Paris-based VC agency Breega has noticed Africa’s tech ecosystem mature over time. 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 inside 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 absolutely 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 beneath a decade, the French investor, with a portfolio of over 100 startups throughout 15 international locations, has reached $700 million in belongings beneath administration.
The “Africa Seed I” fund is Breega’s sixth fund (together with a 3rd European seed fund the agency is presently 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 a part of Breega’s current areas 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 Sequence 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 staff, 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 method to try this than having native companions who perceive the market dynamics and might make knowledgeable funding selections? Bigger Africa-focused corporations with European roots, equivalent to Partech and Norrsken22, function an analogous 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 improvement 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 take a position 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 Vitality, Socium, Klasha, Kwara, Coachbit, and Sava, and goals to make at the very least 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 appropriately, 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 staff 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 occasions. Reflecting on my expertise, I struggled to seek out African traders who had constructed companies with out elevating cash. That’s why our aim is to be the traders we wished we had whereas constructing our companies. Many entrepreneurs worth having a sparring companion who has been there and achieved that earlier than. We need to be the primary examine in startups, coming in fairly robust and main rounds at pre-seed and seed.
Over 1 / 4 of our staff is devoted solely to supporting our portfolio firms throughout varied areas, equivalent 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 information. 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 impression on addressing present and future challenges throughout the continent, particularly with the anticipated development in inhabitants, equivalent to fintech, healthtech, proptech, logistics, and edtech.
Melvyn: As well as, you may consider it like a Venn diagram: We goal areas that provide essentially the most vital impression, aligned with Sustainable Improvement Targets (SDGs), and the place Breega has vital 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 stability and avoids the lure of backing US-style and Euro-styled firms in Africa.
Tosin: It boils right 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 resolve distinctive challenges particular to Africa and its various markets. Whereas some similarities exist, we deliberately again options tailor-made to satisfy native wants.
One in every of Breega’s benefits is our European staff’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 analogous path. This angle helps us acknowledge that it’s a journey and an evolution whereas additionally being conscious of the present state of the market and the options wanted right now.
Ben: I feel what Tosin mentioned is extremely vital. I spend numerous time with our staff in Africa, so it’s not as if we’ve simply positioned a staff and fund there that operates independently from our principal operations. No, it’s absolutely built-in into our tradition, staff dynamics, and total agency technique. We perceive these markets are distinctive, and we don’t anticipate to help the identical sorts of firms in every single place. We’re very acutely aware of this and apply our information 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 need 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 got investments in Uganda, Guinea, and different markets like Francophone Africa, which is especially vital resulting from 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: Today, VCs want to be extra pan-African and put money into largely untapped markets, and to your level, such an method is significant find the subsequent 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 got 18% of the inhabitants. And so, from that perspective, our function as Breega, being a European and African tier-one investor, can be to have the ability to go the place others actually can’t go as a result of we consider that there’s worth to be created there.
If you concentrate on 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 function as traders can be to catalyze sure ecosystems.
And so, to your level, you already know, earlier than Wave, folks weren’t speaking that a lot about Senegal, and it’s what it takes as an investor that understands, past following the herd, what basically good investments appear to be 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 nearly 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 considering globally from day one. And that’s the founders we’re eager 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 enlargement plan. This method has been profitable for us in Europe, and we’re making use of the identical technique in Africa.
TC: I’d prefer 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 traders 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. While 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 perform of the occasions.
Tosin: I consider the acquainted names are nonetheless energetic in investing throughout varied levels and markets. Nevertheless, they seem to train extra warning now in contrast to some years in the past, particularly concerning the entrepreneurs they select to put money into.
