Partech hits first close of largest Africa-focused fund, at €245M

 

Partech, the global VC firm with several funds, has reached first close of Partech Africa II at €245 million (~$263 million), making it the largest Africa-focused fund yet. 

The firm, which focuses on early- and growth-stage startups across the continent, intended to raise about €230 million (~$250 million) for its second African fund and reach a first close at €150 million, according to general partners Tidjane Deme and Cyril Collon. However, overwhelming interest from LPs meant Partech Africa II surpassed what was initially set for the entire fund at first close. To add, the African fund will now seek to reach a final close of not more than €280 million (~$300 million), Deme said on the call. 

Partech Africa II is one of three funds the global venture capital firm has launched in the last two years, including a $750 million growth fund and a $100 million seed fund, which target various markets and industries globally. It’s also a sequel to Partech Africa I, the first fund which was announced in 2018 and closed at $143 million

Venture capital activity has increased in several multiples between then and now. This year, African startups raised over $5 billion — or $6.5 billion, including debt financing — compared to the $1.16 billion recorded in 2018. This highlights how far the tech ecosystem has come, and Partech’s new fund corresponds to that growth, the partners told TechCrunch in an interview. 

“Last year, we went out to raise fund two, and we did it in a very different market. Everything has changed; the deal flow in Africa, especially for Series A and B, has been multiplied by 14 over the last five years,” said Deme from the firm’s Dakar office.

“The average Series A ticket sizes have grown from $4 million to almost $9 million, and Series B has gone from about $10 million to $25 million. So the market has changed, and we embarked on raising fund two; the strategy is to double down on what we did with fund one because the market has validated it.” 

Partech’s first African fund invested in 17 startups at Series A and B stages across nine countries that operate in 27. According to Deme, that fund’s strategy was to back particular startups going after deep economic sectors that are usually highly fragmented and informal in Africa “with many inefficiencies where bringing a tech platform with robust operations can build something that creates a lot of value.”

TradeDepot, Wave, Yoco, Reliance and Nomba are a few startups that underscore this strategy. They cut across fintech, retail and FMCG, agency banking, and health tech, sectors responsible for most of Africa’s employment and economic activity. These startups are capitalizing on increasing access to digital infrastructure and rising consumer and business demand. According to Partech Africa, its portfolio has brought value to over a million merchants and 20 million end users across the continent.

From a VC point of view, Partech says its startups have attracted more than 10% of the investment that has flowed into the continent between 2021 and 2022. Impressively, the venture capital firm also boasts a high-profile exit and unicorn among its ranks: WorldRemit subsidiary Sendwave and Stripe-backed Wave (a spinoff from Sendwave).

Most of these companies had already achieved product-market fit before Partech stepped in and assisted in fine-tuning their business and operational models with funding and other value-adds. It’s also worth noting that Partech Africa engaged most founders — or vice versa — years before the startups were ready to take any investment; cultivating such relationships allowed the investor to lead rounds with checks ranging from $1 million to $7 million. 

“We do invest in late-seed. So when we say $1 million, it’s also because we can go earlier. Also, we will keep working on ensuring that we can preempt talented teams very early on and not necessarily wait till they are fundraising,” Collon said from the VC firm’s Dubai office. “Connecting with the market and entrepreneurs as we have done with fund I is essential for fund II’s success.”

Partech Africa is sticking with this strategy for the second fund. The venture capital firm plans to still back Series A and B companies in fintech, health tech, logistics, mobility and edtech, among others; however, it is doubling the upper end of its ticket size to $15 million.

Its Fund II’s limited partners come from diverse profiles: DFIs and corporates to African fund of funds, family offices and HNIs, including anchor investor KfW, the German Development Bank. Others are existing and new LPs, including Bpifrance Investissement; the International Finance Corporation (IFC), which we reported was investing $26 million last June; South Suez; FMO; Bertelsmann; European Investment Bank (EIB); British International Investment (BII); Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG); and Proparco. 

“Investors that weren’t ready to commit with Fund I participated in Fund II,” noted Collon on Partech’s fundraising activity with LPs over the years. “That’s a powerful signal to have development financial institutions and other investors come in, and existing ones double down.”

The firm intends to deploy its capital in more than 20 startups from Fund II. It’s one of the most significant Africa-focused growth-stage funds, including TLcom Capital, Norrsken22, Algebra Ventures, and Novastar Ventures. The team, distributed across offices in Dakar, Nairobi, and Dubai, is expanding into new locations; Lagos is one. And its operations are augmented by Partech’s robust global platform, which supports crucial functions such as business development and portfolio support, founders community, ESG, finance, compliance, and legal.

Partech hits first close of largest Africa-focused fund, at €245M by Tage Kene-Okafor originally published on TechCrunch

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