No Focus On Exits Yet; Africa Tech Ventures Raises USD 7.5 Mn from AfDB
Africa Tech Ventures (ATV) has received a significant capital injection from the African Development Bank (AfDB) as the Board of Directors of the Bank has given the all-clear on an equity investment of USD 7.5 Mn into the company to fund innovative African startups. With this money, the fund reaches half its target of USD 50 Mn; the balance is expected to be raised by mid next year.
Africa Tech Ventures has an impressive portfolio of East Africa’s most prominent names like Cellulant, Twiga Foods and mSurvey. The fund is yet not focussing on exits, though the companies in its portfolio have raised subsequent rounds.
Boldewijn Sloet, Partner, Africa Tech Ventures added, “holding period is typically 5-7 years. Earlier exits may happen but are expected to be the exception. Not every subsequent funding round provides the opportunity for exit (in fact usually it doesn’t).”
Boldewijn Sloet, Partner, Africa Tech Ventures
ATV is geared to fund startups that leverage technology to bring about important innovative solutions in sectors like logistics, energy, education, fintech, logistics, healthcare, and agriculture. Though the pipeline of the startups is brewing with the fund, they are not ready to disclose the names yet.
The equity investment into ATV is an offshoot of the Boost Africa Investment Program which is the result of concerted efforts between the Bank, the European Commission (EC), and the European Investment Bank (EIB). The latter is believed to have already pumped USD 10 Mn into the Fund.
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As reported by the AfDB, early-stage companies that improve and facilitate access to essential goods and services to underserved markets and effectively promote inclusive growth will be targeted by seed investments from the ATV.
Commenting on the development, Stefan Nalletamby, AfDB’s Director for Financial Sector Development, opined that Africa is in the midst of rapid mobile penetration and this serves up a massive opportunity for startups and SMEs development. He, however, cited the dearth of risk capital to VC funds targeting early-stage businesses as a bottleneck.
“ATV focuses on startups which are early stage, but post revenue (market validation). Among these, we are looking for businesses that use technology for delivery of essential goods and services to consumers (education, health, food, financial services) or use technology to improve efficiency, access to markets or finance for businesses. Typical investments look for business model innovation, rather than technological innovation,” added Sloet.
On a broader scale, ATV has the expansion of economic opportunities for African youth as its prime target. It aims to provide capital to at least 15 startups throughout their growth cycle. The achievement of this goal should see the benefitting startups amass a user-base that will grow from a few thousand to the million thresholds.
ATV portfolio, source: africatechventures.co
The innovations of these startups will be expected to broaden access to finance and increase connectivity for people in urban, rural, and even remote locations, thus bringing about improvements in the quality of life of the underserved. And a move of that nature does resonate with the ‘High-5 Priorities’ of the AfDB.
The investment in ATV also props up the Regional Integration Strategies (RISP) of the AfDB. This strategy was formulated for individual regions that are interested in promoting private sector activities, supporting financial sector integration, and leveraging non-sovereign financing.
Generally, the Fund is expected to do a solid to the building of an enabling ecosystem for innovative enterprises, and that’s because the investment has connections with the respective strategies of the target regional member countries with regards to SMEs, private sector development, and the creation of employment opportunities.
Feature image courtesy: africatechventures.co
This post was updated with quotes from Boldewijn Sloet, Partner, AfricaTech Ventures.
