LoftyInc Capital Launches $43M Third Fund for African Startups

LoftyInc Capital Secures $43 Million for African Startup Investments

A prominent investor in Africa, recognized for early investments in companies such as Flutterwave, Andela, and Wave, has obtained new funding to support startups throughout the continent. Recent data from VC firm Partech indicates that funding deals and overall volumes in Africa experienced only a modest decrease in the previous year.

LoftyInc Capital, which has focused on pre-seed and seed stage startups for over ten years, has achieved the first closing of its third fund, LoftyInc Alpha, totaling $43 million.

Shifting Investment Focus

Founder and managing partner Idris Ayo Bello explained to TechCrunch that, diverging from its previous strategy, this fund will concentrate on late-seed and Series A startups. However, its geographical focus will remain consistent, encompassing Nigeria, Egypt, Kenya, and Francophone Africa.

The initial closing attracted a diverse range of limited partners. These included sovereign wealth funds from both the Middle East and Africa, specifically Egypt’s MSMEDA and Tunisia’s Anava Fund of Funds.

Furthermore, development finance institutions such as FMO, Proparco (FISEA), AfricaGrow, IFC, and U.S.-based First Close Partners participated. African high-net-worth individuals (HNIs) and European family offices also contributed to the fund.

A Veteran of Africa’s Tech Evolution

Idris Bello, who initiated LoftyInc’s first investment vehicle in 2012, has directly observed the development of Africa’s technology sector. His firm has supported startups through various stages of growth.

This includes the diversification of startups beyond fintech, the emergence of a skilled tech workforce, the unicorn surge of 2021, and the current slowdown in funding.

The angel network that initially managed the pre-seed vehicle has evolved into a thriving community of over 250 investors across Africa and its diaspora, establishing a foundation for LoftyInc’s first structured venture fund five years later.

Proven Track Record

In 2017, the Lagos-based venture capital firm secured its first institutional fund, raising $1.1 million exclusively from HNIs and deploying it entirely within Nigeria. Bello, alongside Marsha Wulff and Michael Oluwagbemi, reported a 5.7x DPI (cash return) to investors.

This return was driven by exits and secondary sales from Flutterwave and Reliance Health, a health tech startup backed by General Atlantic.

By 2021, LoftyInc launched its second VC fund, initially aiming for $10 million but ultimately closing at $14.2 million. This fund broadened its scope beyond Nigeria, adopting a pan-African strategy and investing in startups across Egypt, South Africa, and Francophone Africa—regions where LoftyInc intends to maintain an active presence.

Notably, Meta, through its NPE team, made its first and only investment in an African VC through this fund.

Addressing the Seed to Series A Gap

LoftyInc’s third fund is designed to address a critical challenge within Africa’s startup ecosystem: the limited number of startups successfully transitioning from pre-seed to Series A funding. According to the Partech report, average ticket sizes at Series A and Series B stages experienced the most significant declines last year, falling by 18% and 27% respectively.

Bello observes that while LoftyInc’s angel networks and micro funds support pre-seed and seed rounds, a substantial funding gap exists at the late-seed stage. Startups at this stage require structured support to scale and secure Series A capital.

“Investor expectations shift considerably by Series A, despite the initial enthusiasm surrounding pre-seed and seed investments,” he stated. “Our objective is to provide support from the seed stage, with a primary focus on guiding startups to Series A funding. We aim to be the firm that helps companies overcome this hurdle.”

Facilitating Series A rounds, with plans for follow-on investments and the inclusion of co-investors, will also strengthen the pipeline for leading African investors at the Series A and growth stages, such as TLcom Capital, Partech, and Norrsken22.

Differentiating Through Expertise and Networks

LoftyInc distinguishes itself in the competitive early-stage investment market in Africa by leveraging the operational expertise and extensive networks of its partners. With over 200 investments and 14 successful exits, the managing partner emphasizes that the firm offers more than just capital.

It provides market access, business development support, and investor matchmaking services to its portfolio companies.

To support its evolving strategy and expanding portfolio, LoftyInc has strengthened its leadership team with its latest fund. This move is crucial for regional expertise and effective execution as it invests in startups requiring localized support.

Over the past two years, Mariam Kamel and Kevin Simmons have joined the firm as general partners. They will contribute their experience in investment banking, angel investing, and operational VC to deepen LoftyInc’s presence in Africa’s east, north, and Francophone regions, where at least 30% of the fund will be allocated.

“Their fund and investor experience complements our geographical expansion and exit strategies,” Bello explained, adding that Oluwagbemi and Wulff will continue to manage LoftyInc’s previous funds while supporting the transition to this larger, more structured fund.

Investing in Africa’s “Everyday Economy”

LoftyInc Alpha is focused on supporting innovations that drive Africa’s “everyday economy.” A significant portion of investments will be directed towards financial services, which remains the dominant sector in African tech, representing 60% of the over $2 billion in equity deals raised by startups last year.

Other key areas of focus include logistics and transport, health tech, retail, climate, and deep tech and AI, particularly when applied as enablers across other sectors.

The fund intends to invest in 20-25 companies, with initial investments averaging $1 million and follow-on investments potentially reaching $5 million.

LoftyInc’s portfolio includes prominent startups such as Moove, a vehicle financing platform backed by Uber; Thndr, an Egypt-based trading app similar to Robinhood; and OmniRetail, an African B2B e-commerce platform.