US$200M fund set up to back growth-stage tech startups in Africa

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  • Norrsken Foundation has set up a US$200 million fund aimed at backing Africa’s future tech giants
  • So far, the fund, dubbed the Norrsken22 African Tech Growth Fund, has raised US$110 million
  • The firm will make 20 investments at an average ticket size of US$10 million and may go as high as US$16 million, including follow-on rounds in some portfolio companies

Stockholm-based Norrsken Foundation has set up a US$200 million fund aimed at backing Africa’s future tech giants. 

The non-profit organization that seeks to find solutions to problems including poverty, famine, environmental issues, and mental health has its sights set on key markets across the continent to fast-track the growth of African tech firms. 

The announcement comes barely two months after the foundation opened its Norrsken House in Kigali, Rwanda, which plans to accommodate thousands of entrepreneurs by next year.

The foundation has now partnered with thirty unicorn founders and a couple of seasoned venture capital and private equity investors to launch a $200 million fund targeted at African startups.

So far, the fund, dubbed the Norrsken22 African Tech Growth Fund, has raised US$110 million. 

This is the latest fund launched by Norrsken after closing a US$139 million impact fund for European startups last March.

Africa Venture Capitalist funding reached an all-time high in 2021 at over US$4 billion, more than what startups in the continent raised in the two previous years combined. 

Growth and late-stage deals such as US$100 million-plus rounds from unicorns Andela, Flutterwave, Chipper Cash, OPay, and Wave among other companies largely propelled this growth. 

According to Briter Bridges who provide market insights to businesses and investors across Africa, Latin America, and the Asia Pacific, late-stage deals were relatively fewer than early-stage deals.

General partner at Norrsken Foundation Lexi Novitske said that while investors were coming with their capital, they did not have the local knowledge to help companies scale across Africa. 

“What’s happening is, and we’ve seen this in our Acuity portfolio, is that our founders, as they grow and want to scale, have to take time away from their business and spend it with Silicon Valley-based investors who they have to educate on the Africa growth story,” said Novitske. 

According to her, Norrsken22 intends to be that growth-stage local-based firm that will enable startups to unlock significant partnerships to grow revenue, find the best talent, and facilitate expansion plans across Nigeria, Kenya, and South Africa.

The firm is the latest big-sized Africa-focused VC fund that includes the likes of TLcom Capital which recently closed nearly half of its new US$150 million fund, Novastar Ventures, a US$200 million fund; and Partech Ventures, a US$143 million fund.

There’s another issue besides the shortage of growth and late-stage checks. Most of these large deals are often financed by international VCs as local investors tend to focus on pre-seed to Series A rounds with micro to medium-sized funds.

Read: Funding by Founders – the secret sauce for start-up success?

DISTRIBUTION OF FUNDS 

Speaking on the fund’s strategy, general partner Ngetha Waithaka said Norrsken22 plans to invest 40 per cent of its capital, about US$80 million in Series A and B companies and the rest in follow-on rounds from Series C up until exit.

The foundation will make 20 investments at an average ticket size of US$10 million and may go as high as US$16 million, including follow-on rounds in some portfolio companies. 

“I think that reserve capital pool is really important because we do want to have the ability to support companies through their entire lifecycle. Innovation is uncertain, and it doesn’t happen overnight, so we want to be sure to be able to support the top winners in the company so they can be the champions in the tech ecosystem,” Norrsken Foundation general partner Natalie Kolbe said. 

Norrsken22 plans on capitalizing on its general partners’ years of experience and investment philosophies to back startups in fintech, MedTech, Edtech, and market-enabling solutions such as B2B marketplaces and inventory management businesses.

Kolbe, whose previous firm Actis backed Egyptian fintech giant Fawry in 2019 as it prepared to go public, said Norrsken would look at Egypt ‘opportunistically.’ 

Deals from the country that may be of interest to the firm will be those planning an expansion into the four markets Norrsken22 is currently keen on, including Nigeria, Ghana, Kenya, and South Africa.

Of the US$110 million first close reached by Norrsken22, US$65 million comes from a group of unicorn founders globally. 

Some of them include Flutterwave co-founder Olugbenga ‘GB’ Agboola; Skype co-founder Niklas Zennström; iZettle co-founder, Jacob de Geer; Delivery Hero co-founder Niklas Östberg. Others include Carl Manneh, co-founder Mojang; Sebastian Knutsson, co-founder King; and Willard Ahdritz, founder of Kobalt Music.

Asides from the capital, the unicorn founders will help founders understand what it takes to bring their companies from series A to billion-dollar companies. 

The Norrsken22 African Tech Growth Fund is also supported by a local advisory council board, which according to the partners, will help portfolio startups navigate business challenges across the continent.

As an anchor shareholder, the Norrsken Foundation intends to re-invest all of its cash into projects across the continent, including the Kigali House.

Read: Startups raised US$2.02 billion in 2019

Kanyali Cynthia is a Kenyan-based financial journalist with key specialisation in data and tech reporting and over eight years of experience.

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