VC Partech raises Sh30bn for Africa investments

Venture capital fund Partech Africa has raised €230 million (Sh30.8 billion) for investing in technology companies in the continent including Kenya, Nigeria and South Africa.

The capital was raised from major institutional investors including Proparco, DEG, Dutch Development Bank (FMO), the International Finance Corporation (IFC) and British International Investment. Partech Africa received more capital commitments than it was looking for, underlining increased investor interest in Africa’s technology market whose growth has been aided by rising incomes and access to the Internet.

“By the end of the first round of subscriptions, the fund volume had already reached €245 million (Sh32.8 billion), which is above the targeted fund size of €230 million (Sh30.8 billion),” said German fund DEG in a statement.

DEG said it is investing €15 million (Sh2 billion) in the new fund (Partech Africa Fund II). The IFC separately said it was committing €25 million (Sh3.3 billion) to the fund.

“The venture capital fund will concentrate on investments in fast-growing technology companies all over Africa, including Nigeria, Egypt, South Africa, Kenya and Senegal,” said the DEG.

“The limited availability of equity capital is a major factor restricting growth for Africa’s fast-growing technology companies. This is where Partech Africa Fund II comes in. It is the largest African VC fund focusing on technology companies, like HealthTech, FinTech and RetailTech.”

The venture fund has already invested in multiple startups when it deployed capital raised in an earlier round, backing firms including Terrapay, Wave and TradeDepot. The Partech Africa Fund II is the second after the first one which was launched in 2018 and closed at $143 million (Sh18 billion).

The fund is run by Partech Partners, a global technology venture fund manager with branches in San Francisco, Paris, Berlin, Dakar and Nairobi. The fund is looking to make early-stage investments of between €1 million (Sh134 million) and €15 million (Sh2 billion) in African tech startups dealing with supply chain services, mobile and online consumer services, fintech, and mobility.

These sectors, alongside agribusiness and healthcare, have been attracting significant private equity and venture capital funding in Kenya and other African countries. A survey by Partech on venture capital investments in the African tech sector indicated that the continent’s start-ups raised a total of $5.2 billion (Sh657 billion) in equity funding in 2021, up from $1.43 billion (Sh180 billion) in 2020.

Venture capital and private equity funds have found Africa a rich ground for investing in startups in previously underserved and fast-growing sectors of the economy in the past decade. They are attracted by high returns, although the risk is high, with family offices and financial institutions in the west providing them with capital.

Such funds provide African start-ups and SMEs with much-needed capital that they would otherwise struggle to get from formal financial institutions such as banks and the capital markets, while also providing the technical expertise that the small firms need in order to grow their operations.

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