LoftyInc Capital Launches $10M Fund for African Startups

LoftyInc Capital Launches $10 Million Fund for African Tech Startups

LoftyInc Capital, a venture capital firm operating across the African continent, has announced the launch of its third fund, the LoftyInc Afropreneurs Fund 3. This new fund is valued at $10 million and will be dedicated to supporting technology startups throughout Africa.

Initial Funding and Investors

The firm has successfully secured an initial closing of $5.5 million for the fund. A significant portion of this capital comes from returning limited partners from its second fund.

Investors also include FBNQuest Funds, investment groups from The Green Investment Club, high-net-worth individuals associated with major multinational corporations such as Google, Facebook, and ExxonMobil. Additionally, Jeremy Johnson, CEO of Andela, is among the fund’s backers.

Investment Activity to Date

LoftyInc has already made investments in over 20 startups while actively raising capital for this fund. These investments span a diverse range of industries.

The portfolio companies operate within sectors including e-commerce, fintech, healthcare, logistics, and media, and are located both within Africa and in the African diaspora.

Portfolio Companies Across Africa

LoftyInc’s investments are geographically diverse. In Francophone Africa, the firm has backed companies like Afrikrea and Star News Mobile.

West Africa is represented by investments in Omnibiz, RXAll, Sudo Africa, Tech Advance, Aladdin, Flex Finance, Star Kitchens Group, and EPump.

North African portfolio companies include Odiggo, Illa, Tagaddod, and Instadiet. Akiba Digital, Beamm, and Zazu Africa represent LoftyInc’s South African holdings.

East Africa is represented by Cashback and Dash. Furthermore, LoftyInc maintains interests in diasporic startups such as OjaExpress and FitMatch.

Fund Strategy and Focus

LoftyInc currently manages three funds concurrently. Its second fund is primarily focused on investment opportunities within Nigeria.

The Afropreneurs Fund 3, however, mirrors the investment strategy of LoftyInc’s initial fund. It prioritizes investments in startups across various African markets and within the diaspora.

Expanding Beyond Major Markets

The fund intends to prioritize investments in markets beyond the traditionally dominant “Big Four” – Nigeria, Kenya, South Africa, and Egypt. This strategy aims to unlock opportunities in emerging African economies.

LoftyInc Capital Launches Third Fund

Just last month, TechCrunch highlighted Olumide Soyombo, a prominent angel investor in Africa. He stands among a select group of leading figures, including Idris Bello, the founder and general partner of LoftyInc.

Bello characterizes his 12-year involvement in technology and entrepreneurship as an “Afropreneurship journey.” During his time in business school within the United States, he recognized that the subsequent phase of innovation required by the African continent depended on emerging founders.

The Evolution of LoftyInc

Driven by this insight, Bello established LoftyInc Allied Partners with fellow entrepreneurs as an enterprise development organization. This entity subsequently created Wennovation Hub, a technology hub and venture accelerator, and LoftyInc Capital, its venture investment division.

In 2012, the company initiated its inaugural fund – LoftyInc Afropreneurs Fund 1 – as a vehicle for pre-seed investments. This fund functioned similarly to a syndicate or angel network, attracting investors from senior leadership positions across various African industries.

Currently, over 180 angel investors are participating through the first fund, having collectively invested more than $4 million in over 40 startups throughout the continent. Notable investments include Flutterwave (at the pre-seed stage), Andela, Trella, Chefaa, and Koniku, originating from Nigeria and Egypt.

Five years later, Bello partnered with Marsha Wulff, an early investor in Teladoc, and Michael Oluwagbemi, also a general partner, to launch their second fund, LoftyInc Afropreneurs Fund 2.

Between 2017 and 2020, LoftyInc invested over $1.2 million across nine funding rounds in six Nigerian startups: Printivo, RelianceHMO, Epump, YouVerify, Shyft Power Solutions, and Flutterwave (during its pre-Series A round).

A Successful Exit and the Third Fund

LoftyInc’s initial exit came with Flutterwave, which Bello stated yielded a 3x return for its Limited Partners (LPs). This success served as the impetus for establishing the third fund.

Bello explained to TechCrunch, “Following our exit from Flutterwave in February, our LPs expressed interest in a new fund due to the returns we generated. Initially, we considered a $2.5 million fund, but after gauging LP interest, it increased to $4 million, and ultimately, we decided on $10 million to enable investments in a wider range of startups.”

Considering Bello’s standing within the African tech landscape and the size of funds being raised by comparable Africa-focused investors, some have questioned why LoftyInc isn’t pursuing a larger fund.

His response is that he prefers a more measured approach.

“I consistently emphasize that my strategy is distinct. It’s organically driven, as evidenced by our evolution from a group of angels to LPs. I believe that once you reach $50 million to $100 million, deployment becomes a challenge, particularly in Africa. My goal is to establish a solid foundation – a pyramid base – so that raising a larger fund won’t present deployment issues.”

He further notes that the composition of their LPs is a key factor. The majority of LPs in this third fund hold executive and managerial roles in banks and multinational corporations. Bello believes that demonstrating strong returns for these individual LPs will naturally lead to onboarding the institutions they represent for a larger fund.

“Our aim is to cultivate an ecosystem of African investors. Subsequently, we will integrate institutions to participate in investment activities.”

Deal Flow and Differentiation

LoftyInc maintains a strong deal flow, reviewing approximately 30 pitch decks each week. Bello attributes this volume to the firm’s portfolio companies, which serve as its primary source of proprietary deals. This, he believes, sets LoftyInc apart from other venture capital firms.

Jeremy Johnson, CEO of Andela, confirmed this in a conversation with TechCrunch, stating that LoftyInc invested in his startup before it gained widespread recognition. He now reciprocates by sourcing deals and investing in the fund.

Additionally, the firm’s first fund benefits from an extensive network of African investors, both residing in and outside the continent, who act as venture scouts.

“We typically invest before other major investors, mentor new founders, connect them with initial clients within our extensive network of over 65 African startups, and leverage our broad African-based angel and LP network.

We also facilitate introductions to regulators, partners, mentors, top talent, and experienced board members. Founders seek our involvement because we have a track record of attracting both early and later-stage investors to previous ventures.”

Investment Criteria

LoftyInc prioritizes companies targeting large markets with limited competition, offering products that users genuinely value, and demonstrating strong execution.

While generally sector-agnostic, the firm shows a particular interest in startups operating in the IoT, fintech, and health tech sectors, according to Bello.

The first fund, largely supported by angel investors, focuses primarily on pre-seed investments. This year alone, the group has completed over 50 pre-seed deals. Subsequent funds concentrate on seed to Series A deals, with an average investment size of $250,000.

LoftyInc aims to finalize its third fund above $10 million before the end of Q4 2021, as stated by Bello to TechCrunch.