An Africa-focused venture capital firm has steered one of the region’s biggest fundraising efforts of the past five months to invest in technology start-ups, signalling a potential upturn in dealmaking for the industry.
TLcom Capital, which has over the past seven years backed prominent tech start-ups in east and west Africa, on Monday said it has completed a $154mn two-year raise, almost doubling its previous round and attracting investment from the US and Europe.
VC firms have raised more than $655mn for Africa’s tech industry since November. TLcom’s latest fundraising added to $300mn in February by Partech’s Africa fund, while Norrsken22, another fund focused on the region, raised $205mn five months ago.
TLcom is pushing to broaden its portfolio companies to southern Africa and Egypt as it seeks to cement its presence in the continent’s four largest markets to attract investment.
“It’s never popular to raise something for technology in Africa but it’s becoming more acceptable for global capital,” Maurizio Caio, TLcom’s managing partner, told the Financial Times.
The firm’s first fund, completed in 2020, took three years to raise $71mn, which was deployed to 11 companies, he said. TLcom, which seeks out early-stage companies, plans to invest chunks of up to $3mn in its second fund.
The investment comes as the tech industry around the world has suffered a downturn in funding. African tech companies in 2023 received $3.5bn equity and debt funding from investors, a 46 per cent drop from the previous year, according to a report by the global investor Partech. That decline outstripped an estimated 38 per cent fall globally, according to the report, as rising interest rates and investor caution took their toll.
“This [raise] is absolutely critical,” says Olanrewaju Odunowo, head of TechCabal Insights, which tracks funding flows in African tech.
“We’re seeing start-ups feel the impact of the funding drought thereby impacting customers,” he added. “So any fund willing to invest at this time will be a lifeline for start-ups and will fuel innovation on the continent.”
TLcom, with a push into the biggest African tech markets of Nigeria, Kenya, South Africa and Egypt, aims to find companies capable of raking in at least three times investment return for shareholders, Caio said.
The firm’s backers include development finance institutions such as the European Investment Bank, the EU’s lender; AfricaGrow, a joint venture between German-based insurer Allianz and German government-backed DEG; Visa Foundation, the payment company’s philanthropic entity; and family offices.
“Our second fund has been easier because we didn’t have to explain the strategy as we could point to actual companies,” Caio added. “Despite the economic downturn, Africa is becoming more relevant in the strategies of a lot of players globally.”
TLcom is one of a handful of funds exclusively investing in Africa, compared with occasional forays from international investors such as Tiger Global and SoftBank. It has a sizeable war chest of more than $100mn and a portfolio that includes logistics company Kobo360 and software training group Andela, which has also received investment from the Chan Zuckerberg Initiative.
“There is evidence that actual companies can scale in Africa and some big exits have happened,” said Caio. “There’s less of a pioneering feeling and VCs are less likely to get fired for investing in Africa as you would have been six or seven years ago.”
He added: “We can claim great companies that are performing well from a business perspective but we cannot yet claim a string of exits that make those good companies good investments. And success for us is finding good evidence of returns.”
