Partech has successfully closed its second Africa fund, Partech Africa II, at €280 million ($300 million+), just one year after reaching its first close. This achievement solidifies its position as the largest fund dedicated to African startups.
Key Takeaway
Partech Africa II fund, closing at €280 million ($300 million+), aims to provide crucial support for African startups amidst a decline in investor activity on the continent.
A Decline in Investor Activity
Amidst a backdrop of global VCs and institutional investors pulling back from Africa, Partech Africa’s recent fund closure is significant. The continent witnessed a notable decline in investor activity, with a 50% decrease in 2023 compared to the previous year, as highlighted in a Partech report. This retreat, influenced by global economic shifts and local challenges, translated into reduced venture capital inflows for African startups, totaling between $2.9 billion and $4.1 billion last year, down from $4.6 billion to $6.5 billion in 2022.
Support for Startups in Challenging Times
The impact was felt across all investment stages, with seed stage deals decreasing by 33% and growth stage deals by 39%, according to Partech’s findings. While Partech Africa, known to lead rounds, cannot single-handedly reverse this trend, its focus on seed to Series C rounds may offer some stability and support for startups navigating these challenging times.
Investment Strategy and Focus
Partech Africa intends to back over 20 companies, with initial investments ranging from $1 million to $15 million. The firm prioritizes sectors such as fintech, agritech, health tech, retail, FMCG, and agency banking, which are crucial for Africa’s employment and economic activity. Notable investments include Wave, TradeDepot, Yoco, and Reliance.
Diverse Investor Base
Partech Africa’s investor base reflects a diverse range of profiles. During its first close, development finance institutions, commercial investors, African fund-of-funds, and family offices were some of its limited partners. For its second close, it attracted participation from U.S. and Middle Eastern pension funds, sovereign funds, the Dubai Future District Fund (DFDF), and the African Reinsurance Corporation (Africa Re).
Emerging Funds in Africa
Partech’s African fund is among several notable funds that have emerged on the continent in the past year, despite challenges for fund managers in raising capital as limited partners scrutinize strategy and track record. Other large-sized funds include Norrsken22, Al Mada, and Novastar’s Africa People + Planet. Additionally, firms like Enza Capital, Equator, Knife Capital, and E3 Low Carbon Economy Fund for Africa (E3LCEF) have also closed sizable funds, reflecting continued investor interest in Africa’s growth potential.
