Partechthe global multi-fund VC firm close first from Partech Africa II for €245 million (~$263 million), making it the largest Africa-focused fund to date.
The fund, which focuses on startups in the early and growth phase across the continent, aiming to raise approximately €230 million (~$250 million) for its second African fund and reach a first close of €150 million, according to general partners Tidjane Deme And Cyril Colon. However, due to the overwhelming interest from LPs, Partech Africa II exceeded what was initially set for the entire fund. In addition, the Africa Fund will now try to reach a final close of no more than €280 million (~$300 million), Deme said on the call.
Partech Africa II is one of three funds the global venture capital firm has launched over the past two years, including a $750 million growth fund and a $100 million seed fund, targeting different markets and industries worldwide. It is also a follow-up to Partech Africa I, the first fund announced in 2018, which closed at $143 million.
Venture capital activity has increased by several multiples between then and now. This year, African startups raised more than $5 billion — or $6.5 billion, including debt financing — compared to the $1.16 billion recorded in 2018. This highlights how far the tech ecosystem has come and Partech’s new fund matches that growth, the partners told todaybusinessupdates.com in an interview.
“Last year we went out to raise fund two, and we did it in a completely different market. Everything has changedsave; the deal flow in Africa, especially for Series A and B, has multiplied by 14 over the past five years,” says Deme from the company’s Dakar office.
“The AvErage Series A tickets have grown from $4 million to nearly $9 million, and Series B has gone from about $10 million to $25 million. So the market has changed and we started raising fund two; the strategy is to double what we did with fund one because the market validated it.
Partech’s first African fund invested in 17 startups in Series A and B stages in nine countries operating in 27 countries. a lot of inefficiencies where bringing a technical platform with robust operations can build something that creates a lot of value.
TradeDepot, Wave, Yoco, Reliance, and Nomba are some of the startups that underline this strategy. They cut across fintech, retail and FMCG, agency banking and health technology, sectors that account for the bulk of employment and economic activity in Africa. These startups are benefiting from increasing access to digital infrastructure and increasing demand from consumers and businesses. According to Partech Africa, its portfolio has brought value to more than one million sellers and 20 million end users across the continent.
From a VC perspective, Partech says its startups have attracted more than 10% of the investment that has flowed to the continent between 2021 and 2022. subsidiary WorldRemit Sendwave and Stripe-backed Wave (a spin-off of Sendwave).
Most of these companies were already product-market aligned before Partech stepped in and helped refine their business and operating models with financing and other value added. It’s also worth noting that Partech Africa hired most of the founders – or vice versa – years before the startups were ready to make any investment; establishing such relationships allowed the investor to lead rounds with checks ranging from $1 million to $7 million.
“We do invest in late seed. So when we say $1 million, that’s also because we can go sooner. We will also continue to work to ensure we can pre-empt talented teams very early on and not necessarily wait for them to raise money,” Collon said from the VC firm’s Dubai office. “The connection with the market and entrepreneurs, as we did with fund I, is essential for the success of fund II.”
Partech Africa maintains this strategy for the second fund. The venture capital firm plans to continue to back Series A and B companies in fintech, including health tech, logistics, mobility and edtech; however, it doubles the top end of its ticket size to $15 million.
Are Fund II’s limited partners come from diverse profiles: DFIs and corporates to African funds of funds, family offices and HNIs, including anchor investor KfW, the German development bank. Others are existing and new LPs including Bpifrance Investissement; the International Finance Corporation (IFC), which we reported invested $26 million last June; South Suez; FMO; Bertelsman; European Investment Bank (EIB); UK International Investment (BII); Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG); and Proparco.
“Investors who weren’t ready to commit to Fund I joined Fund II,” Collon noted of Partech’s fundraising efforts with LPs over the years. “That’s a strong signal for development finance institutions and other investors to come in and double down on existing ones.”
The company plans to deploy its capital in more than 20 Fund II startups. It is one of the leading Africa-focused growth funds, including TLcom Capital, Norrsken22, Algebra Ventures and Novastar Ventures. The team, spread over offices in Dakar, Nairobi and Dubai, expands to new locations; Lagos is one. And its business is bolstered by Partech’s robust global platform, which supports critical functions such as business development and portfolio support, founder community, ESG, finance, compliance and legal.