Nairobi based venture fund, Novastar has announced that it is expanding into west Africa. Backed by existing investors, Novastar held a first close of its second venture fund on October 18th with $72.5 million in commitments. Leading private asset manager’s AXA Impact Fund II joined with European development finance institutions CDC Group, European Investment Bank, Dutch Good Growth Fund and FMO to capitalize the fund, matching or increasing their commitments from Novastar’s first fund.
With a target size of $120 million, the second fund expands Novastar’s venture model to cover both East and West Africa, adding a presence in Lagos to the one in Nairobi.
Novastar is a venture capital fund manager dedicated to finding and growing the “new stars” of East, and now West Africa. Novastar backs early and growth stage businesses led by entrepreneurs with the capability and ambition to transform markets and sectors.
Novastar Ventures East Africa Fund I reached its target of $80. This was used to fund some of the most innovative social enterprises in East Africa including PayGo Energy a distribution service that harnesses the power of pay-as-you-go-technology to unlock clean energy for those who cannot otherwise afford it, Penda Health a chain of outpatient medical centres to bring high-quality healthcare to East Africa’s aspiring mass market families and Poa Internet, a low cost internet service provider in peri urban Nairobi.
Such enterprises address proven demand for basic goods and services with innovative business models that widen access, improve quality, and lower cost for the mass market in these emerging economies. The fund targets businesses where positive social impact for low-income households is a natural bi-product of their commercial success.
Co-founder and Managing Partner Steve Beck explained the big idea: “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.”
As with its first fund, Novastar II is a multi-round investor with the scale and flexibility to tailor support to each portfolio company’s stage of development. The fund can invest as little as $250,000 in an unproven business model addressing a big problem in a big market. Following initial small funding rounds, Novastar can then fund the rapid growth stage of portfolio companies with more than $6 million through multiple capital rounds.
Explaining the expansion to Lagos, Novastar co-founder and Managing Partner Andrew Carruthers said, “We have seen how flexible long-term capital, coupled with local knowledge and innovative business models has catalyzed 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.”
Novastar’s first fund of $80 million plus a $10 million co-investment facility has backed 15 companies, each reflecting the Fund’s focus on mass-market scale potential, business model innovation and outstanding entrepreneurial leadership. While Fund I continues to invest follow-on capital into the successful businesses in its portfolio, Novastar II targets new breakthrough businesses in East and Anglophone West Africa.