wall Street bulge-bracket investment banker before co-founding two well-known accelerator programs in Africa: Barclays Rise Growth Accelerator and Startupbootcamp Afritech. On the other hand, Du Plessis held the ex-chief investment officer position at the African Development Bank and founded Abrazo Capital, a social impact-driven investment firm.
Launch Africa, with over 238 retail and institutional investors from 40 countries per its statement, has invested over $ 24 million in its portfolio companies. Most of these investments are one-time checks, as the early-stage VC seldom takes on subsequent rounds.
“In fund one, we have limited capacity for follow-ons. If we were to reserve a significant portion of our fund for follow-ons like many other funds do, we would not be able to cover the entire continent and multiple regions and products, ”said George. “Any of our portfolio companies that need significant capital at the next round of funding, we provide an opportunity for our LPs to back them.”
Launch Africa says it helps LPs with due diligence and waives fees when they invest alongside the fund’s lead checks. These LPs have deployed over $ 14 million in Launch Africa portfolio companies.
“The Launch Africa team works with founders and expert advisors to fast-track exit opportunities for investors.” said du Plessis in a statement. “Providing our exit strategy during these challenging times instills investor confidence and brings significant benefits to the African tech ecosystem.”
Some of Launch Africa’s LPs include German fintech-focused CommerzVentures. The firm’s managing partner Patrick Meisberger said his firm was “pleased to partner with Launch Africa Ventures to invest in some of the most exciting fintech investment opportunities in Africa.” Fintech contributes heavily to Launch Africa’s portfolio; over 38% of its companies are from that segment. The rest include e-commerce and marketplaces (16%), healthtech (13%), logistics and mobility (12%), data analytics / AI (11%) and edtech (7%).
Venture capital firms like Launch Africa sometimes come under heavy fire for backing too many companies within a short period. Yet, George views the company’s strategy as necessary given the stage Launch Africa plays and the broader Africa’s early venture capital market.
“There’s very little strategic non-financial value among the pre-Series A investment on the continent. Most of the money that comes at the early stages are from angels, friends and family and accelerators, and very regional VC firms. There’s nothing wrong with that. I mean, it’s the backbone of any mature industry, ”he said. “But it’s very important to have a plan to scale into multiple geographies and product verticals, and you can’t do that by playing low.”
George asserts that the ability to invest significant capital at the early stage and founder-friendly terms with a lot of non-financial value-adds accelerates a company’s growth from what would typically take three to four years to as little as 12 to 18 months. “That’s the benefit of positioning ourselves as specialists in early-stage investing,” George said.
Launch Africa doesn’t intend to slow its pace despite the gloomy VC landscape; the firm might double down on some of its portfolio companies at better discounts. Like a few local investors that have spoken with TechCrunch recently, Launch Africa said it would provide follow-on capital – via bridge and extension rounds – especially to those going through cash crunches.
“We are working hand in hand with each portfolio company in capital preservation and revenue generation for their unique business challenges,” he said Margaret O’Connor, the company’s board chairperson to TechCrunch. “We are trying to help the founders understand how to navigate challenging macroeconomics and focus on how to make more money more quickly so that they continue to grow.” O’Connor has experience as an entrepreneur, MasterCard executive and government advisor in the US, the UK, Asia and Europe in her investment management portfolio.
That said, Launch Africa is not solely interested in holding the moniker of Africa’s most active early-stage fund. It also wants to build a reputation for taking diversity and inclusion into account. The firm claims these themes are “central to its investment ethos”, as shown by two metrics: 91% of founders in its portfolio are African, while 20% are women.