The Nigerian-based Windwarding Agency, Ventures Platform, is moving forward with the second African fund, with a further expansion of investment from the first. The agency indicated that the new fund would be geared towards a broader range of early start-up companies, covering areas such as financial science and technology, medical care, and SaaS, while focusing on AI how to change service costs and business models in African markets.
Investing in multinational countries
The founding partner of Ventures Platform, Kola Aina, stated to TechCrunch that the fund would focus on finding companies that could use technology to address basic needs and establish long-term operations. Compared to the $46 million first-time fund raised in 2022, the second-phase fund has a wider geographical coverage and no longer focuses primarily on Nigeria.
The Agency has funded five companies from the second tranche, in Kenya, South Africa and Egypt. Single investments of up to $3 million are planned to be deployed within the next three to four years.
AI is considered a cost tool
According to Aina, the team was particularly concerned about AI ' s ability to change the economic model of service to African markets and not simply to exist as an additional function. In his view, AI was valuable in reducing service delivery costs, alleviating labour shortages and promoting new business models.
He mentioned that what really deserved attention was not to see AI as a functional point in the product, but to see if it could bring about a completely different cost structure, business model or market space.
LP, there's been a marked increase in scrutiny.
According to Aina, the fund-raising process for the second tranche lasted about a year and a half and the current limited number of partners (LPs) are more cautious and selective than they were a few years ago. Investors now ask more about performance, portfolio-building, liquidity, management discipline and the Fund ' s ability to differentiate.
In his view, the market no longer implied that capital would continue to be adequate. Following the rollback of investments in previous years, the LP has focused more on the ability of fund managers to translate book values into real returns, as well as on capital efficiency, fundamentals, governance and regulatory communication capacities.
African finance is still recovering.
According to the data in the paper, African start-ups have completed more than 200 transactions this year, with a total financing of about $930 million. This compares with 447 transactions completed by African start-ups last year, with a total financing of $1.16 billion.
Aina said that the focus of market discussions a few years ago was “why invest in Africa”, and now the LP is more concerned with “why you, and how you will achieve your return”. In his view, such changes had made the market more rational and had increased the demand for local implementation and cross-market connectivity.
Additional information:According to Ventures Platform, about 70 per cent of the first phase of the Fund continues to participate in the second phase of the Fund, supported by the European Bank for Reconstruction and Development, Norfund and the Ashesi University Foundation in Ghana.