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With the support of existing investors, Kenya-based VC fund manager, Novastar Ventures, has announced the closure of its second fund with the total commitments amounting to USD 72.5 Mn. Joining forces in the latest fund tagged Novastar II, are renowned private asset managers, AXA Impact Fund II, and European development finance institutions as CDC Group, European Investment Bank, Dutch Good Growth Fund, and FMO. These companies combined to capitalise the fund, matching or increasing their previous commitments in Novastar I; the first fund.
The second venture fund has a target size of USD 120 million, and although the amount raised still falls short of this, Novastar is looking to expand its venture model to include both East and West Africa. In that regard, plans are believed to be already afoot to add a presence in Lagos, Nigeria. This will come as an addition to its already-established presence in Nairobi, Kenya.
Novastar prides itself as a venture capital fund manager committed to uncovering and supporting the “new stars” of East, and now West Africa. Novastar is focused on backing early and growth stage businesses run by entrepreneurs who possess the capability and ambition to transform markets and sectors.
Specifically, Novastar places a premium on those businesses that are known to have solutions tailored to meet a proven demand for essential goods and services. It targets businesses that widen access, improves quality, and lower cost for the mass market in emerging economies by adopting innovative business models. Novastar II has set its sights on businesses with positive social impact for low-income households naturally accompany commercial success and profitability.
“Our vision is to see sub-Saharan Africa populated with a growing number of high-capacity entrepreneurs building innovative businesses that serve the common good. We aim to demonstrate that commercial venture investing can generate both large-scale social benefits for the mass market and attractive financial returns for investors, thereby unlocking more capital to fuel entrepreneurship in the region,” commented Steve Beck, Co-Founder and Managing Partner of Novastar, in a statement released by the company.
In mostly the same manner as the first fund, Novastar II is a multi-round investor with the scale and flexibility to customise support to each portfolio following their respective development stages. By design, The fund can make investments of up to USD 250 K in unproven business models. This way, it can be said to be coming as much-needed respite since it addresses a big problem in a big market. More so, following the completion of initial small funding rounds, Novastar can then catalyse the rapid growth stage of portfolio companies by injecting up to USD 6 Mn via multiple capital rounds.
The Nigerian Connection
Throwing more light on the expansion to Lagos, Novastar Co-Founder and Managing Partner Andrew Carruthers enthused; “We have seen how flexible long-term capital, coupled with local knowledge and innovative business models has catalysed rapid growth in some truly exceptional enterprises in East Africa, thereby attracting substantial investment from a new category of investors. By establishing a presence in Lagos, with its concentration of talented entrepreneurs addressing a vast market, we want to be the spark to a similar cohort of innovative businesses generating social and economic value for the mass market, attracting substantial investment into West Africa as well.”
Carruthers’ words pretty much sum up the rationale behind the move as the company’s latest strategy might have a lot to do with tapping into Nigeria’s new breed of resourceful entrepreneurs and innovators, as well as the country’s growing economy.
Novastar is hoping to identify worthy startups that require funding by exporting its flexible long-term policy framework and leveraging local knowledge. And branching into West Africa with Lagos as its first port of call does seem like a no-brainer as the city’s startup ecosystem is growing and making itself an integral part of the Nigerian economy.
The city appears to be well-known for its reputation as a repository of immense opportunity, as well as its far-reaching potential as a real investment destination, and government support by way of favourable policies could make for a plethora of benefits for the early birds.
Novastar I; the company’s initial fund of $80 million, in addition to a USD 10 Mn co-investment facility is believed to have backed 15 companies, each echoing the Fund’s emphasis on mass-market scale potential, business model innovation, and outstanding entrepreneurial leadership. Startups like GreenPath Food, Penda Health, poa! Internet, PayGo Energy, iProcure, and Lynk are just a few mentions of companies in the Novastar portfolio.
While Novastar I continues to focus on investing follow-on capital into the successful businesses in its portfolio, Novastar II targets breakthrough businesses in East and Anglophone West Africa.
Feature image Source: novastarventures.com
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