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African startups have another $ 100 million in VC to pitch for after Novastar Ventures’ latest raise.

The Nairobi and Lagos based investment group announced it has closed $ 108 million in new commitments to launch its Africa Fund II, which brings Novastar’s total capital to $ 200 million.

With the additional resources, the firm plans to make 12 to 14 investments across the continent, according to Managing Director Steve Beck. He spoke to TechCrunch on Novastar Ventures’ plans for the new fund.

A notable update to Novastar’s VC focus is geographic scope. The firm was originally co-founded in Kenya by Beck and British investor Andrew Carruthers and built its first portfolio largely around companies based in East Africa. Novastar Ventures made 15 investments with its first fund, including companies such as Uganda and Kenya focused energy startup SolarNow and agtech venture M-Farm.

“The second fund is basically the same strategy as the first, but…the biggest difference is that we opened up a second front in West Africa — more particularly to be in and around the entrepreneurial system in Lagos,” Beck told TechCrunch on a call.

Before closing its Africa Fund II, Novastar Ventures had already made several investments in West Africa, including leading a round in Nigerian on demand motorcycle transit startup Max.ng and backing Ghanaian health company, MPharma. Novastar opened an office Lagos in 2019.

On the types of startups Novastar will target with its new fund, the focus is more on mission than industry silos, according to co-founder Steve Beck. “We’re sector agnostic. I would describe us more as a segment fund than a sector fund,” he said.

“We really try to look for businesses called breakthrough businesses, [those] that are addressing the biggest problems in the largest markets.”

That has led Novastar Ventures to invest in digital companies in education, information access, agtech, mobility and off-grid energy.

“Essentially what we’re doing is looking for those businesses that are addressing the basic needs, basic goods and services across the true mass markets of the continent,” said Beck.

On whether the firm is a dedicated impact fund, Beck said, “The way we characterize ourselves is we’re a commercial venture fund with an impact screen.”

On investment amounts and types, Novastar Ventures is fairly flexible on ticket size, from seed to later stage.

“We’re gonna…have some portfolio companies where we put to work a million dollars or less or were going to have some where we put $ 8 or $ 9 million dollars in through capital rounds. That’s…the deployment strategy,” Beck said.

Novastar Ventures works closely with its portfolio companies, according to its co-founder.

“We’re very active investors and always take a board seat to be close to the entrepreneurs. We often are the first institutional investor that they have.”

Africa Top VC Markets 2019

Image Credits: TechCrunch

Startups who want to pitch to the company can reach out to the fund’s founders and directors via the website or LinkedIn, according to Beck. He added that Novastar Ventures is recruiting to add another member to its investor team in 2020.

The firm’s latest raise and $ 200 million capital amount creates another high value fund focused on African startups.

On the high end of estimates, the continent’s tech ecosystem reached $ 2 billion in VC to startups in 2019, compared to less than half a billion dollar five years ago.

Other large Africa focused VC shops include TLcom Capital — which closed a $ 71 million fund in February —  and Partech, which doubled its Africa fund to $ 143 million in 2019. The venture arms of major global companies have also become more active in African tech recently, including that of Goldman Sachs and Visa.


TechCrunch

African fintech has taken center stage for the Catalyst Fund, a JP Morgan Chase and Bill & Melinda Gates Foundation-backed accelerator that provides mentorship and non-equity funding to emerging markets startups.

The organization announced its 2019 startup cohort and three out of the four finance ventures — Chipper Cash, Salutat and Turaco — have an Africa focus (Brazil-based venture Diin, was the fourth).

Catalyst Fund, which is managed by global tech consulting firm BFA,  also released its latest evaluation report, which showed 60% of the organization’s portfolio startups are located in Africa.

The new additions to the fund’s program will gain $ 50,000 to $ 60,000 in non-equity venture building support (as Catalyst Fund dubs it) and six months of technical assistance. The funds and support are aimed at moving the ventures to the next phase of catalyzing business models, generating revenue and connecting to global VCs.

“We really tailor the kind of help we give to companies so they can reach market fit and proof points that investors want to see to enable the next phase of growth,” BFA Deputy Director Maelis Carraro told TechCrunch.

Catalyst Fund’s 2019 startup cohort also gained exposure to the fund’s Circle of Investors — a network of impact and commercial backers who can make decisions on investing in and accelerating particular companies.

Next Big Thing and Deciens Capital recently joined the group of 40 investors that includes Techstars and the Mastercard Foundation.

The tenor for support for Catalyst Fund’s newest cohort of startups lasts through 2019. The ventures will also attend the big SOCAP 2019 tech conference in San Francisco, where Catalyst organizes workshops and meetings with its Circle of Investors.

Founded in 2016, the Catalyst Fund’s mandate includes supporting fintech startups that are developing solutions for low-income individuals in emerging markets. The organization has accelerated 20 ventures in Africa, Asia and Latin America that have raised $ 25.7 million in follow-on capital, according to its latest report.

With the Bill & Melinda Gates Foundation and JP Morgan Chase as the lead backers, Catalyst Fund partners also include Rockefeller Philanthropy Advisors and Accion.

JP Morgan Chase’s interest in supporting Catalyst Fund connects to a firm-wide commitment of the global bank to financial inclusion, according to JP Morgan’s Head of Community Innovation Colleen Briggs — who is also a day-to-day Catalyst Fund manager.

JP Morgan recently launched a $ 125 million, five-year commitment to improve global financial health, she explained. “For us there is a true market opportunity…we genuinely believe that financial inclusion is the foundation for the economy,” Briggs said.

“If we don’t get the social issues right it undermines the resiliency of the communities and the markets where we’re trying to operate.”

That Catalyst Fund’s cohorts have shifted toward Africa focused ventures speaks to the thesis for fintech on the continent.

By a number of estimates, Africa’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population.

An improving smartphone and mobile-connectivity profile for Africa (see GSMA) turns this scenario into an opportunity for mobile-based financial products.

Hundreds of startups are descending on Africa’s fintech space, looking to offer scalable solutions for the continent’s financial needs. By stats offered by Briter Bridges and a 2018 WeeTracker survey, fintech now receives the bulk of VC capital and deal-flow to African startups.

Ventures such as Catalyst Fund cohort member Chipper Cash — co-founded by Ugandan Ham Serunjogi and Ghanaian Maijid Moujaled — are looking to grow across Africa first before considering any global moves.

The company plans to introduce its no-fee, P2P, cross-border mobile-money payments products beyond current operations in Ghana and Kenya to Rwanda, Tanzania and Uganda within the next 12 months.

Ventures looking to join companies like Chipper Cash as a Catalyst Fund-supported startup can seek a referral from Catalyst’s Circle of Investors — who make a recommendations on new candidates. Catalyst Fund aims to choose 30 startups for its cohort over the next three years, according to program director David del Ser.


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