Paris-headquartered VC Breega, has launched a $75m seed fund to invest in African startups.
Breega, which has raised five Europe-focused early-stage funds to date and backed companies such as quantum startup Alice&Bob and fintechs Moneybox and Curve, has closed $52m of the new fund so far. The final close is expected by the end of this year.
The firm has also opened offices in Lagos, Nigeria and Cape Town, South Africa.
With this new fund, it plans to invest in Africa’s startup hotspots — Nigeria, Egypt, South Africa and Kenya — as well as several French-speaking African countries such as Morocco, Senegal, Ivory Coast, Cameroon and the Democratic Republic of Congo.
The VC will write cheques ranging from $100k to $2m for seed-stage companies, with 30-40% of the fund reserved for follow-on investments.
The new fund is backed by a mix of high-net-worth individuals, tech entrepreneurs and institutional investors including French public bank Bpifrance and Dutch entrepreneurial development bank FMO.
Investing in Africa’s ‘core needs’
Over the past two years, Breega has made nine investments in African startups, including Kenyan fintechs Sava and Kwara, and Ugandan digital loans provider Numida and, says Breega cofounder Ben Marrel, was keen to do more.
Africa’s population is expected to grow from just under 1.5bn currently to 2.5bn in 2050, according to UNICEF data — and that represents a significant opportunity for investments, says Marrel.
“There is no way that this growth can be managed without technology,” he says. “You need to feed these people, house them, educate them, cure them, and so on.”
“We are very much focused on the core needs that Africa is about to experience.”
The fund will target investments in agritech, edtech and healthtech — but also in technologies that underpin the critical infrastructures that will be needed across the continent, such as fintech, logistics and mobility, and energy and climate.
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Marrel says that this comes with challenges.
“When you’re a European or US business, you’re often competing against incumbents who are doing things the old way, and coming up with a new digital approach to it,” he says.
“In Africa, in many cases, you’re creating your market from scratch.”
Fintechs, for example, are up against the dominance of cash payments across the continent. But Marrel says that this also has the potential to reap greater rewards.
“It’s harder at the beginning, but the difference you can bring in terms of experience is so much better that you become the de facto solution and there is no one else there,” he says.
“Once you’re at that stage, it’s an infinite opportunity.”
Africa’s tech ecosystem
The African tech ecosystem has seen significant growth in the past few years. Startups across the continent raised $3.3bn in 2022 — up from $195m in 2017, according to a report from tech organisation Disrupt Africa.
Investments fell in 2023 amid the global economic downturn to $2.4bn; the first time since 2017 that total funding had not grown by 40% or more year-on-year.
Marrel says that while the ecosystem has reached a “minimum threshold” in terms of funding, it remains small. Local VCs tend to manage $10-20m funds, he says, while US and European money is slow to flow to the continent.
There are just a handful of European VCs explicitly focused on African startups; French VC Partech has had a growth fund dedicated to African startups since 2017, which closed at $300m earlier this year; Stockholm-based investor Norrsken also recently raised a $205m growth fund targeting startups in Africa.
“It’s still rare to see a clear dedicated strategy with a dedicated fund and people on the ground,” says Marrel, adding that this also means less competition for good deals.
Breega already has two partners on the ground: Melvyn Lubega in Cape Town and Tosin Faniro-Dada in Lagos, who will now lead the firm’s activities in the two new offices.
The VC expects its Africa-based team to eventually grow to up to six people.
Read the orginal article: https://sifted.eu/articles/breega-paris-africa-vc-fund-news/
