5 VC firms investing in early-stage African tech companies

Over time, venture capital has become a crucial source for startups and young businesses to get funding. Venture capital firms fund and mentor early-stage startups or young businesses with long-term growth potential.

These VC firms focusing on Africa provide a lever for upcoming tech startups and innovation to fly and expand their product delivery. They also offer the technical know-how these founders need to run their operations.

Africa, particularly Nigeria, Kenya, South Africa and Egypt, have consistently benefited from venture capital investment. According to a report in 2021 by AfricArena based on data released by Partech, which predicts venture capital funding for African startups, VC investment was projected to climb sharply to between $3.8 billion and $4.7 billion in 2022, while the upper range was expected to be $6.8 billion by 2023. By 2025, VC investment in Africa was forecast to exceed $10 billion.

In confirmation of that data, Start-ups in Nigeria and other African countries raised $5.4bn in 2022, according to a report by Briter Bridges. The bulk of these funding activities took place in the “big four” markets of South Africa, Nigeria, Kenya and Egypt, while there was growth in activity across many other ecosystems.

It is essential to note that a venture capital firm is an investment company similar to private equity that focuses on providing money or human resources to a startup with the potential to develop. Only if the startup eventually develops to its predicted potential will the ordinary VC firm be able to recoup its investment.

This article looks at 5 VC firms investing in early-stage tech startups in Africa and their influence on their growth over time.

Y Combinator

Y Combinator (YC), a startup fund and program established in 2005, is a startup accelerator that provides seed funding, mentorship, and resources to early-stage companies. It organises an intensive three-month programme for tech founders globally biannually and funds them with up to $500,000 (previously $150,000).

The program then culminates in a Demo Day, where the companies present their progress to a room full of investors.

YC has invested in nearly 3,000 companies, including African companies like Flutterwave, Paystack, Cowrywise, MarketForce, Kudi, WaystoCap, WorkPay, Healthlane, Trella, 54gene, CredPal, NALA and Breadfast). The combined valuation of the VC firm is over $300B. YC has programs and resources that support founders throughout the life of their company.

After the 3-month program, founders become alumni and still get access to many resources, an incredible alumni network, mentorship from some of the most successful people in Silicon Valley, the brand benefits that come with being YC alumni, and more.

In 2009, the VC firm made its first entry into Africa with the now-defunct Petasales. However, there’s little to no information about them online. In 2012, Senegal’s Wave got into Y Combinator, signifying a major entry into Africa for YC.

Since then, Africa’s YC-backed startups have raised $1.3 billion as of March 2021, with two of them, Wave and Flutterwave, reaching a billion-dollar valuation. Their headline-grabbing stories show investor attraction for YC-backed companies.

Other well-known organizations can be found, such as Techstars, 500 startups, and AngelPad. However, YC has developed to have a big global presence and a sizable impact in Africa.

Techstars

Techstars run one of the largest startup networks in the world, with over 8,000+ founders, 5,000+ mentors, 300+ corporate partners, thousands of investors, and 54 programs in 14 countries.

The VC Fund and Mentorship-Driven Accelerator Program invest in innovative and disruptive companies and supercharge success. Techstars Startup Programs inspire, educate, and connect entrepreneurs and help brands create products and services through its corporate innovation partnerships.

Techstars accelerator portfolio includes over 1,000 companies with a market cap of $8.1 billion. It runs an intensive 90-day, mentorship-driven program for startups and entrepreneurs. They also select around ten companies from a large pool of applicants for each program.

Around 90% of startups who go through the Techstars program get funded. The average investment is $2 million.

In April 2022, Techstars, in partnership with ARM Labs, a Lagos-based innovation program focusing on fintech startups, announced the launch of ARM Labs Lagos Techstars Accelerator Program, which aims to invest in early-stage fintech and proptech companies based in Africa.

Since then, based on data available on the Techstars startup directory, the global accelerator has backed over 50 African tech startups across various countries, including Nigeria, South Africa, Kenya, Mauritius, Tanzania, Ghana, Benin, Rwanda, Egypt and Uganda. Although over 48% of Techstars’ investment in Africa has been targeted toward Nigerian startups.

Convergence Partners

Convergence Partners, founded in 2006, is an investment management firm focused on Africa’s Telecommunication, Media and Technology (TMT) sector. Convergence Partners has a proven track record of developing new investment opportunities and actively adding value to investments across the life cycle of ICT assets.

As a seasoned pan-African private equity player, it invests as value-adding partners in private equity and infrastructure opportunities across sub-Saharan Africa’s technology and digital sectors. It has an asset base above $500 million, which it deploys across Southern, East and West Africa through three funds.

The VC firm 4DI, the provider of IT infrastructure solutions Dimension Data, and the operator of fibre network Fibreco are among the companies in Convergence Partners’ portfolio. Launched in June 2020, the Convergence Partners Digital Infrastructure Fund saw a first closure of $120 million in July 2021.

The leading private equity investor dedicated to the technology sector across sub-Saharan Africa recently said it has successfully raised $296 million, bringing total funds under management to more than $600m. The amount raised surpassed its initial target by over 18%, despite subdued private capital fundraising on the Continent in 2022.

Ingressive Capital

Founded in 2017, Ingressive Capital is a venture capital firm based in Lagos, Nigeria. Ingressive is a $10M VC targeting tech-enabled startups in Nigeria, Kenya, Ghana and Egypt.

The fund is Delaware-incorporated and headquartered in Nigeria. It targets 10% ownership in Pre-Seed to Seed tech-enabled companies based in Sub-Saharan Africa with typical check sizes of up to $400k.

They look for post-launch founders with great products that solve big problems in addition to the follow-on funding with the company’s investor base, who run some of the top funds in the world. They work with them on ways to grow and scale through business development, partnerships, and financial support.

Launched three years ago, It has become one of Africa’s most recognised early-stage VC funds. Before its $10 million fund was completed, Ingressive invested $50,000 to $100,000 in startups, but now, it has doubled that. For perspective, Ingressive Capital’s ticket size is larger than that of the US-based accelerator, Y Combinator. Its portfolio includes Paystack, Bamboo, Tizeti, 54gene and many others.

Ventures Platform

Founded in 2015, Ventures Platform is a VC firm based in Abuja, Nigeria.

Ventures Platform Fund is a discovery fund that invests in early-stage mission-driven founders building capital-efficient platforms that democratise prosperity, plug infrastructural gaps, connect underrepresented communities, solve for non-consumption, and improve livelihoods in Africa.

They are also a seed-stage fund and accelerator that actively finds funds and supports innovative companies solving real problems across Africa. They majorly invest in perceived ambitious founders who are growing sustainable companies, have a clear path to revenue, and operate scalable tech-enabled business models.

This year the VC firm made its first entry and investments in Egypt and Zambia. The company also invested in 28 new companies in 2021 across four countries, Nigeria, Kenya, Egypt, and Zambia. Overall, companies in its portfolio include Printivo, Tizeti, Thrive Agric, crowdForce, Accounteer, Kudi and Reliance HMO.