African startups continue to emerge with innovative ideas and solutions in fields like finance, technology, blockchain, education, health, and more. However, as these startups have been largely funded by foreign venture capital (VC) firms over the years, African VC firms are trying to change the narrative and even fund businesses better. So, while African VC firms are doing enough to come to the scene, some people don’t know the best venture capital firms in Africa for startups. This article will highlight them.
What Is A Venture Capital (VC) Firm?
A venture capital (VC) firm is a private equity-like investment firm that specializes in providing funds or human capital to a startup with the potential to grow. As such, the investment of the VC firm is only profitable when the startup grows to the expected potential. This case is similar to venture capital financing in cryptocurrency and investment in stocks with high dividends.
In most instances, VC firms get funding from wealthy investors and partners, as they usually take a minority stake in any startup that interests them. So since they hold minority stakes in companies, the average VC firm will have stakes in many startups. The list of startups that a venture capital invests in makes up its portfolio.
Meanwhile, a VC investment is risky as its reward is a function of the startup’s productivity. If the startup succeeds, the investors profit, and funds may be lost if things go south. On the part of the startup, you are not obliged to pay back the grant to the venture capital firm if the startup does not grow. This makes VC firms one of the best sources of funding.
Best Venture Capital Firms In Africa
1. Ventures Platform
Ventures Platform was founded by Kola Aina in 2016, claiming to invest in founders building the future of Africa. These claims have come at par with the number of investments the firms have made over the years.
This company initially had a cheque size capped at $50,000. But there was a change after Ventures Platform raised a $40 million pan-African fund in 2021, leading to the eligibility of the company to invest over $1 million in pre-seed and seed startups.
Ventures Platform invests in startups across various fields, including HealthTech, Logistics, Insurtech, AutoTech, SaaS, AgriTech, EdTech, etc. This VC firm has invested in notable startups such as Piggyvest, Paystack, Bitnob, Brass, and Bloc.
2. Techstars Accelerator
Techstars operates over 40 accelerators across the world, with its presence in Lagos, Nigeria. On different occasions, African startups have been admitted to accelerators like Techstars Toronto, Techstars New York, and Techstars Barclays Accelerator.
For instance, Techstars Toronto admitted 10 African startups, and ARM Labs Techstars welcomed 12 startups in 2023. Major interests of this VC firm include Fintech, e-Commerce, Proptech, TalentTech, and MobilityTech. Selected startups for the funding receive a $120,000 cheque, tailored startup programming, and entry to Techstars’ robust network.
Techstars’ portfolio includes startups such as Peppa.io, CDCare, Vittas, Salad, and Sidebrief.
3. Voltron Capital
Voltron Capital focuses on investing in early-stage startups in the areas of Fintech, Heathtech, and Edtech. This VC firm is driven to support outstanding African entrepreneurs and is dedicated to addressing major challenges in larger markets.
Startups in Voltron Capital’s portfolio can receive funding ranging from $20,000 to $100,000. Some of the startups in its portfolio are AltSchool, Bamba, Allawee, Bujeti, and Chargel.
4. Y Combinator
Y Combinator is one of the most successful accelerator programs in the world. This program is notable for offering funding, mentorship, and connections that support entrepreneurs throughout their business lifecycle.
Startups in Y Combinator’s program receive $500,000 funding, structured as $125,000 for 7% equity and an additional $375,000 through an uncapped SAFE note. This VC’s investment is across various sectors such as e-commerce, Fintech, Edtech, Artificial Intelligence (AI), Analytics, etc.
Some startups that have benefited from this funding are Flutterwave, ChowDeck, Prospa, Nomba, Kobo360, etc.
5. Renew Capital
Renew Capital is an investment firm that supports innovative companies with high potential for growth. Founded in 2007, this Ethiopia-based company runs exchange hubs across sub-Saharan Africa, engaging in activities such as organizing capital and building a channel of investment opportunities. Others include offering support to investments and providing executive training programs.
This investment company focuses on startups in e-commerce, Healthtech, and MobilityTech, investing an average of $228,000. African startups in Renew Capital’s portfolio are Wazi, Badili, and Xente.
6. Catalyst Fund
The Catalyst Fund functions as a pre-seed fund and an accelerator. It supports innovative tech startups driven to enhance the resilience of underserved and climate-prone communities in emerging markets. The accelerator invests in areas like e-Commerce, Edtech, Insurtech, Agritech, and CleanTech.
Institutional investors like JPMorgan Chase & Co., Mastercard Foundation, and Rockefeller Philanthropy Advisors support this fund. The Catalyst Fund provides grants ranging from $2,500 to $15,000 to individuals and startups in climate resilience, digital commerce, and inclusive fintech.
Some startups in its portfolio include Turaco, Jetstream, Lami, Wasoko, and Indicina.
7. International Finance Corporation
International Finance Corporation (IFC) has made staggering investments worth over $60 billion in African businesses over the past six decades. This is a sister organization of the World Bank and a member of the World Bank Group, providing funding to startups in fields like Healthtech, e-Commerce, Agritech, Cleantech, Edtech, etc.
Notable startups that have benefited from the fund are Kobo360. Naked, Nuru, Lulalend, Anka, and CSquared.
8. DOB Equity
DOB Equity is a venture capital firm headquartered in the Netherlands. The firm focuses on scalable, innovative, and high-impact companies that address social and environmental challenges, with special emphasis on the East African region.
This VC firm provides funding that ranges from $250,000 to $3 million for startups in areas like Fintech, Edtech, Agritech, and Healthtech. Some startups in its portfolio include Power, Victory Farms, Zuri Health, Kwara, and Zydii.
9. Vantage Capital
Vantage Capital is one of the oldest VC firms in Africa, as it was founded in Cape Town, South Africa, in 2001. The company does not have the largest average cheque size or many investments, but it has made an impact over the years.
This firm started as a $19 million technology fund distributed to many startups, with some becoming listed companies today. Vantage Capital, today, has investments across different fields. Some startups in its portfolio include Ally Roads, CIM Sante, Petro Ivoire, EquityInvest, etc.
10. Launch Africa
Launch Africa operates as a pan-African VC fund to address the funding gap across Africa’s investment landscape. This firm’s major focus is tech-enabled startups in Africa to tackle daily challenges. The funding from Launch Africa ranges between $200,000 and $300,000 for startups.
This venture capital firm focuses on startups in areas like Fintech, Edtech, business-to-business (B2B) and business-to-customer (B2C). Some of the startups in its portfolio are Balad, Workpay, Gameball, Chekkit, and Credable.
Frequently Asked Questions (FAQs) About Venture Capital Firms In Africa
What Is The Largest Venture Capital Firm?
Many venture capital firms in Africa make huge investments. So, it may be difficult to determine the largest venture capital unless the percentage stake they hold in each startup is known. However, Ventures Platform is one of the largest VC firms in Africa.
Where Are The Most Venture Firms Located In Africa?
Venture capital firms are evenly distributed across Africa. You can find these VC firms in Nigeria, South Africa, Kenya, etc.
How Many Venture Capital Firms Are In Africa?
According to Crunchbase, there are 371 venture capital firms in Africa.
Conclusion
African startups continue to thrive due to the large fund inflow they are receiving from investors who see potential in them. The prosperity of some of these startups has also encouraged the emergence and funding from venture capital firms in Africa to support the innovative solutions that these startups offer.
