Paris-based VC agency Breega has noticed Africa’s tech ecosystem mature through the years. From receiving lower than a billion {dollars} in enterprise capital per yr to a record-high $6 billion, there’s additionally been a rise in high-growth firms, from one unicorn to seven throughout the span of three years.
Now the VC needs to place a few of its personal cash behind what it sees, with a $75 million fund to put money into early-stage startups in Africa. It’s secured commitments for round 70% of the capital within the first shut, the agency revealed to TechCrunch.
Since getting into the VC scene in 2015, Breega has totally raised 4 funds: a primary seed fund (€45 million), a second seed fund (€110 million), a first enterprise fund (€106 million), and a second enterprise fund (€250 million). In below a decade, the French investor, with a portfolio of over 100 startups throughout 15 international locations, has reached $700 million in property below administration.
The “Africa Seed I” fund is Breega’s sixth fund (together with a 3rd European seed fund the agency is at present elevating) in 9 years however the first with a mandate outdoors Europe. Its launch coincides with opening two new workplaces in Lagos and Cape City, key hubs in Africa’s tech ecosystem. These workplaces be part of Breega’s current places in Paris, London, and Barcelona, strengthening its presence throughout the EMEA area.
Breega prides itself on being a founders-for-founders fund, investing throughout pre-seed to Collection A levels. “Our DNA is all about backing founders where innovation thrives and opportunities are immense. We bring them our operational expertise because everyone on our team has been on the other side as founders or operators,” mentioned co-founder and CEO Ben Marrel in an interview with TechCrunch.
Marrel notes that this method, coupled with a devoted scaling and portfolio help crew, has propelled Breega to develop into one of many fastest-growing VCs in Europe. The intention is to copy this success in Africa.
As such, launching a fund for early-stage startups stemmed from a want to faucet into the continent’s alternatives. What higher means to try this than having native companions who perceive the market dynamics and may make knowledgeable funding choices? Bigger Africa-focused corporations with European roots, similar to Partech and Norrsken22, function an identical technique.
Melvyn Lubega and Tosin Faniro-Dada are main Breega’s Africa fund, which acquired backing from establishments together with Bpifrance and the Dutch entrepreneurial growth financial institution, FMO. Each companions convey a long time of entrepreneurial and operational expertise to the desk; earlier than becoming a member of Breega, Lubega co-founded the edtech unicorn Go1, whereas Faniro-Dada was the CEO of Endeavor Nigeria.
Breega plans to speculate between $100,000 and $2 million in startups throughout the Huge 4 African markets—Nigeria, Egypt, South Africa, and Kenya—in addition to Francophone African markets, together with Morocco, Senegal, Ivory Coast, Cameroon, and the DRC. The Africa-focused VC agency has already backed 9 startups, together with Numida, Hohm Power, Socium, Klasha, Kwara, Coachbit, and Sava, and goals to make no less than 40 investments from this primary fund.
In an interview with TechCrunch, the companions mentioned Breega’s curiosity in Africa, the agency’s funding methods, native market dynamics, and the potential of untapped markets on the continent. The interview has been edited for brevity.
TC: $75 million is a sizeable first fund in any market, extra so in Africa. If I perceive accurately, the fund is for pre-seed and seed startups. However other than the cash, what worth does the agency present that founders might not discover at different corporations?
Melvyn: All companions and funding crew members at Breega are former founders and operators. We all know firsthand what it’s like to lift capital, construct companies, face failures, and endure powerful instances. Reflecting on my expertise, I struggled to search out African buyers who had constructed companies with out elevating cash. That’s why our aim is to be the buyers we wished we had whereas constructing our companies. Many entrepreneurs worth having a sparring accomplice who has been there and achieved that earlier than. We wish to be the primary verify in startups, coming in fairly robust and main rounds at pre-seed and seed.
Over 1 / 4 of our crew is devoted solely to supporting our portfolio firms throughout numerous areas, similar to go-to-market technique, expertise administration, governance, model, and communications. This dedication permits us to supply extra than simply capital; we offer our entrepreneurs with skilled sparring companions who convey worldwide publicity and ecosystem data. We discover this to be not solely vital to our entrepreneurs but in addition permits us to have an outsized efficiency from our European expertise.
TC: What sectors is Breega eager on in Africa? And why?
Tosin: Our focus is on industries that may have a transformative influence on addressing present and future challenges throughout the continent, particularly with the anticipated development in inhabitants, similar to fintech, healthtech, proptech, logistics, and edtech.
