Partech has closed its second Africa fund, Partech Africa II, at €280 million ($300 million+), just one year after reaching its first close.
At that size, Partech Africa, which originally targeted €230 million before its fundraising efforts started, solidifies its position as the largest fund dedicated to African startups.
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.
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.
Partech Africa wants to support founders at various stages of their journey, from early to later rounds leveraging its position in the ecosystem, the firm’s general partners communicated. “The capacity to anchor rounds at all stages from seed to early growth, is more critical than ever,” Cyril Collon said in a statement.
Meanwhile, in an email to TechCrunch, Tidjane Deme says the VC firm’s expanding team will enable it to effectively deploy capital and offer assistance to portfolio companies across these stages. With offices in Dakar, Nairobi, and Dubai, Partech Africa has recently established a presence in Lagos, where it’s actively hiring to engage closely with startups in the region, underscoring the city’s significance as a third of the firm’s portfolio companies are based there. However, he clarified that the firm will deploy the majority of its second fund between Series A and B rounds.
Among the investments from its second fund is Revio, a South African payment orchestration platform, where Partech Africa co-led the seed round with global fintech fund QED. Additionally, the firm has made undisclosed investments in an Egyptian proptech and a Senegalese e-commerce startup. Partech Africa intends to back over 20 companies, with initial investments ranging from $1 million to $15 million, it disclosed.
The Dakar-based venture capital firm, which has backed 17 startups in its first fund, 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.
“Companies from the first fund can benefit from follow-on capital from the first fund but not from the second one,” Deme commented on the firm’s deployment strategy. “We keep supporting Fund 1 companies through their journey with capital and in many other ways.”
More of the fund’s strategy was covered during its first close last February.
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).
“We are grateful for the support and commitment of our investors: almost all Fund I investors reinvested, and some more than doubled their commitment,” remarked Collon. “We are also honored to get the support from a new set of strategic investors from the US, the Middle East and Africa, and for some of whom, this marks their first commitment in African tech.”
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.
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