Magic Fund Raises $30M for Founders-Backing-Founders Fund
The Rise of Founder-Led Venture Funds
Prominent entrepreneurial figures such as Paul Graham and Naval Ravikant consistently emphasize the importance of startups securing investment from individuals with direct experience as founders. Ravikant articulates this need, stating that founders desire assurance that their investors possess first-hand knowledge of the challenges involved.
AngelList, Ravikant’s platform, has facilitated connections between founders who also act as investors, enabling them to pool resources and participate in investment opportunities through collectives. However, certain venture capital firms have expanded upon this model by establishing funds specifically managed by founders, allowing for collaborative investment.
MAGIC Fund Announces Second Funding Round
Today, MAGIC Fund, a global network of founders, has announced the successful completion of a $30 million second fundraise. This capital will be used to further support early-stage startups operating across Africa, Europe, Latin America, North America, and Southeast Asia.
Since the launch of its initial fund in 2017, MAGIC has made investments in 70 companies at the pre-seed and seed stages within these emerging markets. Notable portfolio companies include Retool, Novo, Payfazz, and Mono.
The fund is structured around 12 founders who serve as general partners. TechCrunch interviewed managing partner Adegoke Olubusi and operating partner Matt Greenleaf to gain insights into the fund’s investment strategy and operations.
The Genesis of MAGIC Fund
Olubusi, having successfully built and exited several startups, also engaged in angel investing. In 2017, his current venture, Helium Health, was accepted into the Y Combinator accelerator program. It was during this experience that he connected with other founders who were also active angel investors with substantial portfolios.
A key observation was that these founders were eager to invest in companies presented during Y Combinator’s Demo Day. “Around three years ago, while at YC, I intended to invest in ventures from my cohort. I was simultaneously pitching my own company and evaluating other opportunities,” Olubusi explained.
Following the successful creation and sale of their companies, many founders transition to angel investing as a means of supporting the broader startup ecosystem. However, these individual investors often operate in isolation, limiting their investment scope to local markets.
Overcoming Geographical and Industry Limitations
Consider this example: in 2016, when Flutterwave and Kavak secured their seed funding in Nigeria and Mexico, respectively, a biotech founder based in Africa with knowledge of Kavak, and a Latin American edtech founder interested in African fintech, would likely have lacked the capacity to properly assess these investment opportunities.
This limitation stemmed from a lack of both industry expertise and geographical reach. Olubusi and his colleagues recognized this challenge and decided to establish MAGIC as a solution.
The core concept behind MAGIC was to unite founders from diverse backgrounds, industries, and locations to collectively evaluate deals and maximize value for one another. This collaborative approach allows them to participate in a wider range of successful ventures.
“Rather than investing as individuals, given our limited time commitments due to our ongoing company responsibilities, we proposed a collaborative strategy and co-investment approach,” Olubusi stated.
Greenleaf added, “We envisioned MAGIC as a fund comprised of micro-funds, built by founders, for the benefit of founders.”
A Network of Micro-Funds, Exceeding Mere Capital
Discussions with numerous founders regarding their investors frequently reveal that the most impactful contributors weren't necessarily those who provided the largest investments. This observation resonates strongly with Olubusi’s own experiences.
“It consistently occurred that those offering the most substantial funding were often the least available to us. This pattern was so prevalent that we recognized it as a genuine phenomenon. The true value came from investors who were themselves founders and operators, alongside seasoned professionals capable of guiding us toward product-market fit and navigating regulatory challenges. These individuals were actively engaged alongside us.”
Olubusi posits that the initial phases of investment, specifically pre-seed and seed stages, represent the ideal domain for VCs with a background as founder-operators. Their expertise proves invaluable as startups strive to establish product-market fit. Furthermore, Olubusi contends that, unlike conventional investors focused on investment multiples, founder-investors prioritize the value they can generate for the startups they support.
MAGIC’s approach is particularly crucial within emerging markets, where localized operational assistance is essential in sectors characterized by significant unknowns and inherent uncertainties.“The current market is saturated with capital, and decision-making at the pre-seed and seed levels should be entrusted to founders. Consider this: evaluating investment opportunities in African healthcare or fintech is best done by those who have directly confronted the challenges within those fields. Our aim is to disseminate as much information as possible, consistently achieve top-tier performance, and demonstrate the scalability of this strategy.”
MAGIC Fund 1, totaling $1.5 million, yielded a 5x return over three years. Subsequently, founders from companies that experienced successful exits reinvested in MAGIC and joined as partners in Fund 2.
MAGIC has also secured the participation of additional investors recognized for their investment acumen and ecosystem support. For example, Olugbenga Agboola, CEO of Flutterwave, is widely known throughout the African tech landscape for his dedication to assisting both established and emerging fintech companies. Hendra Kwik of Payfazz enjoys a similar reputation in Southeast Asia. These founders, among others, have become limited partners within MAGIC.
According to the firm’s announcement, one-third of the fund’s capital originates from the founder GPs. Diversity is a key consideration for its LPs, with 50% identifying as Black and 33% as women. Notable LPs include Michael Seibel, Tim Draper, Rappi’s Andres Bilbao, Paystack’s Shola Akinlade, Katie Lewis, and Octopus Ventures’ Kirsten Connell. MAGIC’s partner network includes individuals such as Tom Chen of Stitchroom, Elvis Zhang of Oxy2, Adeel Yang of Medumo, Michael Lisovetsky of Juice, Troy Osinoff, and Temi Awogboro of Evercare.
Fund 2 will allocate investments ranging from $100,000 to $300,000 at the pre-seed and seed stages, with a focus on fintech, healthcare, SaaS and enterprise solutions, women’s health, and developer tools.
What qualities does the fund seek in founders? Olubusi offers two key criteria. First, MAGIC prioritizes backing founders who are incentivized to persevere through the inevitable challenges a company faces.
“At the pre-seed and seed stages, sufficient data about a company is often unavailable to make a sound investment decision. The investment is fundamentally a bet on the founder and the founding team. Our experience has shown that difficulties will arise. Therefore, when evaluating a founder, we assess their capacity to endure the most challenging periods, which are certain to occur.”
The second indicator assesses the founder’s willingness to learn, their openness to feedback, and their ability to apply new knowledge to achieve success. Greenleaf believes these strategies have significantly contributed to the firm’s success in funding exceptional companies and fostering strong founder relationships.
“Many of these founders don’t perceive us as mere investors. They view us as fellow founders supporting their journey. I believe this fosters transparency and allows us to connect with them on a personal level, rather than simply as founders. This has proven to be a significant advantage,” he stated.