Melvyn: As well as, you may consider it like a Venn diagram: We goal areas that supply probably the most important influence, aligned with Sustainable Improvement Objectives (SDGs), and the place Breega has important expertise from backing over 100 firms. What’s notably helpful is that our insights from successes in Europe and the U.S. inform our method in Africa, serving to us pinpoint the place impactful alternatives align with our experience.
TC: It’s good you touched on that as a result of I’m curious how Breega strikes a steadiness and avoids the entice of backing US-style and Euro-styled firms in Africa.
Tosin: It boils all the way down to having native companions on the bottom who perceive the challenges of various markets. With my in depth expertise in Nigeria and Melvin’s in South Africa, our mindset stays unchanged. We don’t put money into firms as a result of they resemble U.S. or European counterparts. Our focus is options that remedy distinctive challenges particular to Africa and its numerous markets. Whereas some similarities exist, we deliberately again options tailor-made to fulfill native wants.
One in every of Breega’s benefits is our European crew’s expertise. They assist us perceive that Africa is probably the place Europe was a long time in the past. They’ve witnessed this evolution, and we’re already following an identical path. This attitude helps us acknowledge that it’s a journey and an evolution whereas additionally being aware of the present state of the market and the options wanted right this moment.
Ben: I feel what Tosin mentioned is extremely vital. I spend a number of time with our crew in Africa, so it’s not as if we’ve simply positioned a crew and fund there that operates independently from our essential operations. No, it’s totally built-in into our tradition, crew dynamics, and total agency technique. We perceive these markets are distinctive, and we don’t anticipate to help the identical kinds of firms in every single place. We’re very acutely aware of this and apply our data of what has labored and hasn’t for us.
TC: What’s Breega’s method to investing in sure markets versus others in Africa?
Melvyn: We don’t wish to make investments solely within the Huge 4 international locations (Nigeria, South Africa, Egypt, and Kenya) as a result of we perceive that expertise is equally distributed. That’s why we’ve investments in Uganda, Guinea, and different markets like Francophone Africa, which is especially vital as a consequence of our robust roots in these areas. Moreover, we’re dedicated to supporting and nurturing ecosystems via our investments. As a Pan-African fund, we have to take this broad method.
TC: Nowadays, VCs want to be extra pan-African and put money into largely untapped markets, and to your level, such an method is significant to find the following Wave. Nevertheless, such wins are uncommon, so why prioritize breadth over depth within the largest markets with extra potential for VC-scalable companies?
Melvyn: The fact is that Africa will get 1% of enterprise capital, but we’ve 18% of the inhabitants. And so, from that perspective, our position as Breega, being a European and African tier-one investor, can also be to have the ability to go the place others truthfully can’t go as a result of we imagine that there’s worth to be created there.
If you consider the ecosystems that we serve, there are some areas that don’t get enterprise capital however are nonetheless very enticing. Additionally, as a result of we’re taking long-term bets on the continent, we’re very intentional about saying that our position as buyers can also be to catalyze sure ecosystems.
And so, to your level, you understand, earlier than Wave, individuals weren’t speaking that a lot about Senegal, and it’s what it takes as an investor that understands, past following the herd, what essentially good investments appear like on the early stage, and having the ability to leverage that have to go there.
TC: Would you say this mannequin labored for Breega after virtually a decade of investing in Europe?
Ben: I feel it did. The benefit of individuals beginning a enterprise from smaller international locations is that they normally begin pondering globally from day one. And that’s the founders we’re fascinated about proper now.
The important thing query isn’t about expertise alone however the market these founders are getting into. Constructing a large-scale enterprise in a small nation is uncommon, so a multi-country technique is essential. We’re captivated with supporting founders in smaller African international locations so long as they’ve a world growth plan. This method has been profitable for us in Europe, and we’re making use of the identical technique in Africa.
TC: I’d wish to get a way of the place you assume the African VC scene is true now concerning co-investing alternatives.
Melvyn: Many Africa-only or country-specific buyers are tending to their present portfolio firms whereas deploying much less to the brand new companies. In the identical vein, many don’t have the capital to deploy. Once you see follow-on rounds and a collection of extension rounds, you see many smaller funds struggling to take part meaningfully. And I feel that’s additionally extra of a operate of the instances.
Tosin: I imagine the acquainted names are nonetheless energetic in investing throughout numerous levels and markets. Nevertheless, they seem to train extra warning now in contrast to a couple years in the past, particularly concerning the entrepreneurs they select to put money into.
