Ventures Platform Raises $64M for African Startups

Ventures Platform Secures $64 Million for Second Fund

Ventures Platform, a Lagos-based early-stage investment firm operating across Africa, has currently raised $64 million towards its second fund. The firm, led by founding partner Kola Aina, is aiming for a final close of $75 million, as reported to TechCrunch.

Government Backing Signals Confidence

A noteworthy aspect of this funding round is the inclusion of the Nigerian government, through its Investment in Digital and Creative Enterprises (iDICE) program. This represents the first instance of the Nigerian government directly investing in a venture capital fund.

This investment is particularly significant given Nigeria’s position as the leading hub for startup unicorns within Africa.

Diverse Investor Base

Beyond the government, Ventures Platform’s second fund benefits from a diverse group of limited partners. These include the International Finance Corporation (IFC), British International Investment (BII), Proparco, Standard Bank, MSMEDA, and AfricaGrow.

Furthermore, the fund has attracted support from European family offices like Alder Tree Investment and prominent global investors, including former Y Combinator CEO Michael Seibel. Notably, 70% of investors from the firm’s previous fund have reinvested.

Strategic Investment Choice

The Nigerian government’s decision to invest in Ventures Platform is logical, considering the firm’s track record. Since its establishment in 2016, Ventures Platform has consistently identified promising startups within Nigeria early on.

The firm intends to extend this success to other African markets.

Fund Evolution and Investment Strategy

Ventures Platform launched its initial institutional fund, a $46 million vehicle, in 2022. This fund focused primarily on pre-seed and seed stage investments.

The second fund will broaden the firm’s investment scope to include Series A rounds, alongside a strategy of “investing with more conviction” and securing larger equity stakes. This approach is expected to be beneficial for founders, as Series A funding has become more challenging to secure due to reduced activity from Silicon Valley investors.

Expanding Geographic Focus

While maintaining a strong presence in Nigeria, Ventures Platform is actively expanding into Francophone West Africa and North Africa.

This expansion aims to provide earlier access to potentially lucrative investment opportunities in these regions.

Portfolio and Investment Philosophy

To date, the Pan-African venture capital firm has invested in over 90 startups across the continent.

The firm prioritizes investments in “painkiller” businesses – those addressing fundamental needs in sectors like fintech, health tech, agtech, edtech, and AI. These companies focus on serving markets with limited or no existing access to essential services.

Highlighting Portfolio Successes

Aina highlights portfolio companies such as Moniepoint, a unicorn backed by Visa, and Paystack, acquired by Stripe, as examples of fintechs that have expanded access to online payments and banking services.

He explains that Paystack enabled small businesses to reach customers beyond their local area by facilitating online transactions, while Moniepoint has broadened financial inclusion throughout Nigeria.

Notable Portfolio Companies

Other significant portfolio companies include LemFi, a remittance app supported by Left Lane; SeamlessHR, backed by the Gates Foundation; OmniRetail, with Norfund’s investment; Raenest, a fintech company funded by QED; and Remedial Health, a health tech innovator.

Addressing Exit and Liquidity Concerns

Despite the accelerating innovation and exceeding $12 billion in funding for African tech since 2015, concerns are growing regarding the lack of exits and liquidity events.

This situation has made fundraising more difficult for many VCs, particularly emerging managers who have faced a challenging global climate in recent years.

Resilience in a Challenging Market

Ventures Platform has successfully attracted both domestic and international limited partners for its two funds, despite the prevailing market uncertainties.

Aina attributes this success to the understanding among LPs of how venture ecosystems evolve and the firm’s ability to recycle capital from previous syndicates.

Strong Performance Metrics

The firm has returned capital from four out of its six vintages, including five angel syndicates, between 2016 and 2022. Furthermore, the first fund is reported to be among the top performers globally based on TVPI and IRR for its vintage year.

Africa’s Long-Term Potential

Acknowledging concerns about exits and the recent funding slowdown (from $5 billion in 2021 to $2 billion in 2022), Aina emphasizes that Africa’s long-term potential remains strong.

He describes the continent as offering a “purest asymmetric play for non-consensus alpha” – a high-risk, high-reward investment opportunity.

A Diversification Opportunity

“For global capital allocators seeking genuine diversification, Africa presents an ideal location,” Aina stated. “By 2050, a quarter of the world’s population will reside in Africa. Our GDP growth rate surpasses that of the U.S., yet a significant portion of economic activity remains offline, creating substantial opportunities for those with patience and local expertise.”